WHEN CRISIS GIVES WAY TO OPPORTUNITY: DECOMPOSING THE 2008-2009 RECESSION AND RECOVERY IN THE U.S., U.K., AND SWEDEN

Abstract

This paper attempts to investigate the large discrepancies in real GDP per-capita growth between three countries – the U.S., Sweden, and the U.K. – during the recent recession and recovery period (years 2007 to 2012). This is done by adapting the methodology of a November 2012 paper by Gavyn Davies and Juan Antolin-Diaz, which accounts for annual real GDP per-capita differences between the U.S. and U.K. using a combination of three factors: credit bubble impacts, export impacts, and fiscal policy impacts. Using data from the IMF, OECD, and World Bank, among other sources, it is shown that exports and fiscal policy differences can more than explain the U.S. outperformance of the U.K.; however, these factors do not sufficiently explain Sweden’s outperformance of the U.K. and fail to explain its outperformance of the U.S. Credit bubble effects were substantial for all three countries, but fairly convergent, and therefore do not explain a large portion of any of the inter-country differences. It is therefore likely that one or more key components, either beneficial to Sweden or detrimental to the U.S. or U.K., remain unidentified.