Finansielle kriser i Danmark 1875-2009

Kasper Holmbo Sørensen

Student thesis: Master thesis


With the recent financial crisis in mind the aim in this thesis is to determine when Denmark has experienced financial crisis through history. Furthermore this thesis will examine which macroeconomic variables are best to forecast financial crisis and discuss how the rising government debt lead by a financial crisis affects the economy. Since 1875 Denmark has experienced seven major banking crises and eleven currency crisis or currency attacks. Banking crisis have showed to affect the economy in a larger scale than currency crisis throughout history by leading to a larger drop in GDP and output gab. In average the growth in GDP has fallen around 6 percentage points based on banking crisis and over 3 percentage points by currency crisis. Even though financial crisis have shown to occur on the basis of various events, some macroeconomic variables are better to anticipate financial crises than others. Among the best performing variables are not surprisingly stock prices, exchange rates, currency reserves and housing prices. A few of these macroeconomic variables has shown to develop slightly identical before, under and after a banking- and currency crisis in Denmark. Three variables, export, import and growth in GDP did in fact have rather high statistically significant showing almost identical paths around the two types of crisis. Traditionally the common fiscal policy after a financial crisis has been expansionary, which has lead to a rise in the government debt due to larger government investments or lower tax income, which will lead to higher consumption in the short run. But in the long run larger government debt will affect the economy which will lead to higher interest rates, smaller export, a weaker Danish krone, and influence policy decisions. An alternative approach to the fiscal policy is the Ricardian equivalence that states that an expansionary fiscal policy will have no effect on the consumption. As concluded in this thesis the Ricardian equivalence is build on strong assumptions and will not hold in the real world. Although the Ricardian equivalence gives an alternative approach to the government debt strategy in future decision making.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2010
Number of pages86