Submission

Title: A Comparative Analysis of the Macroeconomic Impact and Policy Responses to COVID- 19 in Norway and Sweden 

Introduction

The COVID-19 pandemic wreaked havoc on economies worldwide, prompting governments to implement fiscal and monetary policies to mitigate its adverse effects. This essay compares the macroeconomic impact of the pandemic and the policy responses of Norway and Sweden, focusing on their economic performance before and during the pandemic, the policies implemented, and their impact on key macroeconomic indicators in 2021.

Macroeconomic Performance in 2019 and 2020

In 2019, both Norway and Sweden exhibited stable economic conditions. Norway’s GDP grew at 2.3%, and Sweden’s at 1.2%. Unemployment rates were low, standing at 3.9% in Norway and 6.8% in Sweden. Inflation was also modest, with Norway at 1.9% and Sweden at 1.8%. Both countries maintained fiscal discipline with manageable budget deficits. 

However, when the pandemic struck in 2020, the economic landscape changed dramatically.

Norway’s GDP contracted by 2.5%, while Sweden’s contraction was slightly less severe at 2.8%. Unemployment rates surged in both nations, reaching 5.3% in Norway and 8.9% in Sweden.

Inflation moderated, with Norway at 1.3% and Sweden at 0.7%. Both countries faced significant challenges due to the sudden economic downturn.

Key Policy Responses

Norway and Sweden adopted different approaches in their policy responses to the pandemic.

Norway implemented a substantial fiscal stimulus package, which included income support for affected individuals, grants for businesses, and increased healthcare spending. The government also provided liquidity support to financial institutions to ensure the stability of the banking sector. The central bank, Norges Bank, lowered interest rates to near-zero levels, providing further monetary support.

Sweden, on the other hand, took a more liberal approach, avoiding strict lockdowns and relying on voluntary measures. The fiscal response was less pronounced compared to Norway, with a focus on protecting vulnerable groups and businesses. The Swedish central bank, Riksbank, also lowered interest rates but adopted a more cautious stance.

Impact on Macroeconomic Indicators in 2021

In 2021, Norway experienced a robust economic recovery, with GDP growing by 3.7%. The unemployment rate improved to 4.2%, and inflation stabilized at 2.3%. The fiscal stimulus, combined with accommodative monetary policy, supported a swift rebound.

Sweden, while also witnessing economic growth, lagged behind Norway in terms of recovery. Its GDP expanded by 3.0%, with an unemployment rate of 7.2% and inflation at 1.6%. Sweden’s approach of avoiding strict lockdowns might have contributed to a less severe economic downturn, but it appeared to result in a slower recovery.

Conclusion

In assessing the macroeconomic impact and policy responses to the COVID-19 pandemic, it is evident that Norway outperformed Sweden in terms of economic recovery. Norway’s swift and decisive fiscal and monetary policy actions resulted in a more robust rebound in 2021, with lower unemployment and higher inflation. Sweden’s more liberal approach, while potentially mitigating the initial economic shock, led to a slower recovery, with persistently higher unemployment. Norway’s comprehensive fiscal stimulus, support for businesses and individuals, and proactive monetary policy measures created an environment conducive to economic recovery. In contrast, Sweden’s reliance on voluntary measures and a more cautious fiscal response may have dampened its economic resurgence. 

Therefore, based on the economic analysis, Norway appears to have handled the pandemic better than Sweden, as it demonstrated a more effective combination of fiscal and monetary policies to navigate the challenges posed by the COVID-19 crisis and achieve a more robust recovery in 2021.

GUIDING QUESTIONS:

• Did ChatGPT consider all three key macroeconomic indicators identified in Topic 1?
• Are the values of the macroeconomic indicators in ChatGPT’s essay accurate? If not, provide the correct values.
• Which economic growth indicator did ChatGPT provide, and does it align with the recommendation for country comparisons in Topic 1? If not, provide the relevant data values for both countries for the relevant years.
• Which inflation indicator did ChatGPT provide?
• Which country implemented the tightest monetary policy response?
• Which country implemented the most extensive fiscal stimulus package?
• Do you agree with ChatGPT’s conclusion that Norway handled the pandemic better than Sweden? Why or why not?
• Does the format of the ChatGPT essay align with UQ expectations for research essays?
• Did ChatGPT cite supporting sources in its response?

