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  • Kivistö, Jarkko (2012)
    Bank of Finland bulletin. Economic outlook 3
    This article discusses the development of housing prices in Finland, with a special focus on the relationship between rents and housing purchase prices (rent-to-price ratio), which is analysed against a constructed benchmark of the user costs of investors or homeowners. A comparison of the rent-to-price ratio and time series of user costs indicates that the development of housing prices relative to rents has been broadly consistent with the fall in housing user costs. The key determinants of user cost dynamics are house price expectations and level of interest rates. The interest rate fall, in particular, has had a significant impact on the reduction in user costs and, hence, housing prices. However, the increase in housing prices relative to developments in household income has been fairly moderate.
  • Newby, Elisa; Railavo, Jukka; Ripatti, Antti (2011)
    Bank of Finland bulletin. Economic outlook 3
    The purpose of economic forecasts is to support economic agents decision-making by providing a coherent picture of the present state of the economy and the outlook for the future. Since 2004, a key tool for preparing the Bank of Finland s forecast has been the Aino model.1 It is employed as a tool for integrating forecast information. The new version of the Aino model was introduced in the preparation of the March 2010 forecast. This article describes the features of the model and its use in the preparation of forecasts.
  • Kinnunen, Helvi; Railavo, Jukka (2011)
    Bank of Finland bulletin. Economic outlook 5
    The macroeconomic effects of population ageing will be considerable. Projections with a general equilibrium model highlight a structural shift in the economy and a pronounced fall in the standard of living in the wake of population ageing. Total output will decline not only in response to a fall in labour input but also due to a shift in the output structure towards service sectors. A substantial increase in the tax ratio will, in practice, make labour markets other than the public labour market wither away, while the ratio of private consumption to GDP will fall permanently.
  • (2012)
    Bank of Finland bulletin. Economic outlook 3
    Preface 3 Bank of Finland forecasts 5 Executive summary 6 Economic outlook 9 Recent developments 9 Box 1. National Accounts for the first quarter of 2012 11 Operating environment 12 Non-financial corporations 19 Box 2. Finnish services exports still narrowly based 21 Households 25 GDP and employment 27 Box 3. Productivity developments reflect sectoral, structural and cyclical factors 30 Public finances 33 External balance 36 Box 4. Current account decline based on several factors 37 Wage and price trends 39 Risk assessment 42 Box 5. Alternative scenario: Households strengthen their financial position by adjusting demand 43 Changes from the previous forecast 47 An assessment of housing price developments against various measures Jarkko Kivistö 49 Market share of Finnish goods exports contracted sharply since 2000 Seppo Orjasniemi - Terhi Ravaska 59 Long-term growth forecast for the Finnish economy Helvi Kinnunen - Petri Mäki-Fränti - Elisa Newby - Seppo Orjasniemi - Jukka Railavo 69 Articles and boxes from previous publications 79 Forecast tables T1
  • (2012)
    Bank of Finland bulletin. Economic outlook 5
    Preface 3 Bank of Finland forecasts 5 Executive summary 6 Economic outlook 9 Recent developments 9 Box 1. National accounts for the third quarter of 2012 12 Operating environment 13 Non-financial corporations 20 Households 23 Box 2. Precautionary savings push up household savings ratio in a recession 24 GDP and employment 27 Box 3. The link between economic growth and the unemployment rate has changed 30 Public finances 33 Box 4. Finland's public finances 36 External balance 41 Wage and price trends 42 Risk assessment 45 Box 5. Alternative scenario: increased competition in labour and product markets 48 Changes from the previous forecast 53 Financial stability 55 Fiscal sustainability projections for Finland Helvi Kinnunen - Petri Mäki-Fränti - Hannu Viertola 75 Finland's competitiveness and its measurement Lauri Kajanoja 87 Articles and boxes from previous publications 99 Forecast tables T1
  • (2011)
    Bank of Finland bulletin. Economic outlook 5
    Preface. 1 Bank of Finland forecasts 3 Executive summary 4 Recent developments 7 Box 1. National accounts for the third quarter of 2011 10 Box 2. Model for short-term forecasting of GDP 11 Operating environment 14 Non-financial corporations 21 Box 3. Corporate profitability by sector in Finland 24 Households 27 GDP and employment 29 Box 4. Estimating potential output is a challenging task 33 Public finances 36 Box 5. Finland's public finances 39 External balance 44 Wage and price trends 45 Box 6. Structural features and competition in the distributive trades sector: impact on euro area prices 47 Risk assessment 51 Box 7. Alternative scenario: debt crisis escalates into global recession 54 Changes from the previous forecast 58 Financial stability 61 Finnish households' economic margin Petri Mäki-Fränti 75 Analysis of the macroeconomic effects of population ageing using a general equilibrium model Helvi Kinnunen and Jukka Railavo 85 Articles and boxes from previous publications 94 Forecast tables T1
  • (2011)
    Bank of Finland bulletin. Economic outlook 3
