Browsing by Author "Vilmunen, Jouko"

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  • Kilponen, Juha; Ripatti, Antti; Vilmunen, Jouko (2004)
    EURO & TALOUS 3
  • Kilponen, Juha; Ripatti, Antti; Vilmunen, Jouko (2004)
    Bank of Finland. Bulletin 78 ; 3
  • Jääskelä, Jarkko; Vilmunen, Jouko (1999)
    Suomen Pankin keskustelualoitteita 12/1999
    This paper investigates the measurement of anticipated interest rate policy and the effects of these expectations on the term structure of nominal interest rates.It is shown that, under the expectations hypothesis, the level of long-term interest rates depends on three factors: the level of the monetary policy interest rate, ie the steering rate; the spread between the market interest rate and the steering rate; and market expectations of the next steering rate change.The theoretical model builds on the assumption that market participants have only imperfect knowledge of the mechanism whereby changes in the steering rate are determined.As a consequence, expectations formation, although realistic, need not be entirely rational.Steering rate changes take the form of discrete jumps and occur infrequently on a daily scale.Given these assumptions, discussion of the determination of the term structure is related to the literature on uncertainty about monetary policy regimes and small samples, ie "peso" problems. Empirical analysis based on Nelson-Siegel estimates of the daily yield curves in Finland in the period 1 January 1993 to 31 October 1997 complements the theoretical discussion.The observed differences between estimated market expectations and actual tender rate changes are quite large in the sample, particularly for the longer maturities.The approach applied in this study is promising, not only in the sense of potentially providing estimates of market expectations concerning future discrete changes in monetary policy interest rates but also in the sense of its apparent potential in accounting for the often reported poor empirical performance of the expectations hypothesis. Keywords: term structure of interest rates, expectations, target changes, peso problems
  • Vilmunen, Jouko; Palmroos, Peter (2013)
    Bank of Finland Research Discussion Papers 17/2013
    In this study we present a closed form solution to the moments and, in particular, correlation of two log-normally distributed random variables, where the underlying log-normal distribution is potentially truncated and censored at both tails. Throughout the analysis we further assume that the parameters of the unconstrained bivariate log-normal distribution are known. The closed form solution also covers the cases where one tail is truncated and the other is censored. Keywords: Bivariate log-normal distribution, Pearson's product-moment correlation, Truncated, Censored, Tail correlation, Solvency II JEL Classification C18, C46, G28
  • Ripatti, Antti; Vilmunen, Jouko (2001)
    Suomen Pankin keskustelualoitteita; Bank of Finland. Discussion papers 10/2001
    The study demonstrates that the decline in the labour share in Finland can not be explained by the Cobb-Douglas production function.Instead, we propose an approach based on the constant-elasticity-of-substitution (CES) production function with labour- and capital-augmenting technical progress.The model is augmented by imperfect competition in the output market.According to the empirical results based on estimation of the first-order-conditions, the technical elasticity of substitution is significantly less than unity (0.6) and hence the Cobb-Douglas production function is rejected.The growth rate of the estimated labour-augmenting technical progress has decreased in recent years, which is not consistent with the 'new-economy' hypothesis. Capital-augmenting technical trend has exploded during the same period, which provides a possible explanation for the rapid growth of the Solow residual.The main contributing factor behind the declining labour share is, however, the increasing mark-up. Keywords: production function, elasticity of technical substitution, input-augmenting technical progress, new economy
