Lessons for China from Financial Liberalization in Scandinavia

HKIMR Working Paper No.26/2009

53 Pages Posted: 3 Sep 2009

See all articles by Hongyi Chen

Hongyi Chen

affiliation not provided to SSRN

Lars Jonung

Lund University - Dept. of Economics

Olaf Unteroberdoerster

International Monetary Fund (IMF) - Asia and Pacific Department

Date Written: July 31, 2009

Abstract

This report identifies a set of policy lessons for China today drawn from the experience of financial deregulation, financial crisis and recovery in Scandinavia during the period 1985-2000. Although there are considerable differences between the huge Chinese economy and the small Nordic countries, there are enough similarities to make lesson-drawing a worthwhile exercise. Based on the Scandinavian experience and the added complexity of China’s status as a transition economy, financial reforms should strike a proper balance between being gradual (to avoid costly mistakes) and substantive (to secure efficiency gains in the longer term) with due consideration being given to initial conditions concerning regulation, taxes and exchange rate arrangements. A well managed process of financial deregulation requires that policy-makers and market participants fully understand the interlinkages between financial reforms and the rest of the economy. In addition, the supervisory and management systems in the financial sector should move in step with the liberalization process.

Keywords: Financial Liberalization, Financial Crisis, Transition, Financial Regulation, Banking, Boom-Bust, China, Scandinavia, the Nordics

JEL Classification: E52, E58, F31, F32, G01, G21, G28, G32, P52

Suggested Citation

Chen, Hongyi and Jonung, Lars and Unteroberdoerster, Olaf, Lessons for China from Financial Liberalization in Scandinavia (July 31, 2009). HKIMR Working Paper No.26/2009, Available at SSRN: https://ssrn.com/abstract=1466653 or http://dx.doi.org/10.2139/ssrn.1466653

Hongyi Chen

affiliation not provided to SSRN ( email )

Lars Jonung

Lund University - Dept. of Economics ( email )

Box 7080
Lund, 22007
Sweden

Olaf Unteroberdoerster (Contact Author)

International Monetary Fund (IMF) - Asia and Pacific Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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