In Finland, economic fluctuations have been greater than in Sweden, Denmark and in the majority of other developed countries. According to our results, the size of the country’s GDP and the living standard are negatively correlated with economic fluctuations. However, there exist only a few general factors affecting to output volatility. In the Covid19-crisis, global value chains transmitted economic impacts between countries and industries. As much as one fifth of the decline of the Finnish GDP in 2020 can be explained by disturbances in global value chains.
In 2020, the disturbances of value chains were based output decreases originated from covid diseases and restrictive actions against Covid-19. In the late 2021, however, these disturbances were more based on strong demand, the lack of stocks, the rise of transportation costs and the lack of containers.
Small open economies such as Finland are not able to fully prevent negative effects originated overseas. Furthermore, it seems that factors behind different economic crisis vary. In the long run, innovation policy potentially increases the versatility of economy but its impact is uncertain. According to our results, companies itselves try to improve the resilience of their value chains but it is hard to design policy instruments that could be efficientely used to improve the resilience of value chains.
Publications of the Government’s analysis, assessment and research activities, 2021:59.