ABSTRACT
Finland and Sweden both experienced financial crises in the early 1990s. We give a concise description of the crises, including the background, the evolution of the main events, and the government policies to handle the crises. We discuss the consequences for the real economy, and try to isolate what explained the emergence of the crises and the relatively speedy recoveries. We conclude that the crises were due to a combination of extraordinary shocks and serious mistakes, both in macro policies and in regulatory policies. The crises were preceded by a fundamental financial liberalization in both countries, but this was not sufficient cause for them. The crises exacerbated macro economic problems primarily through their impacts on borrower balance sheets. However, evidence of a so-called credit crunch remains weak. Crisis management was fast and strong-handed. In both countries, the financial sectors were substantially restructured, and recovered from the crisis relatively quickly.
