Varieties of central banking: the Nordic Model beyond a fiscal-centric approach

Abstract

ABSTRACT Since policymakers and scholars coined the term in the 1930s, the Nordic Model has often been considered to denote a homogeneous political entity in which the constituent countries are ostensibly interchangeable. As a result, seldom attention has been afforded to what fundamentally differentiates Denmark, Finland, Norway, and Sweden. By going beyond traditional ‘fiscal-centric’ accounts of the Nordic model, and instead focusing on the role of central banks and monetary policy, we show that each country bares far less similarities than has often been assumed in the literature. We trace this heterogeneity back to variegated responses to the 1970s crises of Fordist capitalism and draw on growth model theory to explain this divergent trajectory. We show how these differences shaped how each country responded to the Global Financial Crisis and the COVID-19 pandemic, where a variegated array of monetary measures was employed to uphold their own distinct growth model. By accounting for the role of central banks within the Nordic Model, we propose that it is better understood as a series of models, drawing attention to the function of monetary policy within the growth models perspective in the political economy literature.