ABSTRACT
During the course of the twentieth century, Europe experienced two deadly world wars, unprecedented in expense and destruction. While the macroeconomics of belligerency during World War II has been well studied, less is known about that of neutrality. This chapter describes the effects of the world wars on the Nordic economies. As a collective unit, the economies of the Nordic countries which had suffered only mildly in World War I shrank almost twice as much in World War II as they had done in the Great Depression. Sweden was the Nordic country least affected by WWII, in part because its capital account balance was generally better than the others. In 1940 and 1941, Germany extracted better prices for exports to Sweden. In 1942, Sweden extracted price concessions from Germany, charging more for its exports than were charged for German goods sold to Sweden.
