Browsing by Author "Suomen Pankki, KT"

Sort by: Order: Results:

Now showing items 1-19 of 19
  • Hukkinen, Juhana; Virén, Matti (1996)
    Suomen Pankin keskustelualoitteita 23/1996
    This paper contains a description of a small quarterly forecasting model for the Finnish economy.We evaluate the forecasting properties of the model by means of stochastic simulation involving both the endogenous and exogenous variables of the model.The simulations allow us to identify and quantify the main sources of forecasting uncertainty.We are also able to assess the linearity of the model.Forecasting performance is also analyzed in a conventional way by means of dynamic simulation.The important issue in these simulations is the stability of the model: how simulated values depend on the estimation period and the ordering of time periods. Key words: forecasting, macro models, simulation
  • Björkstén, Nils; Syrjänen, Miika (1999)
    Suomen Pankin keskustelualoitteita 11/1999
    Evidence suggests that after a period of convergence in the early and mid 1990s, the euro area economies may have started diverging. As a consequence, the common monetary policy could become less well-suited for a number of countries.This paper studies the extent and severity of the recent divergences, and discusses the capacity of exposed countries to compensate for nationally suboptimal monetary conditions through other policy channels.As a step toward developing an analytical framework for monitoring intra-euro area developments, we present a "convergence barometer" to monitor divergences, and a Taylor rule based "monetary thermometer" to compare the common monetary policy to benchmark optimal policy for individual countries.A main conclusion is that policyrnakers at the euro area level should be concerned about divergences, since automatic stabilisers alone may not be enough to restore a healthy equilibrium to potential "outlier" countries.
  • Kinnunen, Helvi; Tujula, Mika (1997)
    Suomen Pankin keskustelualoitteita 9/1997
    Raportissa tarkastellaan julkisen talouden alijäämän ja velkaantumisen reaktioita talouden kasvuhäiriöihin lyhyellä aikavälillä.Lisäksi selvitetään painelaskelmien avulla rakenteellisten tekijöiden, erityisesti väestön vanhenemisesta aiheutuvien menojen vaikutusta Suomen julkisen talouden kestävyyteen pitkällä aikavälillä. Laskelmien mukaan riski alijäämärajoitteen ylittymiseen on lyhyellä ja keskipitkällä aikavälillä (2-8 vuotta) pieni.Tuotannon supistuminen 2 prosentilla ei vuoteen 2005 mennessä johtaisi alijäämärajoitteiden ylittymiseen, mikäli häiriö on Iyhytaikainen ja kasvu nopeutuu uudelleen trendiuralle.Pienikin kasvuhäiriö on kuitenkin ongelmallinen, koska se estää valtiontalouden velkaantumisen taittumisen.Sen sijaan poikkeuksellisen vakava lama (bkt supistuu 5 % yhtenä vuonna) johtaisi alijäämärajoitteiden pysyvään ylittymiseen ja siten kestämättömään velkaantumiskehitykseen . Kauemmas tulevaisuuteen ulottuvat painelaskelmat, joissa arviot eläkemenojen kehityksestä perustuvat voimassa olevaan eläkelainsäädäntöön ja ennustettuun väestökehitykseen, osoittavat, että ilman talouden kasvuhäiriöitäkin julkisen talouden rahoitustilanne on pitkällä aikavälillä kestämätön.Julkisen talouden tasapainottaminen on siten välttämätöntä EMU-ratkaisusta riippumatta.