    Preface 1 Bank of Finland forecasts 3 Executive summary 4 Recent development 6 Box 1. National accounts for the first quarter of 2011 9 Operating environment 10 Box 2. Recent euro area monetary policy 14 Non-financial corporations 17 Households 19 GDP and employment 21 Box 3. Job-matching in the labour market after the recession 24 Public finances 25 Box 4. Medium-term outlook for public finances 28 Box 5. Central and local government financial assets 30 External balance 32 Box 6. Finland's net international investment position has improved by less than the current account surpluses indicate 33 Price and wage trends 36 Box 7. Inflation higher in Finland than in the euro area 38 Risk assessment 40 Box 8. Alternative scenario: an increase in domestic wage and price pressures 43 Changes from the previous forecast 47 Long-term supply of labour Helvi Kinnunen and Petri Mäki-Fränti 49 An estimated general equilibrium model for forecasting Elisa Newby, Jukka Railavo and Antti Ripatti 58 Bank of Finland's forecast errors in 2004-2010 Elisa Newby and Seppo Orjasniemi 67 Articles and boxes from previous publications 75 Forecast tables T1
  • (2013)
    Bank of Finland bulletin. Economic outlook 5
    Preface 3 Bank of Finland forecasts 5 Executive summary 6 Economic outlook 9 Recent developments 9 Box 1. National accounts for the third quarter of 2013 11 Box 2. Employment effects of structural change in manufacturing sector 12 Operating environment 14 Non-financial corporations 20 Households 22 GDP and employment 23 Box 3. Weak economic trend reflected more in employment than unemployment 25 Public finances 28 Box 4. Finland's public finances 30 External balance 36 Wage and price trends 37 Box 5. Outlook for Finland's cost-competitiveness 40 Risk assessment 42 Box 6. Alternative scenario: improved corporate profitability 44 Changes from the previous forecast 47 Financial stability 49 Structural reforms in the economy and fiscal sustainability Helvi Kinnunen - Petri Mäki-Fränti - Jukka Railavo 67 Articles and boxes from previous publications 79 Forecast tables T1
  • (2013)
    Bank of Finland bulletin. Economic outlook 3
    Preface 3 Bank of Finland forecasts 5 Executive summary 6 Economic outlook 9 Recent developments 9 Box 1. National accounts for the first quarter of 2013 12 Operating environment 13 Non-financial corporations 20 Box 2. Geographical and product structures of Finnish goods exports have changed 23 Households 26 GDP and employment 27 Box 3. Demographic factors obscuring the picture of labour supply 30 Public finances 32 Box 4. Composition of Finland's public debt 36 External balance 39 Box 5. Foreign trade statistics based on value added reallocate country-specific trade surpluses and deficit 41 Wage and price trends 45 Box 6. Finnish inflation above euro area average 47 Risk assessment 49 Box 7. Alternative scenario: Demand in export markets picks up at the same time as conditions for corporate investment improve 53 Changes from the previous forecasts 58 Labour supply and population cohorts: impact of the business cycle on labour market attachment Helvi Kinnunen - Petri Mäki-Fränti 61 Sector-specific labour cost developments from the perspective of the industrial sector's cost structure Jarkko Kivistö 71 Articles and boxes 81 Forecast tables T1
  • Bank of Finland (2014)
    Bank of Finland bulletin. Economic outlook 3
    Preface 3 Bank of Finland forecasts 5 Executive summary 6 Economic outlook 9 Recent developments 9 Box 1. National accounts for the first quarter of 2014 12 Box 2. Deepening of Ukraine crisis would slow growth 13 Operating environment 15 Non-financial corporations 21 Box 3. Product structure of Finnish exports becomes less favourable 23 Box 4. Investment recovering only slowly 25 Households 27 GDP and employment 28 Box 5. Total factor productivity and R&D expenditure growing more slowly 31 Public finances 34 Box 6. Impact assessment of the government decision on spending limits 37 External balance 39 Wage and price trends 41 Box 7. The rise in average wages and weak productivity developments have pushed up inflation 43 Risk assessment 45 Box 8. Alternative scenario: financial tightening would lower GDP growth significantly 47 Changes from the previous forecasts 49 Large worker flows in the Finnish economy 51 Heidi Schauman - Juuso Vanhala - Matti Virén From Finnish Great Depression to Great Recession 65 Adam Gulan - Markus Haavio - Juha Kilponen Articles and boxes from previous publications 72 Forecast tables T1
  • Newby, Elisa; Orjasniemi, Seppo (2011)
    Bank of Finland bulletin. Economic outlook 3
    The Bank of Finland's Monetary Policy and Research department prepares a macroeconomic forecast twice a year for the current calendar year and the following two years. The forecast describes the most probable developments in the economy at the forecast date. In addition to the Finnish economy, the forecast also examines inter-national developments. However, interest and exchange rates are assumed to develop in line with financial market expectations, and no forecast is prepared for them. This article examines the accuracy of forecasts with respect to GDP inflation, unemployment and the components of GDP. An analysis of forecast errors is topical, as the Bank of Finland forecast model has recently been updated. In 2004-2009 the Bank prepared its fore-casts using a general equilibrium model of the Finnish economy named Aino.1 In spring 2010 the Bank introduced a new estimated version of the Aino model 2.
