Voltage collapse was one of the main causes for many recent blackouts. The direct link between voltage stability and reactive power balance in the system leads to more attention toward reactive power resources in the power systems. Shunt reactors and capacitors are used to balance reactive power in the power systems. The strategy to control them in both normal and emergency conditions is an important issue. This paper deals with two different strategies for automatic switching of shunt reactors and capacitors in the power systems. The first control strategy, called the local scheme, switches the shunt when the voltage at the local bus is outside the tolerance band. In the second control strategy, called neighboring scheme, local voltage as well as voltage at neighboring buses are used. Dynamic simulations of the NORDIC 32 test system show that the neighboring scheme improves voltage compared to the local one. In the simulated scenario a blackout is avoided by using the neighboring scheme. This is explained using PV curves for a new test system reflecting the key behavior of NORDIC 32.