  • Vilmunen, Jouko (2002)
    Suomen Pankin keskustelualoitteita 22/2002
    In this paper we estimate reduced form investment equations for Finland using aggregate as well as firm-level panel data.We obtain significant estimates of the accelerator and user-cost effects on investment with both aggregate and firm level data, but these effects appear to be stronger at the aggregate level.Although the response of firms' investment spending to shifts in monetary policy seems to be quantitatively nontrivial, it is surprisingly weak according to the results with firm-level data, and a considerable amount of heterogeneity also exists across firms in this respect. The firm-level estimates do not provide evidence for the existence of binding financing constraints in firms' investment spending, at least among the sampled large firms, as we cannot obtain a significant coefficient estimate on the cash flow variable. Key words: accelerator, user cost, transmission of monetary policy, panel data
  • Kilponen, Juha; Vilmunen, Jouko; Vähämaa, Oskari (2013)
    Bank of Finland Research Discussion Papers 9/2013
    Cancellation of income and substitution effect implied by King-Plosser-Rebelo (1988) preferences breaks tight coefficient restriction between the slope of the Phillips curve and the elasticity of consumption with respect to real interest rate in a sticky price macro model. This facilitates the estimation of intertemporal elasticity of substitution using full information Bayesian Maximum Likelihood techniques within a structural model. The US data from the period 1984 - 2007 supports low intertemporal elasticity of substitution and strongly rejects a logarithmic and an additively separable utility specification commonly applied in the New Keynesian literature. Keywords: Monetary policy, Bayesian estimation, Non-separable utility. JEL: E32, E52, E21
  • Vilmunen, Jouko (2005)
    EURO & TALOUS 1
  • Haaparanta, Pertti; Starck, Christian; Vilmunen, Jouko (1988)
    Bank of Finland Research Discussion Papers 21/1988
    Kotitalouksien säästämisaste on trendimäisesti alentunut Suomessa jo useamman vuoden ajan. Tämä näyttäisi muodostuvan ongelmalliseksi kasvavan vaihtotaseen alijäämän olosuhteissa. Säästämisasteen alenemiseen on useita syitä, joista yksi keskeisimmistä on kotitalouksien tulo-odotukset ja säännöstelystä vapautuneet pääomamarkkinat. Jos pääomamarkkinat nimittäin toimivat riittävän täydellisesti, voivat kotitaloudet ottaa luottoa vallitsevalla korolla haluamansa määrän, kun ne odottavat tulojensa kasvavan, tai sijoittaa vallitsevalla korolla haluamansa määrän, kun ne odottavat tulojensa laskevan. Näin ollen kotitaloudet voivat tasata kulutusvirtaansa pääomamarkkinoiden avulla, jolloin säästäminen laskee odotettujen tulojen noustessa ja nousee odotettujen tulojen laskiessa. Tätä hypoteesia tutkittiin Suomen osalta ajanjaksolla 1960 - 85, sekä osajaksoilla 1960 - 69, 1960 - 75, 1970 - 85 ja 1976 - 85. Hypoteesi hylätään ainoastaan ajanjaksolle 1960 - 69, joka yhdessä erillisten luottorajoitearvioiden kanssa viittaa 1960-luvulla suhteelliseen kattavaan ja sitovaan luotonsäännöstelyyn. Kotitalouksien kulutus- ja säästämiskäyttäytymisessä näyttäisi tapahtuneen muutoksia siis jo 1970-luvulla.
  • Haaparanta, Pertti; Vilmunen, Jouko (1989)
    Bank of Finland Research Discussion Papers 25/1989
    Tutkimusraportissa esitellään tulokset, jotka on saatu selvitettäessä kestokulutushyödykkeiden kokonaiskysyntää. Tulokset viittaavat siihen, että kestokulutushyödykkeiden kysynnän kasvu voidaan selittää lähes täysin tulojen kasvulla ja kestokulutushyödykkeiden suhteellisten hintojen laskulla. Intertemporaalisilla tekijöillä (koroilla ja odotetuilla hintojen muutoksilla) ei näyttäisi olevan mitään merkitystä.