  • Bank of Finland (2014)
    Bank of Finland bulletin. Economic outlook 5
    Editorial 3 Economic outlook 5 I Forecast and risk assessments 5 Return to growth will be sluggish 5 Box 1. What do confidence indicators tell us about the short-term growth outlook for the Finnish economy? 8 Weak earnings development and concerns over the future subdue consumer demand 10 Individual projects sustain investment growth 10 Exports to lag behind pace of growth in export markets 11 Labour market trend will continue to be muted 12 Inflation will slow, but less than the euro area average 14 Current account will remain in deficit 14 General government balance will not be restored 15 Risk assessment and economic policy challenges 17 Economic policy challenges 18 Box 2. Alternative scenario: Lower oil price boosts economic growth 19 Box 3. Forecast assumptions 21 Box 4. Finland’s public finances 23 II Recent developments 28 GDP and eployment 28 Box 5. Corporate profitability declined 30 Prices 32 Box 6. Wages and taxation main factors behind rise in prices 33 Finland – the most expensive country in the euro area 34 Public finances 35 Labour market 37 Box 7. Change in age structure compensates for labour supply impact of population ageing 38 Financial markets and financial factors 40 Box 8. What factors explain Finland’s double-dip recession? 42 External balance 44 Global economy and Finland’s export markets 45 Commodity prices 46 Exchange and interest rates 47 Box 9. National accounts for the third quarter of 2014 49 Financial stability 51 Finland’s long-term growth outlook has deteriorated Juha Kilponen – Helvi Kinnunen – Petri Mäki-Fränti 67 Articles and boxes from previous publications 79 Forecast tables T1
  • Kajanoja, Lauri (2012)
    Bank of Finland bulletin. Economic outlook 5
    Finland s competitiveness has weakened during the period of Economic and Monetary Union, if competitiveness is understood to mean the presence of conditions ensuring the economy s external balance. The profitability of output in the open sector has declined. Unit labour costs in manufacturing point to a more favourable performance, but differences in price developments across sectors essentially reduce the usefulness of this indicator as a measure of competitiveness.
  • Kilponen, Juha; Kinnunen, Helvi; Mäki-Fränti, Petri (2015)
    Bank of Finland bulletin. Economic outlook 5/2014
    The prolongation of the recession, accumulation of public debt and ageing of the population are eroding the growth potential of the Finnish economy. Potential output growth is expected to remain below 1% over the next 25 years.
  • Mäki-Fränti, Petri (2011)
    Bank of Finland bulletin. Economic outlook 5
    The debt ratio of Finnish households has grown steadily over the past decade and in 2011 stood at approximately 108% of disposable household income.' Despite the growth in the debt ratio, the low level of interest rates has enabled households to continue to service their loans, and the employment situation did not show any rapid deterioration even during the recess-ion of 2008-2009. There have actually been very few payment defaults by Finnish households, despite the growth in the debt ratio. The most heavily indebted house-holds could nevertheless be vulnerable co financial difficulties. Even a short period of unemployment, or an increase in housing loan interest rates, could force them to substantially reduce their accustomed level of consumption, with this being reflected in increased volatility in aggregate private consumption. This would in turn amplify cyclical volatility in the economy. Moreover, excessive levels of debt increase the risk of households defaulting on their payments, and in an extreme scenario household credit risks could endanger the stability of the entire financial system. More important than the average debt ratio is the way in which debt is distributed between households. High-income and wealthy households are better placed than low-income households to bear risks that are large not just in absolute euro terms, but also relative to house-hold income. The larger the amount of money left over after loan servicing costs, the easier it will be for a household to adjust its consumption in the event of a decline in income due, for instance, to unemployment.
