Looking Back, Moving Forward : The 2007-09 Financial Crisis in the light of the 1990s Financial Crisis in Sweden

Abstract: The aim of this thesis, is through a qualitative research strategy and thematic data-approach, guided by the policy learning process theoretical framework to establish how the lessons from the 1990s financial crisis influenced the stabilization policies of the Swedish Riksbank during the 2007-09 financial crisis, and what effects the 2007-09 financial crisis had on the Riksbank’s stabilization policies to date. By analysing primary sources of policymakers and economists, this thesis finds that Sweden was successful in its 2007-09 crisis management, because it had learnt important lessons from its own past, namely, the severe financial crisis of the 1990s. The new insights gained from the 1990s financial crisis, led to a radical policy change for Sweden’s stabilization policy framework, where the Swedish Riksbank was given the main responsibility for stabilization policies. When the 2007-09 financial crisis hit, it was the inherited framework from the 1990s that Sweden leaned on, however, as the crisis exposed the Swedish economy to new challenges, it required the Riksbank to take extraordinary measures to manage the crisis and promote financial stability. This thesis finds that the good prequisites, implemented measures and flexibility of the framework helped Sweden to manage the crisis with confidence. Nonetheless, a major effect of the 2007-09 financial crisis, was how the Riksbank’s stabilization framework was outdated and needed to be modernized to cope with Sweden’s current economic landscape. Overall, the flexibility of the Riksbank’s stabilization policy framework during the 2007-09 financial crisis become a strong factor for Sweden’s success but also its shortcomings.