  • Redward, Peter; Saarenheimo, Tuomas (1996)
    Suomen Pankin keskustelualoitteita 22/1996
    In this paper we analyse the empirical relevance of the mechanisms through which the Bank of Finland's actions are transmitted to the Finnish economy.We concentrate on the first stage of the monetary policy transmission mechanism; namely, the effect of the Bank's actions on domestic market interest rates and the exchange rate. The questions we analyse include: What is the impact of a change in the Bank of Finland's one month tender rate on interest rates of longer maturities and on the exchange rate?How do Finnish interest rates and the exchange rate react to turmoil in foreign money and bond markets?To what extent can recent developments in Finnish interest rates be attributed to the Bank of Finland's policies? We find that the effect of a monetary policy shock is limited to the short end of the yield curve.Changes in the Bank of Finland's tender rate seem to signal the future path of short rates for a period of 1-2 years.On the other hand, Finnish bond rates appear to follow closely circumstances in the international financial market and do not seem to react systematically to changes in the Bank of Finland's tender rate.We find that monetary policy has contributed little to the large swings in Finnish bond rates experienced over the last few years.Most of the variation in bond rates can be attributed to changes in international long rates and changes in the perceived overall credibility of the Finnish economy. Key words: monetary policy transmission, VAR-models, Finland
  • Barot, Bharat; Takala, Kari (1998)
    Suomen Pankin keskustelualoitteita 12/1998
    Given the emphasis on price stability in monetary policy, the concern caused by recent rapid increases in housing prices are understandable.It is suspected that such rises may provide early indication of mounting inflationary pressure.The purpose of this paper is to formulate and estimate an error-correction system model for housing prices and inflation for forecasting purposes.By using the estimated cointegrating vector, we also get an estimate of the equilibrium level for house prices that might be helpful in analysing the current situation in the housing market and the stance for monetary policy. Housing prices typically exhibit large cycles, and they are thus predictable to some extent.Volatility is caused by the fact that the supply of houses does not react perfectly to changes in housing demand.However, housing prices and inflation tend to have similar growth rates over the long run.In other words, houses provide a good inflation shelter, but in the long run, the real return to is equal to the explicit or implicit rental income derived from the owning of houses.The estimation results also show that the changes in the general price level are transmitted into house prices rather quickly, but inflation is surprisingly insensitive to housing prices.The equilibrium relationship between housing prices and consumer prices is also affected in the short run by variables such as interest rates, wages and the unemployment rate. Keywords: House prices, inflation, cointegration
  • Hukkinen, Juhana; Virén, Matti (1998)
    Suomen Pankin keskustelualoitteita 5/1998
    This paper provides an answer to the question of how to improve the forecasting performance of a macro model to better account for economic developments and how to evaluate the forecasting uncertainty.The main tool in this assessment is stochastic simulation.Stochastic simulations in this paper involve both endogenous and exogenous variables.These simulations also allow us to assess the linearity of the model.Alternative dynamic simulations may, in turn, give some idea of the stability of the model.Finally, the forecasts may be improved by comparing the outcomes from the macro model and from a leading indicators' model. This kind of exercise is particularly useful in assessing the developments in the short run, in which case the macro models typically perform rather poorly. Keywords: forecasting, macro models, simulation
  • Forsman, Pentti (1997)
    Suomen Pankin keskustelualoitteita 12/1996