  • Kinnunen, Helvi; Mäki-Fränti, Petri; Viertola, Hannu (2012)
    Bank of Finland bulletin. Economic outlook 5
    Finland has substantial problems with fiscal sustainability. The weak economic situation in the next few years, combined with economic growth that will remain subdued also in the long term and rising expenditure pressures denote a considerable need to strengthen the financial balance of both central and local government. Higher immigration would reduce these needs, but could not be a decisive factor. Faster output growth would ease the situation of the earningsrelated pension funds. A rise in the price of public services is a particular threat to the sustainability of the public finances.
  • Gulan, Adam; Haavio, Markus; Kilponen, Juha (2014)
    Bank of Finland bulletin. Economic outlook 3
    The Finnish economy has experienced three major recessions over the last 25 years, all very different in nature. The turn of the century witnessed the bursting of the dot-com bubble in the ‘Nokia economy’. The country was also severely hit by the global financial crisis of 2007–2008 and the ‘Great Recession’ that followed. However, the most serious episode was the prolonged contraction of the early 1990s, known in Finland as the ‘Finnish Great Depression’. In this article, we use an empirical structural vector autoregression approach to identify different factors that could explain the Finnish business cycle, and the 1990–1993 contraction in particular. We estimate the model of a small open economy, in which we identify both real and financial shocks, from both the demand and the supply side. Shocks are identified by using state-of-the-art sign restrictions methodology. Our approach allows us to study the propagation mechanisms of the shocks and the role of macro-financial linkages. In comparison with earlier studies of the Finnish Great Depression, our approach allows us to quantify the relative importance of different factors.
  • Kinnunen, Helvi; Mäki-Fränti, Petri (2013)
    Bank of Finland bulletin. Economic outlook 3
    People of different age react in the labour market differently to cyclical trends and changes in social security and pension provision. The labour force participation rate for even same-age people has not remained unchanged over a long period of time. Cohorts born in the 1950s and 1960s and entering working life in the 1970s and 1980s have the highest labour force participation rate. However, the participation rate for younger people has begun to fall. Young people s absence from the labour market can in part be explained by longer times of study. But the weakness of the business cycle and tightness of the labour market are also reducing labour supply among young men, in particular. Structural change in the economy has increasingly gained momentum during the financial crisis, and the employment situation has deteriorated particularly in male-dominated industrial sectors. There is a risk that the labour market will face a generation of recession males in the same way as following the recession of the 1990s there were recession females , whose labour force participation rate remained lower than average for a long time.
  • Schauman, Heidi; Vanhala, Juuso; Virén, Matti (2014)
    Bank of Finland bulletin. Economic outlook 3
    Viewed in the light of Finland’s employment and unemployment figures, the labour market impact of the weak economic performance of recent years would appear so far to be less than feared. These aggregate-level figures do not, however, reveal anything about changes between sectors or worker flows. The present article explores the labour market’s internal dynamics and worker flows. Our aim is to take an overview of the dynamics of the Finnish labour market that lie behind the typically reported aggregate figures. We also use worker flows to explain observed changes in unemployment. In addition to this, the article presents the results achieved when probit analysis is used to study labour market flows. The analysis presented here is based primarily on micro-level quarterly data from Statistics Finland’s Labour Force Survey for the years 2001–2013 (covering 15–74-year-olds). This, in turn, is based on monthly data from questionnaires. The material comprises one and a half million observations and contains data on e.g. respondents’ age, gender, educational background, sector of employment, labour force participation, labour market state, professional status, duration of unemployment and duration of current job.
  • Kinnunen, Helvi; Mäki-Fränti, Petri; Newby, Elisa; Orjasniemi, Seppo; Railavo, Jukka (2012)
    Bank of Finland bulletin. Economic outlook 3
    To make the correct economic policy choices one must have a view of the long-term growth prospects for the economy, as these policy choices will have implications for decades ahead. Of the factors that will influence economic growth in the decades ahead, the easiest to anticipate is population ageing, which will depress labour supply and hence reduce the economy's growth potential. In contrast, it is much harder to estimate future trends in productivity. The slower productivity growth since 2008 could be viewed as a temporary phenomenon that will be followed by a return to the earlier trend of rapid productivity growth, but it could also be a more permanent change. In any case, the share of output taken by services, with their slower productivity growth, will grow in the immediate decades ahead as the population ages, which foretells much more sluggish GDP over the next few decades.