The Finnish Great Depression: From Russia with Love
Yuriy Gorodnichenko, Enrique G. Mendoza, Linda L. Tesar
American Economic Review · 2012 · Volume 102 · Issue 4
Abstract
Why did Finland experience, in 1991-1993, the deepest recession observed in an industrialized country since the 1930s? Using a dynamic general equilibrium model with labor frictions, we argue that the collapse of the Soviet-Finnish trade was a major contributor to the contraction. Finland's experience mirrors that of the transition economies of Eastern Europe, which suffered similar deep recessions coupled with institutional changes. By focusing on the Finnish case, we isolate the effects of the Finnish-Soviet trade collapse and shed new light on the sources of recessions in transition economies.
Keywords
Business Fluctuations, Cycles, Country and Industry Studies of Trade, Open Economy Macroeconomics, Socialist Institutions and Their Transitions: International Trade, Finance, Investment, and Aid
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