Can large trade shocks cause crises? The case of the Finnish-Soviet trade collapse

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dc.contributor Bank of Finland
dc.contributor.author Gulan, Adam
dc.contributor.author Haavio, Markus
dc.contributor.author Kilponen, Juha
dc.date.accessioned 2019-06-05T11:47:55Z
dc.date.available 2019-06-05T11:47:55Z
dc.date.issued 2019
dc.identifier.isbn 978-952-323-274-7
dc.identifier.issn 1456-6184
dc.identifier.uri https://helda.helsinki.fi/bof/handle/123456789/16154
dc.description.abstract We study macroeconomic consequences of a major trade disruption using the example of the Finnish-Soviet trade collapse in 1991. This is a rare case of a well-identified large trade shock in a developed economy. We find that the shock had a significant effect on Finnish output. While the direct trade channel effect was rather moderate, the shock led to significant tightening of financial conditions. It was therefore endogenously amplified due to the propagation through the domestic financial sector. Even so, the trade collapse was insufficient to generate an all-out economic crisis. It can account for only a part of the Finnish Great Depression (1990 − 1993). The crisis was triggered and prolonged by the meltdown of the overheated financial and banking sectors since 1989. We show that the financial system remained a major independent source of shocks throughout the depression.
dc.format.extent 107
dc.language.iso ENG
dc.rights https://helda.helsinki.fi/bof/copyright
dc.subject Suomi
dc.subject Neuvostoliitto
dc.subject.other trade shock
dc.subject.other natural experiment
dc.subject.other financial propagation
dc.subject.other great depressions
dc.subject.other small open economy
dc.title Can large trade shocks cause crises? The case of the Finnish-Soviet trade collapse
dc.type Paper
dc.identifier.urn URN:NBN:fi:bof-201906051219
dc.series.name Bank of Finland Research Discussion Papers
dc.series.year 2019
dc.series.number 9/2019
dc.series.sortingnumber 0009
dc.date.publication 5.6.2019
dc.subject.yso kriisit
dc.subject.yso ulkomaankauppa
dc.subject.yso häiriöt
dc.subject.yso lama
dc.subject.yso rahoitusmarkkinat
dc.subject.yso taloudelliset kriisit
dc.subject.yso taloushistoria
bof-internal.includedInCRIS 1
dc.type.okm D4

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