The Impacts of American Economy on Swedish Economy from 1985 to 2009

Abstract: In this article, I estimated the impacts of American economy on Swedish economy from long-term perspective with using the standard form vector autoregression model (VAR model). In order to obtain a comprehensive point of view, I decided to investigate the relationship between these two countries from three aspects, living and working environment, export and import volumes and stock market. After general analysis, I found two countries had strong correlation, but there was a lag from one quarter to three quarters in Swedish economy to American economy. With the purpose of quantity the lag-length and dynamic mechanism, I employed three VAR models to test how fast Swedish economy could react to the changes of American economy and how big the American economy could influence Swedish economy. In the end, I found Swedish real GDP needed three quarters to respond to a shock happened in the United States. And American economy had positive impacts on Swedish trading volumes. In addition, I also found Swedish stock market only needed one quarter to react to the changes of American stock market due to the widely usage of information and communication technologies.