TIPS:

• Do not explain concepts or definitions of commonly used macroeconomic indicators. 
• Create and include a table with the relevant data. Remember to clearly indicate which data in the table you are referring to in your writing.
• For consistency, round indicator values to one decimal place in your report.
• Cite reliable sources to support your findings and include the full reference details of those sources in the reference list at the end of your document (after Part 2).
• Your policy information sources should be the websites of the countries’ fiscal and monetary policy authorities.
• Your data sources should be national or multinational agencies, e.g., the Australian Bureau of Statistics (ABS), Stats NZ, Reserve Bank of Australia, Reserve Bank of New Zealand, The World Bank, OECD, IMF, and Bank for International Settlements.
• The World Bank’s World Development Indicators (WDI) database contains most national data collected by national and multinational agencies, and you may use it as a primary data source. For tutorials on extracting WDI data, refer to the following videos: https://www.youtube.com/watch?v=JGJhI_YqFuI, https://www.youtube.com/watch?v=f_B1t4BRQ94&t=64s, and https://www.youtube.com/watch?v=MKANl-ZWUTY.

PLEASE NOTE:

• The countries you must use for Part 2 of the research report are based on the last digit of your complete student ID. So, for example, if your student ID is 44194358, then your allocated countries for Part 2 are Denmark and Spain.
• The number in your student email address (e.g., S4419435) is not your student ID; it misses the last digit (i.e. 8 in this example). A 20-mark penalty (out of 100 marks) will be applied if you fail to follow the country allocation rules.

TIPS:

• Part 2 does not require collecting data for economic indicators.
• Revise Topics 7, 8 and 9 before completing Part 2.
• Denmark has a fixed-exchange-rate system, while the other countries are Eurozone countries with a floating exchange rate (euro) – so make sure you use the relevant Mundell-Fleming model for each country.
• Your fiscal balance (government surplus/deficit) sources should be national or multinational agencies, e.g., the Danish Ministry of Finance or the OECD. 
• Your monetary policy sources should be the websites of the relevant monetary policy authorities. Denmark’s central bank is Danmarks Nationalbank. But in the case of Eurozone countries, the monetary policy authority is not the country’s central bank but the European Central Bank (ECB).
• Cite the relevant sources in Part 2 and include the full reference details of those sources in the reference list at the end of your document (after Part 2).
• For each country, you must include one graph illustrating the short-run effect of the country’s fiscal-monetary policy mix according to the relevant Mundell-Fleming diagrams of Topic 7.

REFERENCING TIPS:

SUBMITTING YOUR ASSESSMENT:

• Your research report must be submitted as a Microsoft Word document through Turnitin on Blackboard.
• While most instances of plagiarism are unintentional (for example, forgetting to close a quotation mark), the Turnitin originality report will reveal any form of plagiarism (intentional or unintentional) and the use of Artificial Intelligence tools. Your research report should have a Turnitin similarity index value of 15% or less. From the originality report, the marker will check whether any part of your research report is potentially plagiarised from other sources, which could result in mark penalties, as shown in the marking rubric. Thus, carefully review the originality report before your final submission.
• You can resubmit your essay multiple times until the due time. However, Turnitin will only release the Similarity Report after 24 hours from the third resubmission onwards.
• After uploading your research report, click the Submit to Turnitin button. Then, download your digital receipt in your Assignment inbox to confirm successful submission (refer to the Turnitin student guide). No digital receipt, no submission.
• The deadline for submission is based on the time your assessment has been successfully uploaded on Turnitin, as recorded by Turnitin, not the time you tried to upload it.
• Many students fail to meet the deadline because they have internet connection problems on their side, but they mistake it as an IT problem of UQ. If UQ has any internet connection problems, it will keep a record of it.
• The only way to guarantee meeting the deadline is to submit your research report well before the deadline.