    Inflaation haittoja on usein vähätelty.Samalla on ylikorostettu mahdollisuutta, että työllisyysongelmat olisi helpompi hoitaa nopean inflaation oloissa.Uudemmat teoreettiset tutkimukset ovat kuitenkin tuoneet esiin uusia kanavia, joiden kautta inflaatio vaikuttaa haitallisesti sekä yksityisten taloudenpitäjien että julkisen sektorin toimintaan.Osa näistä inflaation haittatekijöistä saa aikaan kulutusmahdollisuuksien pienentymiseen kertaluontoisesti.Lisäksi hintatason nousu vaikeuttaa investointeja tai muutoin haittaa markkinoiden toimintaa talouden kasvuvauhtia heikentävästi.Inflaatio on usein merkki epävakaasta talouspolitiikasta, joka puolestaan saa aikaan riskilisän rahoitusvarojen siirtyessä turvallisempiin kohteisiin. Myös uudemmat empiiriset tulokset antavat selkeitä viitteitä sitä, että inflaation ja kasvun välinen relaatio on negatiivinen. Erityisesti kaksinumeroinen tai vielä sitäkin nopeampi inflaatio hidastaa kasvua ja heikentää hyvinvointia pitkällä ajalla. Empiiriset tulokset eivät myöskään anna minkäänlaista tukea sille, että kohtuullisen matala, so. muutaman prosentin inflaatio olisi suotava.Pienilläkin inflaatioluvuilla on taipumus vaikeuttaa markkinoiden toimintaa ja hidastaa kasvua.Lisäksi rahapolitiikan teko on helpompaa vakaan hintatason oloissa, koska silloin keskuspankin on helpompi säilyttää uskottavuutensa ja sitä kautta saada liikkumatilaa.Viimeksimainitusta on hyvä esimerkki 1990-luvun USA:n onnistunut rahapolitiikka. Asiasanat: inflaatio, kasvu, rahapolitiikka
  • Pyyhtiä, Ilmo (1994)
    Suomen Pankin keskustelualoitteita 14/1994
    This paper is an extension of earlier studies by the writer on the influence of innovations on investment plans.It examines the effects of a change in the financial market regime on the revision of investment plans.The innovations in economic data were measured with the error terms of the VAR model.The VAR model was estimated to demand, user cost of capital and total labour costs in the manufacturing industry.Innovation terms calculated in this way were added to the OLS model, in which the realized investments of manufacturing firms are explained by survey data on investment plans collected by the Bank of Finland.In the earlier studies of the writer innovations are formed using ARIMA models and survey data.The estimation results confirm the findings of the earlier revision models of investment plans.Unpredicted economic innovations alter investment plans and the signs of the estimated coefficients are the expected ones, positive for demand innovations and negative for capital cost and wage cost innovations.The conclusion drawn is that financial market liberalization has not influenced the revision of investment plans.The parameters of the investment plan model are also stable after financial market liberalization.
  • Alberola, Enrique; Tyrväinen, Timo (1998)
    Bank of Finland. Discussion papers 15/1998
    The Balassa-Samuelson (BS) model is evaluated in eight of the eleven EMU countries.This model suggests that productivity differentials between traded and non-traded goods sectors generate sectoral inflation differentials (dual inflation).Furthermore, differentials in the degree of dual inflation induce inflation differentials between countries. The standard BS model implies a cointegration relationship between relative prices and sectoral productivities.While this link generally seems to exist, the magnitudes of the parameter estimates are not in accordance with the theoretical model in most countries. As the presumed uniformity of sectoral wages is rejected in most cases, relative wages were allowed to enter the estimation.This extended BS model is endorsed by the data in every country. Simulations based on these results were carried out to quantify possible inflation differentials.Setting EMU-wide inflation equal to 2% and assuming that PPP holds for traded goods, the projected inflation varies around the EMU-average within a margin of some b1 1 percentage points accross the countries. Keywords: sectoral productivity, inflation differentials, EMU
  • Djerf, Kari; Takala, Kari (1997)
    Suomen Pankin keskustelualoitteita 20/1997
