The Impact of Economic Crisis on Sweden and Norway Research Paper

The Impact of Economic Crisis on Sweden and Norway - Research Paper Example The main theme that runs across this entire piece of writing is the effects of economic crisis in Sweden and Norway, their negative impacts and ways in which the countries are trying to fight the same. The paper also compares the effect of these crises to the two mentioned countries. In Sweden, the monetary deregulation began a few years ago. The financial intermediaries hastily stretched loans as an outcome of the monetary deregulation. Mortgage institutions, banks, and finance firms freely competed to grant loans. The total lend increased by 136 % from 1986 to 1990. A tax increase was also experienced due to the rise in housing costs. According to Perrels, when people borrowed from financial institutions to purchase houses, interest expenses were wholly deductible from taxable salary. High-leverage monetary savings were used in the standard market. The standard market became lively and stock amounts persistent in rising. The redundancy rate continued to drop to the lowest levels in 1989. Mutually, high increase anticipation and a tax benefit decreased the after-tax actual interest rate to a lower level. Conversely, the bubble unexpectedly busted after 1990, when the financial strategy was tautened. A tax improvement also contributed to the severe drop in asset costs. A reduction of the interest expenses from taxable earnings was strictly forced by the change. The stock market on the other hand also adversely responded and began to drop. Specifically, the real estate stock cost index had dropped by 52%. The bust of the bubble was initiated by a taut monetary strategy. The fundamental change of financial strategy was triggered by international interest rate hiking, succeeding the German reintegration and Riksbank’s plan alteration to focus on inflation.