Browsing by Subject "avoin talous"

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  • Hlédik, Tibor (2003)
    Suomen Pankin keskustelualoitteita 35/2003
    The paper presents a structural model framework for a small open economy.The model, based on optimising households and firms, has been calibrated on Czech macroeconomic data in order to develop an analytic framework suitable for analysing key policy questions related to the Czech Republic s anticipated EMU accession.In order to be able to use the model for assessing both pre- and post-accession policy issues, two versions of the model fixed and flexible exchange rate versions were developed.The suitability of the two alternative models for policy analysis was subsequently tested on a series of impulse response exercises.The dynamic responses of the two models to selected shocks and policy experiments are plausible.Hence these results suggest that the presented analytic framework can serve as a good starting point for analysing complex policy issues facing the Czech Republic. Key words: monetary policy, monetary union, EMU accession JEL classification numbers: E52, E20, E31, F41
  • Freystätter, Hanna (2012)
    Suomen Pankki. E 43
    Chapter 1: Introduction 9 Chapter 2: Price setting behaviour in an open economy and the determination of Finnish foreign trade prices 29 Chapter 3: Financial market disturbances as sources of business cycle fluctuations in Finland 79 Chapter 4: Financial factors in the boom-bust episode in Finland in the late 1980s and early 1990s 127
  • Paloviita, Maritta (2008)
    Bank of Finland Research Discussion Papers 16/2008
    Published in New Zealand Economic Papers, Vol 43, Issue 3, December 2009: 233-254
    This paper examines euro area inflation dynamics by estimating open economy New Keynesian Phillips curves based on the assumption that all imports are intermediate goods. Instead of imposing rational expectations a priori, Consensus Economics survey data and OECD inflation forecasts are used to proxy inflation expectations. The results suggest that, compared with a closed economy New Keynesian Phillips curve, euro area inflation dynamics are better captured by the open economy specification. Moreover, in the open economy context, and even if we allow for persistence in expectations, the hybrid specification of the New Keynesian Phillips curve is needed in order to capture the euro area inflation process properly. We also provide some evidence that in recent years of low and stable inflation, euro area inflation dynamics have become more forward-looking and the link between inflation and domestic demand has weakened (ie the euro area Phillips curve has flattened). On the other hand, in low-inflation euro area countries the inflation process seems to have been more forward-looking already since the early 1980s
  • Tervala, Juha (2009)
    Bank of Finland Research Discussion Papers 28/2009
    This study analyses cross-country correlations of stock prices (values of firms) using the basic New Open Economy Macroeconomics model. We show that cross-country correlations of stock prices greatly depend on the currency of export pricing in the case of monetary shocks but not notably for temporary technology shocks. In the case of a money supply shock, the producer (local) currency pricing version of the model generates a negative (positive) cross-country correlation of stock prices.
  • Bask, Mikael (2007)
    Bank of Finland Research Discussion Papers 22/2007
    Published in Journal of Economics and Business, Volume 61, Issue 2, March-April 2009: 97-111
    We embed different instrument rules into a New Keynesian model for a small open economy that is augmented with technical trading in currency trade to examine the prerequisites for monetary policy. Specifically, this paper focuses on conditions for a determinate, least-squares learnable rational expectations equilibrium (REE). Under an interest rate rule with only contemporaneous macroeconomic data, the intensity of technical trading or trend-seeking in currency trade does not affect these conditions, except in the case of an extensive use of trend-seeking. On the other hand, if the central bank uses only forward-looking information in its interest rate rule, a determinate and learnable REE is a less likely outcome when trend-seeking in currency trade becomes more popular. The interest rate rule followed by the central bank in the model incorporates interest rate smoothing. Keywords: determinacy, DSGE model, interest rate rule, least-squares learning, technical trading JEL classification numbers: C62, E52, F31, F41
  • Isoré, Marlène (2016)
    Bank of Finland Research Discussion Papers 28/2016
    This paper develops a two-country model in which transmission of financial shocks arises despite a flexible exchange rate regime and substitutable financial assets, contrary to the open-economy literature results under these two conditions. The search and matching approach first accounts for the time needed to restore normal functioning of financial markets following a disruption. It also allows dissociating two types of financial shocks: (i) pure liquidity contractions imply negative co-movements of home and foreign outputs, so that the model nests the standard open macroeconomy results as a particular case; (ii) shocks to banks’ capitalization costs in one country do generate international financial contagion.
