A1 Journal article (refereed)
Finland’s great depression of the 1990s : Lessons about financial reform based on econometric macro evidence (2020)

Ahtiala, Pekka; Junttila, Juha (2020). Finland’s great depression of the 1990s : Lessons about financial reform based on econometric macro evidence. Review of Financial Economics, 38 (S1), 188-209. DOI: 10.1002/rfe.1077

JYU authors or editors

Publication details

All authors or editors: Ahtiala, Pekka; Junttila, Juha

Journal or series: Review of Financial Economics

ISSN: 1058-3300

eISSN: 1873-5924

Publication year: 2020

Volume: 38

Issue number: S1

Pages range: 188-209

Publisher: John Wiley & Sons

Publication country: United States

Publication language: English

DOI: http://doi.org/10.1002/rfe.1077

Open Access: Publication channel is not openly available

Publication is parallel published (JYX): https://jyx.jyu.fi/handle/123456789/68669

Additional information: Special Issue: Patterns in Post‐Financial Crisis Periods : A Historical Perspectives


The paper re‐examines the Finnish Great Depression of the 1990s, based on an open macro model, with specific dummy variables to identify the initial effects of liberalized financial markets and capital mobility, and of the Russian trade collapse. It is shown that the explosive credit expansion resulting from the simultaneous liberalization of the financial markets and international capital movements in 1986 has played the most important role in explaining the uncontrolled growth and the subsequent depression in 1989 in real economic activity in Finland. Their effects were strengthened by a vicious circle between the financial and asset markets. The Russian trade collapse in 1991 had a smaller partial effect on economic activity than did any other explanatory variable. The results suggest that some of the present day problems in the euro area, especially those occurring post‐2008 in the “Club Med” countries, are very alarming. In many cases, they are results of expansionary policies based on unsustainable capital imports, made possible by the introduction of the euro, and the consequences resemble in many ways those during the 1990s Great Depression period in Finland.

Keywords: financial markets; depression (economic events); foreign trade; economic crises

Free keywords: 1990-luku; Finland; Russia

Contributing organizations

Ministry reporting: Yes

Reporting Year: 2020

Preliminary JUFO rating: 1

Last updated on 2020-18-08 at 13:05