    The Finnish Consumer Barometer was introduced in autumn 1987.Data were first collected twice a year and from August 1991 until September 1995 quarterly.After Finland joined the European Union in 1995, the survey was adopted as one member of the Harmonised Consumer Survey of the European Communities.Since October 1995, data have been collected monthly.Performance of the Consumer Barometer has already been evaluated by means of descriptive studies (see Djerf 1990).As the survey matures, it becomes feasible to make a more thorough study on the usefulness of the survey.Here we are, for example, interested in investigating how consumers were able to predict the long-lasting recession of our economy.The consumer confidence index and the five questions used for calculating it are compared to various components of Finnish macroeconomic time series.Additionally, we analyse the coincidence of other common measures (unemployment expectations, inflation expectations, etc.) as well as other, less frequently studied indicators such as the willingness to save and borrow with their possible counterparts in the real economy.It is important to evaluate whether consumer assessments about different economic questions are useful in predicting various macroeconomic variables i.e. we look for the additional information contained in barometer answers.We end by considering the usefulness of various indicators for specific macro-economic behavioural equations.Key words: consumer barometer, economic forecasting, causality testing
  • Forsman, Pentti; Saarenheimo, Tuomas; Terviö, Marko (1996)
    Suomen Pankin keskustelualoitteita 30/1996
    This study of markups, ie prices over marginal costs in manufacturing industries, builds on the work of Robert Hall and Werner Roeger.We analyze several methods used in estimating sectoral markups, and then apply them to empirical analysis of the industrial sectors of six EU countries (Germany, France, Italy, the UK, Sweden and Finland).We argue that measurement errors in the model variables, particularly in the rental price of capital, are likely to be a major problem in markup estimation, and show that due to measurement errors, the approach developed by Roeger is likely to produce markup estimates with an upward bias.Such biased results are particularly deceiving since the outcome tends to produce artificially good fits, high t-values, and markup estimates which are "sensible" in magnitude. We also introduce a "modified" model for markup estimation, which would, if all assumptions were fulfilled and variables correctly measured, yield results identical to those obtained with Roeger's model.Yet, in contrast to Roeger's model, in the presence of measurement errors the markup estimates produced by this model have downward bias.Comparison of these two sets of estimates enables us to assess the seriousness of the measurement problem.We found that the estimates produced by the two models differed in a systematic fashion which is symptomatic of measurement errors.All in all, our results provide strong support for our hypothesis that the markup estimates obtained with Roeger's method are likely to be artifacts created by measurement errors mainly in the rental price of capital. Key words: markup, imperfect competition
  • Kuismanen, Mika; Spolander, Mikko (1994)
    Suomen Pankin keskustelualoitteita 21/1994
    This paper gives a short overview of how inflation expectations are measured in Finland and considers the possibilities of using such data to predict actual inflation. In Finland, there are three regularly published surveys, which include questions on ex post perceptions and/or ex ante expectations of the direction of change in the general price level or in the inflation rate.They are conducted by Statistics Finland (TK), the Confederation of Finnish Industry and Employers (TT) and the newspaper Helsingin Sanomat (HS). In the TK data expectations match realized rates of inflation quite well but the time series is too short.In the TT data the time series is long enough but the match between expectations and realized rates is poor.In HS data the match is quite good and the time series covers more than one business cycle. According to the correlation analysis, it seems that the TK data and the HS data could be used to form some kind of estimate of the future rate of consumer price inflation.By contrast, the TT data is probably better for predicting wholesale, producer or export price inflation. Although the HS data seems to offer us the best modelling possibilities, it is not very useful as a single exogenous variable in explaining realized rates of inflation.The small number of observations alone limits the use of advanced econometric methods and several exogenous variables.With the accumulation of more observations over time, however, we will be able to expand the model and the use of alternative data.For particular, the TK data seems quite promising.
