A role model for the conduct of fiscal policy? Experiences from Sweden

Sweden was hit by a severe macroeconomic crisis in the early 1990s. GDP fell for three consecutive years in 1991–1993, unemployment increased by 9 percentage points, banks had to be nationalized, and public budget deficits exceeded 10 percent of GDP. The recovery was however quick. GDP growth was around four percent in 1994–1995, and budget deficits had been eliminated by 1998. Growth remained high in the subsequent decade, and the government debt ratio was reduced by almost 50 percent of GDP.