Question

Instructions: find the below questions for Finland.

You may use the FRED, the World Development Indicators (WDI) database by the World Bank, OR the OECD.Stat database to respond to the following questions.

1) Generate a graph for Finland, showing how its real GDP (in level, US$) has evolved since the initial year with available data (usually in 1960s or 1970s).

2) Add a measure for physical capital, human capital, and labor productivity and explain which one has been the main contributor of growth? Give your reasoning.

3) How many recessions has Finland economy undergone over the years plotted in the chart? Explain how you identified the recessions (a popular method for identifying a recession is when there is at least two consecutive quarters of negative growth in GDP, but you are free to use other methods as long as you clearly explain and provide the source for definition). You may also generate a graph for real GDP growth rates, if that helps you with your demonstration.

4) What are the two biggest recessions in terms of length and magnitude?

5) Plot the unemployment rate for the same period (for ex., for 1960-2017).

6) How does the unemployment rate react during the two main recessions you have identified?

7) What do you conclude about the link between recession and the variation in unemployment?

8) Plot the CPI inflation rate for the same period (for ex., for 1960-2017).

9) Identify the periods of deflation and hyper-inflation over the period. What threshold are you using for the hyperinflation rate? (note: you may have to do a little research to determine how economists determine deflation)

10) Explain how CPI is calculated for Finland. Laspeyres, Paasche, or Fisher method?

Answer 1

FINLAND GDP PER CAPITA 1960    

( I am explaining the complete history of finlad and the gdp of 1960 to 1970 from here you can find all your answers )

GDP per capita is gross domestic product divided by midyear population. GDP is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources. Finland in the early 2000s is a small industrialized country with a standard of living ranked among the top twenty in the world. At the beginning of the twentieth century it was a poor agrarian country with a gross domestic product per capita less than half of that of the United Kingdom and the United States, world leaders at the time in this respect.

3,000 2,500 GDP Per Capita (US $) 2,000 1,500 1,000 15 10 Annual Growth Rate (%) 5 0 -5 -10 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971

Finland has large forest areas of coniferous trees, and forests have been and still are an important natural resource in its economic development. Other natural resources are scarce: there is no coal or oil, and relatively few minerals. Outokumpu, the biggest copper mine in Europe in its time, was depleted in the 1980s. Even water power is scarce, despite the large number of lakes, because of the small height differences. The country is among the larger ones in Europe in area, but it is sparsely populated with 44 people per square mile, 5.3 million people altogether.

Openness of the economies (exports+imports of goods/GDP, percent) in Finland and EU 15, 1960-2005

Openness of the economies (exportstimports of goods/GDP, percent) in Finland and EU 15, 1960-2005 70,0 60,0 50,0 40,0 -EU 30,0 Finland 20,0 10,0 0,0

The Postwar Boom until the 1970s

Finland became part of the Western European trade-liberalization movement by joining the World Bank, the International Monetary Fund (IMF) and the Bretton Woods agreement in 1948, becoming a member of the General Agreement on Tariffs and Trade (GATT) two years later, and joining Finnefta (an agreement between the European Free Trade Area (EFTA) and Finland) in 1961. The government chose not to receive Marshall Aid because of the world political situation. Bilateral trade agreements with the Soviet Union started in 1947 and continued until 1991. Tariffs were eased and imports from market economies liberated from 1957. Exports and imports, which had stayed at internationally high levels during the interwar years, only slowly returned to the earlier relative levels.

Exports and, accordingly, the structure of the manufacturing industry were diversified by Soviet and, later, on Western orders for machinery products including paper machines, cranes, elevators, and special ships such as icebreakers. The vast Soviet Union provided good markets for clothing and footwear, while Finnish wool and cotton factories slowly disappeared because of competition from low-wage countries. The modern chemical industry started to develop in the early twentieth century, often led by foreign entrepreneurs, and the first small oil refinery was built by the government in the 1950s. The government became actively involved in industrial activities in the early twentieth century, with investments in mining, basic industries, energy production and transmission, and the construction of infrastructure, and this continued in the postwar period.

The new agricultural policy, the aim of which was to secure reasonable incomes and favorable loans to the farmers and the availability of domestic agricultural products for the population, soon led to overproduction in several product groups, and further to government-subsidized dumping on the international markets. The first limitations on agricultural production were introduced at the end of the 1960s.

Slower Growth from the 1970s

The oil crises of the 1970s put the Finnish economy under pressure. Although the oil reserves of the main supplier, the Soviet Union, showed no signs of running out, the price increased in line with world market prices. This was a source of devastating inflation in Finland. On the other hand, it was possible to increase exports under the terms of the bilateral trade agreement with the Soviet Union. This boosted export demand and helped Finland to avoid the high and sustained unemployment that plagued Western Europe.

Economic growth in the 1980s was somewhat better than in most Western economies, and at the end of the 1980s Finland caught up with the sluggishly-growing Swedish GDP per capita for the first time. In the early 1990s the collapse of the Soviet trade, Western European recession and problems in adjusting to the new liberal order of international capital movement led the Finnish economy into a depression that was worse than that of the 1930s. GDP fell by over 10 percent in three years, and unemployment rose to 18 percent. The banking crisis triggered a profound structural change in the Finnish financial sector. The economy revived again to a brisk growth rate of 3.6 percent in 1994-2005: GDP growth was 2.5 percent and GDP per capita 2.1 percent between 1973 and 2005.