  • Saarenheimo, Tuomas (1996)
    Bank of Finland. Discussion papers 15/1996
    The possible participation of Finland in the Stage m of the European Monetary Union would constitute a major change in the operating environment of the Finnish economy.As a member of the common currency area, Finnish interest and exchange rates would no longer be determined by domestic monetary policy or domestic financial market reactions, but would instead be given by the European Central Bank and the European financial markets.Would this increase the severity of business cycles in Finland?This is the question the present paper seeks to analyze. In the first part of this paper, we review and evaluate the existing econometric work on the consequences of the European Monetary Union.Although the empirical work on the subject is abundant, it suffers from a narrow focus.Most of the research follow a highly simplistic empirical implementation of the traditional Keynesian theory of optimal currency areas and measure the desirability of a currency union is by cross-country correlations of certain macroeconomic variables.We find the results obtained in those studies hard to interpret, and argue that - particularly when measured in a mixed exchange-rate system as has prevailed in Europe - simple macroeconomic correlations do not convey any meaningful information about the desirability of a currency union. In the second part we present an alternative approach to the empirical analysis of the topic.We construct a structural vector error-correction system to quantify the extent to which monetary autonomy has served to stabilize the real economy in Finland.This model is applied to analyze directly the consequences of Finland's possible entry into the European Monetary Union. The results suggest that monetary autonomy has played some role in insulating the real economy from the effects of shocks.In particular, adjustments of the nominal exchange rate appear to have stabilized the real interest rate and, consequently, smoothed the changes in domestic demand.However, this role has been relatively small, and given the uncertainties involved, it is possible that the effect has actually been negligible.Overall, we find no strong evidence to support a claim that monetary autonomy has served to stabilize significantly the Finnish economy. Key words: EMU, optimal currency area, Finland, structural VAR models
  • Spolander, Mikko (1994)
    Suomen Pankin keskustelualoitteita 24/1994
    February 1993 the Bank of Finland announced an inflation target the aim of which is to stabilize the inflation rate, as measured by the indicator of underlying inflation (IUI), permanently at the two per cent level by 1995.The IUI is the consumer price index (CPI) from which the effects of indirect taxes, subsidies and housing-related capital costs, i.e. house prices and mortgage interest payments, have been removed. Removing the effects of housing-related capital costs from the overall CPI simply means that a new consumption basket is constructed without them.The exclusion of the effects of indirect taxes and subsidies is more discretionary.The procedure is the same as in the case of the net price index (NPI).The indicator of underlying inflation is actually a type of net price index.It acts like the NPI and has the same weaknesses as the NPI. In practice the removal of the effects of changes in the rates of indirect taxes and subsidies is not simple or transparent. The size of the overall effect can be estimated reliably enough on the basis of the effect on the central government revenue for the same year.But, unfortunately, nobody knows how long it will take for this effect to be passed through into consumer prices.All the errors in estimating the pass-through lags are also reflected in the IUI.The IUI remains sensitive to these estimation errors and, hence, some of the monthly changes in the IUI will undoubtedly be difficult to interpret. The price effects of Finland's EU membership serve as a good illustration of the effects of a structural change on the behaviour of the IUI.
  • Ketelsen, Uwe; Kortelainen, Mika (1996)
    Suomen Pankin keskustelualoitteita 26/1996
    Corrected version.
    In this paper, we analyze the empirical relevance of exchange rate pass-through for Finland, Sweden and Denmark during the period 1980-1994.Further, we attemp to determine if there has been a structural change in the pass-through relationship in 1990s.We find that about half the changes in exchange rates and world prices are passed through to import prices within one year, and three-quarters of such changes are passed through to import prices in two years.Moreover, there are no major differences among countries.Parameter constancy tests indicate the possibility of a structural change where the pass-through has slowed in recent years.Possible explanations of this are that the exchange rate regime has changed and competition has increased. Key words: exchange rate pass-through, import prices, structural change
  • Kinnunen, Helvi (1998)
    Bank of Finland. Discussion papers 3/1998
    This paper examines the sources of output shocks in Finland as compared to other EU countries.The data consists of output fluctuations in main industries in nine current EU countries for the period 1978 - 1993.The sources of output shock are considered to consist of country-specific factors, sector-specific factors and a time factor, which is common to all countries and sectors. Fluctuation is partitioned using three-dimensional analysis of variance. Output shocks in Finland are clearly more country-specific than in other EU countries.A separate examination of the time period preceding the 1990s demonstrates that the result is not due to the exceptional recession in the beginning of the 1990s.The more central role that the country-specific factor has in Finland as compared to other EU countries is explained by the fact that average output growth was higher in Finland than in other EU countries until the end of the 1980s.Differences in growth rates between sectors also were larger than in other countries. Examination of the time period including the recession revealed that idiosyncratic economic cycle was clearly a more significant source of disturbances in Finland than in other countries. Examining the time period covering the depression also underlines the large volatility of the sheltered sector in Finland. Keywords: output shocks, output by industry, variance partitioning, EU countries