  • Kilponen, Juha; Ripatti, Antti (2006)
    Bank of Finland Research Discussion Papers 5/2006
    Using the DGE model of the Finnish Economy (the 'Aino' model), we study the response of the economy to reforms in both labour and product markets.The reforms are two-fold.We assume that the wage mark-up, ie the monopoly power of wage-setters is gradually reduced by 5 percentage points.At the same time, the degree of competition is increased, ie price margins are exogenously reduced by 2 percentage points.These reforms imply a very favourable outcome of the economy.Both consumption and employment increases permanently and the reforms are welfare enhancing.Public balances improve giving room for 1.5 percentage point cut in income taxes.Our simulation exercises clearly demonstrate that such reforms may help in financing the future fiscal burden of an ageing population. Key words: competition, dynamic general equilibrium, public finance JEL classification numbers: E60, C68
  • Bask, Mikael (2007)
    Bank of Finland Research Discussion Papers 19/2007
    A DSGE model with a Taylor rule is augmented with an evolutionary switching between technical and fundamental analyses in currency trade, where the fractions of these trading tools are determined within the model. Then, a shock hits the economy. As a result, chaotic dynamics and long swings may occur in the exchange rate, which are appealing features of the model given existing empirical evidence on chaos and long swings in exchange rate fluctuations. Keywords: chaotic dynamics, foreign exchange, fundamental analysis, monetary policy, technical analysis JEL classification numbers: C65, E32, E44, E52, F31
  • 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
  • Sarajevs, Vadims (2000)
    BOFIT Discussion Papers 12/2000
    The impact of an unanticipated monetary shock in a small open economy with dollarization, factor price rigidities, and nontradeables is re-examined in an optimizing intertemporal general equilibrium model.The framework of an earlier study is extended to incorporate foreign real money balances into the representative agent's utility function and to account for the phenomenon of dollarization so characteristic of transition economies.The major finding is that in the event of small monetary shocks, the presence of dollarization does not alter the outcome that relates the sign of response of consumption, current account balance, and other macroeconomic variables to the difference between intertemporal and intratemporal elasticities of substitutions of the total consumption index.The solution also shows that the elasticity of intertemporal substitution of money services and the share of traded goods in total consumption - a proxy for openness of the economy - are the crucial parameters in determining the response and the possibility of overshooting of the model variables, with economic openness playing a stabilizing role for the economy in the event of monetary shocks. Key words: New open-economy macroeconomics, Monetary shocks, Dollarization, Factor price rigidities, Nontradeables, Current Account
  • Guender, Alfred V. (2003)
    Suomen Pankin keskustelualoitteita 12/2003
    In open economy, a choice can be made between two measures of inflation for use as a target variable: CPI inflation or domestic inflation.This paper considers flexible and strict inflation targeting strategies and explores the circumstances under which a domestic inflation target is preferred to a CPI inflation target. This is done from the perspectives of the central bank and society as a whole.The quantitative results of this paper indicate that under suitable conditions the temporal properties of stochastic disturbances are instrumental in determining which inflation target is preferred.The choice of target variable from society's viewpoint coincides almost perfectly with the choice of the central bank if the utility of the representative household serves as the welfare criterion for society.If qualitative aspects matter in the choice inflation target, then the role of temporal properties of the stochastic disturbances becomes less prominent.Policy conclusions are drawn with the help of a forward-looking model for a small open economy.This model has proper micro-foundations and exhibits two important features.First, the degree of openness affects the parameters of the IS relation and, second, under domestic inflation targeting, the existence of a direct exchange rate channel in the Phillips Curve impairs the perfect stabilising properties of monetary policy in the presence of demand-side disturbances.Key words: monetary policy, inflation target JEL classification numbers: E52, F41