  • Vilmunen, Jouko (1992)
    Suomen Pankki. B = Bank of Finland Publications. Series B 45
    Acknowledgements 5 1 Introduction 9 2 Wage Indexation and Foreign Exchange Intervention in an Open Economy: the Gray-Fischer Approach 14 2.1 Introduction 14 2.2 The labour market model 15 2.2.1 Comments on the Gray-Fischer labour market model 16 2.3 A small open economy subject to wage rigidity and foreign exchange intervention 21 2.3.1 Exchange rate expectations 26 2.3.2 Full information output 28 2.3.3 Actual real wages and output 28 2.3.4 Optimal wage indexation and foreign exchange intervention from the point of view of macroeconomic stability 29 2.3.5 Optimality of a single instrument 34 2.3.5.1 Optimal wage indexation under a given exchange rate regime 34 2.3.4.2 Optimal degree of intervention given the degree of wage indexation 37 2.4 Introducing terms-of-trade changes 39 2.5 Wage rigidity, foreign exchange intervention and the degree of openness 45 2.5.1 A two-sector economy with wage indexation and foreign exchange intervention 46 2.5.2 Optimal degree of wage indexation and foreign exchange intervention and openness 52 2.5.3 Optimality of a single instrument 62 2.5.3.1 Optimal wage indexation under a given exchange rate regime 62 2.5.3.2 Optimal degree of intervention given the degree of wage indexation 67 2.6 Summary of chapter two and discussion 70 3 Bargaining, Trade Unions and Wage Formation in an Open Economy 78 3.1 Introduction 78 3.2 Bargaining between trade unions and firms 78 3.3 Indexed contract wages: an operationalization of the asymmetric Nash bargaining models 86 Appendix to chapter three 104 4 Exchange Rate Variability and Wage Formation 106 4.1 Introduction 106 4.2 A marcomodel of a small open economy with union-firm wage bargaining 108 4.3 Steady state effects of indexation and foreign exchange intervention 115 4.3.1 Steady state output under fixed and flexible exchange rates 116 4.3.1.1 Fixed exchange rates 117 4.3.1.2 Flexible exchange rates 119 4.3.2 Structural features of the labour markets 122 4.3.3 Variability versus level; policy makers' objectives and optimality of a single instrument 125 5 Summary and Discussion 143 References 154
  • Vilmunen, Jouko (1992)
    Suomen Pankki. B 45
    Sisällysluettelo: Acknowledgements 5 1 Introduction 9 2 Wage Indexation and Foreign Exchange Intervention in an Open Economy: the Gray-Fischer Approach 14 2.1 Introduction 14 2.2 The labour market model 15 2.2.1 Comments on the Gray-Fischer labour market model 16 2.3 A small open economy subject to wage rigidity and foreign exchange intervention 21 2.3.1 Exchange rate expectations 26 2.3.2 Full information output 28 2.3.3 Actual real wages and output 28 2.3.4 Optimal wage indexation and foreign exchange intervention from the point of view of macroeconomic stability 29 2.3.5 Optimality of a single instrument 34 2.3.5.1 Optimal wage indexation under a given exchange rate regime 34 2.3.4.2 Optimal degree of intervention given the degree of wage indexation 37 2.4 Introducing terms-of-trade changes 39 2.5 Wage rigidity, foreign exchange intervention and the degree of openness 45 2.5.1 A two-sector economy with wage indexation and foreign exchange intervention 46 2.5.2 Optimal degree of wage indexation and foreign exchange intervention and openness 52 2.5.3 Optimality of a single instrument 62 2.5.3.1 Optimal wage indexation under a given exchange rate regime 62 2.5.3.2 Optimal degree of intervention given the degree of wage indexation 67 2.6 Summary of chapter two and discussion 70 3 Bargaining, Trade Unions and Wage Formation in an Open Economy 78 3.1 Introduction 78 3.2 Bargaining between trade unions and firms 78 3.3 Indexed contract wages: an operationalization of the asymmetric Nash bargaining models 86 Appendix to chapter three 104 4 Exchange Rate Variability and Wage Formation 106 4.1 Introduction 106 4.2 A marcomodel of a small open economy with union-firm wage bargaining 108 4.3 Steady state effects of indexation and foreign exchange intervention 115 4.3.1 Steady state output under fixed and flexible exchange rates 116 4.3.1.1 Fixed exchange rates 117 4.3.1.2 Flexible exchange rates 119 4.3.2 Structural features of the labour markets 122 4.3.3 Variability versus level; policy makers' objectives and optimality of a single instrument 125 5 Summary and Discussion 143 References 154
  • Vilmunen, Jouko (1998)
    Suomen Pankin keskustelualoitteita 13/1998
    Using a standard model as a basis, we analyse the rational expectations macroeconomic equilibrium for an open economy with flexible exchange rates, in which expectations are affected by a percieved possibility of discrete shifts in monetary policy.These discrete shifts are modelled as possible jumps in the money supply process, which is otherwise a smooth random walk.Two such jump models are analysed.In equilibrium, the distribution of endogenous variables is (apparently systematically) affected by peso problems (premia), which reflect distributional peculiarities associated with expectations of possible future policy shifts.It turns out that the macroeconomic effects of peso premia accord closely with intuition regarding the effects of poor credibility of a policy regime: the output gap widens; the levels of real interest rates and domestic prices rise; and the domestic currency appreciates in real terms due to anticipated expansionary shifts in the money supply.Moreover, the key macro-aggregates become more volitile. The effects of peso premia on the nominal interest rate and the exchange rate turn out to be ambiguous. Keywords: poisson process, policy shifts, peso problem, rational expectations
