Financial Crisis in Norway and Japan

Three Nordic countries, Norway, Finland and Sweden, and Japan had experienced the severe financial crisis after the rapid asset price increase in almost the same period. However the recovery was fast in Nordic countries, while Japan experienced a prolonged recession, so called lost two decades. This study explains the difference and similarity of two crises, comparing the factors behind the bubble and bust in Norway and Japan. The paper also focuses on the role of monetary policy in both countries. Miyagawa and Morita (2012, 2013) statistically analyzed the important role of money in the up and down swing of economy in the Japan’s economy. They had taken the role of expectation in the money demand. The same VAR model was performed to the Norwegian crisis, taking into consideration the financial anxieties in the period of financial boom and crisis. The estimation results showed that money played the important role in the bubble and bust in Norway as in Japan.