  • Rasi, Chris-Marie; Viikari, Jan-Markus (1998)
    Suomen Pankin keskustelualoitteita 6/1998
    This study presents statistical estimates of Non Accelerating Inflation Rate of Unemployment, or NAIRU, and potential output in Finland.The estimates are obtained by applying the structural time series/unobserved components method to quarterly data on inflation, rate of unemployment, aggregate production and a number of auxiliary variables covering the period 1982:1-1996:4.According to the basic idea underlying these methods, noisy estimates of the unobserved NAIRU and potential output can be obtained from the so called measurement equations, which in the present study are provided by the now standard specifications of the Okun's law and Phillips-curve.To pin down the dynamics of the unobserved components the study assumes that they are driven by stochastic trends.One of the main features of the method applied in the study is the system estimation of the NAIRU and potential output time seria along with other parameters.According to the results NAIRU and potential output variate in the long run less than the actual unemployment rate and output.Until the latter part of 1991 NAIRU has been above the unemployment rate.After this the NAIRU has remained clearly below the unemployment rate although it has risen trendwise to a level between 8 and 9.5 per cent in the 1990ies. Key words: NAIRU, potential output, Phillips curve, structural time series models, unobserved components method
  • Forsman, Pentti; Saarenheimo, Tuomas; Terviö, Marko (1997)
    Suomen Pankin keskustelualoitteita 16/1997
    In this study, we analyse variation of markups in Finnish industrial sectors, both between industries and over time.The study finds evidence that:Since the beginning the 1980s, practically every Finnish industrial sector has been able to extract a positive markup.The average industrial markup has apparently declined over time.In addition to the declining trend, there seems to be procyclical movement in markups.Despite of the decline in average markups, most industries maintained positive markups in 1995.The same reservations apply to these results as to corresponding macro-level analysis of markups, because the model relies on instantaneous adjustment of the factors of production. If, for any reason, firms are slow to adjust their factors to changes in demand conditions, it would bias our markup estimates upwards.Indeed, we believe this is the case, so we do not recommend giving too much weight to the level of our markup estimates.Rather, we wish to note that the estimated time path for industrial markups is generally plausible.Thus, the decline in markups since 1991 may partly explain Finland's unexpectedly low inflation in recent years. Key words: markup, imperfect competition
  • Tyrväinen, Timo (1996)
    Suomen Pankin keskustelualoitteita 29/1996
    This study examines wage paths in the Finnish manufacturing using the Johansen method in estimations.The empirical results have the following implications. i) Wage-wage links in the Finnish manufacturing industry have been tight.In a longer perspective, wages in the high-pay branches and low-pay branches have followed a common path. ii) An important characteristic of wage development in high-pay branches has been the tendency to counteract any attempts to improve the relative position of the low-pay branches with additional wage increases.A major part of the adjustment through which earlier wage structures have been restored has taken place within one year. iii) The adjustment process due to wage-wage links seems to have changed since the devaluation of the markka in November 1991. Result (ii) is of great interest for Finland and the other Nordic countries.This is because in Northern Europe wage settlements have been commonly designed to reduce wage differentials.In the Scandinavian literature, these have often been called "solidarity" or "solidaristic" type contracts. The results imply that when wage differentials have been compressed through institutional arrangements, market forces have counteracted and nullified the effects on wage structures.These forces include both local and branch-specific trade union bodies as well as employers.Resulting wage adjustment has been so quick that most of it must be attributable to wage drift.For analysis of the Finnish inflation history it is of great interest to notice that efforts to reduce wage differentials through incomes policy have led to additional inflation.The earlier wage structures have been fully restored and only a higher wage and price level - ie a loss in competitiveness - has remained. Against the commonly held view, wages in the low-pay sector have, in a sense, driven wages in the high-pay sector and "solidarity" in wage policy seems to have been part of the national behavioural model characterized by high inflation and repeated devaluations.In recent years, a change in this process appears to have taken place. Whether this is actually an indication of some profound change in wage-wage links remains to be seen. Key words: Wage determination, wage differentials, wage-wage links, solidaristic wage contracts.