  • Vilmunen, Jouko (2005)
    Bank of Finland. Bulletin 1
  • Ellison, Martin; Sarno, Lucio; Vilmunen, Jouko (2004)
    Suomen Pankin keskustelualoitteita 3/2004
    Published in Macroeconomic Dynamics, Volume 11, No. 4, September 2007 , pp. 519-541
    In this paper, we examine the incentives for central bank activism and caution in a two-country open-economy model with uncertainty and learning.We find that the presence of a strategic interaction between the home and foreign central banks creates an additional motivation for caution in monetary policy.An activist policy designed to help the learning of the home central bank is suboptimal since it generates a strong reaction from the foreign central bank.As joint learning by the home and foreign central banks is shown to be detrimental to welfare, the optimal policy is cautious. Key words: activism, learning, monetary policy, open economy JEL classification numbers: D81, D83, E52, E58, F41
  • Koskela, Erkki; Vilmunen, Jouko (1994)
    Suomen Pankin keskustelualoitteita 17/1994
    According to the conventional theory of competitive labour markets formal incidence of income and payroll taxes is irrelevant in the sense that it does not matter in terms of welfare effects which side the tax is levied on.In this paper this issue is re-examined under imperfectly competitive labour markets by using monopoly union model of wage and a employment determination adjusted for corporatism as the vehicle for analysis.The irrelevance of the structure of labour taxation holds under equal tax bases if there is no uncertainty.Trade unions create a distortion in the labour market by setting the wage rate too high a level; with only one distortion it does not matter which instrument income or payroll taxation is used to eliminate that.In the first best case unions should be subsidized and the more so the higher is the degree of corporatism.The structure of labour taxation matters even under certainty if tax bases are unequal and there is some degree of corporatism.Finally, if tax bases are equal, there is idiosyncratic stochastic component in the wage rate and unions are risk-averse, it is desirable to use both income and payroll taxation; trade unions create a distortion and risk is inefficiently allocated so that one needs two instruments to deal with the two inefficiencies.Given the positive income tax it is desirable to introduce a subsidy to employers.Roughly, the income tax serves as social insurance to decrease risk associated with the wage rate and the payroll subsidy is assigned to deal with labour market distortion.Under full corporatism the tax structure is irrelevant even under uncertainty.
  • Vilmunen, Jouko (2009)
    EURO & TALOUS 1
    Eurokäteisen liikkeeseenlaskusta on kulunut runsaat seitsemän vuotta. Sujuvan rahanvaihdon jälkeen liikkeessä olevan eurokäteisen määrä on kasvanut ennakoitua nopeammin ja euroseteleiden kysyntä on lisääntynyt myös euroalueen ulkopuolella. Samanaikaisesti euroalueen keskuspankkien yhteistyö rahahuollossa on kehittynyt ja yhteisen rahan tehokkuusetuja on hyödynnetty. Joukko uusia haasteita on myös syntynyt.
  • Vilmunen, Jouko (2002)
    EURO & TALOUS 2
    Euroalueen keskuspankit perustivat runsaat kaksi vuotta sitten tutkimusverkoston, jonka tarkoituksena oli selvittää rahapolitiikan vaikutuksia pankkien, yritysten ja kotitalouksien käyttäytymiseen.Verkoston avulla saatiin runsaasti uutta tietoa rahapolitiikan pankki- ja yrityskohtaisista vaikutuksista euroalueen eri maissa.Sen mukaan on viitteitä siitä, että ainakin osa raha- politiikan vaikutuksista välittyy muiden tekijöiden kuin koron kautta.Pankkien luotonannon vaihtelu on yksi näistä.
  • Ripatti, Antti; Vilmunen, Jouko (1995)
    Suomen Pankin keskustelualoitteita 32/1995
    Under certain assumptions, the permanent income model yields the result that prices of different products share common stochastic trends.We construct four price series from the components of the consumer price index, combine this four variable system with various macroeconomic variables, such as broad money (M2), nominal exchange rates, import and export prices in domestic currency etc., with the ultimate hope of capturing empirical regularities between this price structure and the proposed macroeconomic information.It is found that broad money, money market and bond yield indices, nominal exchange rates and import prices contain long-run information about the price level.We also find that the common trends of price groups cointegrate with the broad monetary aggregate and the money market yield index, indicating that these variables might be the driving forces of underlying inflation.