  • Bask, Mikael (2007)
    Bank of Finland Research Discussion Papers 21/2007
    We embed an expectations-based optimal policy rule into a DSGE model for a small open economy that is augmented with trend extrapolation or chartism, which is a form of technical trading, in currency trade to examine the prerequisites for monetary policy. We find that a unique REE that is least-squares learnable is often the outcome when there is a limited amount of trend extrapolation, but that a less flexible inflation rate targeting may cause a multiplicity of REE. We also compute impulse-response functions for key macroeconomic variables to study how the economy returns to steady state after being hit by a shock. Keywords: determinacy, DSGE model, least-squares learning, targeting rule, technical trading, monetary policy JEL classification numbers: C62, E52, F31, F41
  • Horvath, Julius (2003)
    BOFIT Discussion Papers 15/2003
    The first part of this paper is a review of significant papers in the vast literature on optimum currency area (OCA) theory.The author focuses on the main classical contributions, then considers modern treatment of OCA theory.The second part considers empirical literature on the types of geographical areas that might constitute optimum currency areas, particularly with respect to asymmetry and symmetry of shocks.JEL classification: E42, F33
  • Kilponen, Juha; Kinnunen, Helvi; Ripatti, Antti (2006)
    Bank of Finland Research Discussion Papers 28/2006
    This paper extends Gertler's (1999) tractable overlapping generations model with life-cycle features by allowing for distortionary taxation, demographic transition and stochastic variation in demographic structure.The model is then used to study demographic change in the small open economy of Finland. Simulations highlight the key role played by labour market responses to ageing.When the responses of labour supply, wages, and hence private consumption, to higher taxation are consistently accounted for, population ageing has clearly much larger effects on public finance, when compared to mechanical sustainability calculations.Stochastic simulations suggest that lengthening of working time has only a modest alleviating effect on the fiscal burden of ageing.This is due to the fact that stochastic variation in the length of working time has only a relatively small effect on the model's dependency ratio.Variation in life expectancy is clearly much more important. Key words: ageing, general equilibrium, public finance, demographic uncertainty JEL classification numbers: E13, H55, J11, J26
  • Henriksson, Marketta (2005)
    Bank of Finland Research Discussion Papers 7/2005
    Differences in growth, productivity and inflation levels are going to be a prominent feature of the future of EMU, as the convergence process is still on-going in the new Member States. This convergence process can be described by the Balassa-Samuelson proposition, which states that faster growth in the traded goods sector than in the non-traded goods sector results in a rise in the price of non-traded goods and an appreciation of the trend real exchange rate. In this study, the aim is to construct a small open economy model that enables examination of the effects of Balassa-Samuelson-type growth in an intertemporal fixed exchange rate framework with a focus on the external balance. To address the well-known problems with small open economy models, an endogenous discount rate is used. The results imply that faster productivity growth in the traded than in the non-traded goods sector may induce external imbalances, leading to increased vulnerability of the economy. However, trade account deficits would appear to be a temporary phenomenon, as this line of development can be reversed by the natural shift in the composition of consumption towards non-traded goods that is characteristic of catch-up economies. In the meantime, fiscal policy plays a key role. Key words: small open economy, Balassa-Samuelson effect, ERM II, external balance JEL classification numbers: F41, F33, F32
  • Freystätter, Hanna (2012)
    Suomen Pankki. BoF online 8/2012
    1 Johdanto 3 2 Kumoaako yksityisen sektorin velkadynamiikka vientivetoisen nousun? 5 2.1 Rahoitusvarallisuussokki nostaa riskilisiä ja johtaa laskusuhdanteeseen 5 2.2 Bruttokansantuote laskee 2 vuotta ja alkaa hitaasti palata kohti lähtötasoaan 6 2.3 Viennin hintakilpailukyvyn paraneminen sisäisen tai ulkoisen devalvaation kautta herättää toiveet vientivetoisesta noususta.. 8 2.4 .. mutta yksityisen sektorin velkadynamiikka hidastaa talouden toipumista sekä kiinteän että kelluvan valuuttakurssiregiimin tapauksessa 10 2.5 Korkea velkaantuneisuus lähtötilanteessa johtaa syvään ja pitkäaikaiseen laskusuhdanteeseen 11 3 Lopuksi 14 LÄHTEET 16
  • Leitemo, Kai; Söderström, Ulf (2005)
    Bank of Finland Research Discussion Papers 20/2005
    This paper studies how a central bank's preference for robustness against model misspecification affects the design of monetary policy in a New-Keynesian model of a small open economy.Due to the simple model structure, we are able to solve analytically for the optimal robust policy rule, and we separately analyse the effects of robustness against misspecification concerning the determination of inflation, output and the exchange rate.We show that an increased central bank preference for robustness makes monetary policy respond more aggressively or more cautiously to shocks, depending on the type of shock and the source of misspecification. Keyword(s): Knightian uncertainty, min-max policies, model uncertainty and robust control JEL(s): E52 , E58 , F41
  • Funke, Michael; Paetz, Michael; Pytlarczyk, Ernest (2009)
    BOFIT Discussion Papers 14/2009
    Published in Economic Modelling, Vol 28, No 1-2 (2011), pp. 316-334.
    This paper develops and estimates an open economy dynamic stochastic general equilibrium (DSGE) model of the Hong Kong economy. The model features short-run price rigidities generated by monopolistic competition and staggered reoptimisation. The model is enhanced with wealth effects due to stock price dynamics, which we believe to be important. For this reason we adopt a perpetual youth approach. Model parameters and unobserved components are estimated with a Bayesian maximum likelihood procedure, conditional on prior information concerning the values of parameters.
  • Silvo, Aino; Verona, Fabio (2020)
    Bank of Finland Research Discussion Papers 9/2020
    In this paper we present Aino 3.0, the latest vintage of the dynamic stochastic general equilibrium (DSGE) model used at the Bank of Finland for policy analysis. Aino 3.0 is a small-open economy DSGE model at the intersection of the recent literatures on so-called TANK (“Two-Agent New Keynesian”) and MONK (“Mortgages in New Keynesian”) models. It aims at capturing the most relevant macro-financial linkages in the Finnish economy and provides a rich laboratory for the analysis of various macroeconomic and macroprudential policies. We show how the availability of a durable consumption good (housing), on the one hand, and the presence of credit-constrained households, on the other hand, affect the transmission of key macroeconomic and financial shocks. We also illustrate how these new transmission channels affect model dynamics compared to the previous model vintage (the Aino 2.0 model of Kilponen et al., 2016).
  • Mayes, David G.; Vilmunen, Jouko (1999)
    Suomen Pankin keskustelualoitteita 10/1999
    Unemployment is now the key issue for economic policy in the OECD and Europe in particular.By examining data from the period 1962- 1996 for two highly different small open OECD economies, Finland and New Zealand, in a VE? model this paper seeks to cast light on three questions: the degree to which unemployment has been the result of slow adjustment to large external shocks; the degree to which differences in labour market structures can lead to different responses to shocks; the importance of the exchange rate and the external sector in resolving the problmems.The approach uses a fairly general model of the labour market that includes wages, unemployment, the capital stock and the terms of trade.It uses cointegration analysis to establish long-run relationships among the four variables.In the case of Finland we find that the shoji-run response of unemployment to shocks (to the long-run relationship) is large relative to the response of real wage and the terms of trade.In New Zealand on the other hand both real wages and the terms of trade, in particular, adjust more rapidly. As a result the burden of short-run adjustment in the New Zealand economy appears to fall more heavily on (relative) prices.Since the unemployment rate in both countries displays hysteresis, these results suggest that relative price adjustment in the New Zealand economy is more effective in preventing adverse aggregate shocks from becoming adverse unemployment shock. Keywords: unemployment, open economy, structural change, labour market