Browsing by Subject "oppiminen"

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  • Evans, George W.; Honkapohja, Seppo (2002)
    Suomen Pankin keskustelualoitteita 29/2002
    We review the recent work on interest rate setting, which emphasizes the desirability of designing policy to ensure stability under private agent learning.Appropriately designed expectations based rules can yield optimal rational expectations equilibria that are both determinate and stable under learning.Some simple instrument rules and approximate targeting rules also have these desirable properties.We take up various complications in implementing optimal policy, including the observability of key variables and the required knowledge of structural parameters.An additional issue that we take up concerns the implications of expectation shocks not arising from transitional learning effects. Key words: commitment, interest rate setting, adaptive learning, stability, determinacy, expectations shocks JEL classification numbers: E52, E31, D84
  • Rantala, Anssi (2003)
    Suomen Pankin keskustelualoitteita 30/2003
    This paper demonstrates that the adaptive learning approach to modelling private sector expectations can be used as an equilibriumselection mechanism in a natural-rate monetary model with unemployment persistence.In particular, it is shown that only one of the two rational expectations equilibria is stable under least-squares learning, and that it is always the low-inflation equilibrium with intuitive comparative statics properties that is the learnable equilibrium.Hence, this paper provides a basic theoretical justification for focusing on the lowinflation equilibrium.Earlier contributions, in which the high-inflation equilibrium was ignored, mainly because of its unpleasant characteristics, are not theoretically satisfactory.Key words: adaptive learning, monetary policy, multiple equilibria, persistence JEL classification numbers: C62, D83, D84, E52
  • Bask, Mikael (2006)
    Bank of Finland Research Discussion Papers 7/2006
    Published in European Financial Management, 14, No. 1, 2008, Pages 99-117
    It is demonstrated in this paper that adaptive learning in least squares sense may be incapable to reduce, in a satisfactory way, the number of attainable equilibria in a rational expectations model.The model investigated, as an illustration, is the monetary approach to exchange rate determination that is augmented with technical trading in the currency market in the form of moving averages since it is the most commonly used technique according to questionnaire surveys.Because of technical trading in foreign exchange, the current exchange rate is dependent on jmax lags of the exchange rate, and the model has, therefore jmax + 1 nonbubble rational expectations equilibria (REE), where most of them are adaptively learnable.However, by assuming that a solution to the model should have a solution to a nested model as its limit, it is possible to single out a unique equilibrium among the adaptively learnable equilibria that is economically meaningful.Key words: asset pricing, heterogenous agents, least squares learnability, rational expectations equilibria and technical trading JEL classification numbers: C62, F31, G12
  • Waters, George A. (2012)
    Bank of Finland Research Discussion Papers 30/2012
    This paper examines a class of interest rate rules that respond to public expectations and to lagged variables. Varying levels of commitment correspond to varying degrees of response to lagged output and targeting of the price level. If the response rises (unintentionally) above the optimal level, the outcome deteriorates severely. Hence, the optimal level of commitment is sensitive to the method of expectations formation and partial commitment is the robust, optimal policy. Keywords: Learning, Monetary Policy, Interest Rate Rules, Commitment, Price Level Targeting JEL classification: E52, E31, D84
  • Honkapohja, Seppo; Mitra, Kaushik (2015)
    Bank of Finland Research Discussion Papers 9/2015
    Published in Manchester School, Volume 83, Issue Supplement S2, pages 27–59, September 2015
    We examine global dynamics under learning in New Keynesian models with price level targeting that is subject to the zero lower bound. The role of forward guidance is analyzed under transparency about the policy rule. Properties of transparent and non-transparent regimes are compared to each other and to the corresponding cases of inflation targeting. Robustness properties for different regimes are examined in terms of the domain of attraction of the targeted steady state and volatility of inflation, output and interest rate. We analyze the effect of higher inflation targets and large expectational shocks for the performance of these policy regimes.
  • Berglund, Tom; Mäkinen, Mikko (Elsevier, 2019)
    Research in International Business and Finance January ; 2019
    Published in Bank of Finland Research Discussion Papers 30/2016.
    Using a large panel data set of Nordic (Finland, Norway and Sweden) and European banks for the period 1994–2010, we study whether banks can retain their lessons from the experience of a severe financial crisis. Our key finding is that the Nordic banks had better returns and greater financial stability compared to other European banks during the 2008 crisis, after controlling for key bank characteristics and macroeconomic factors. Our findings are consistent with the learning hypothesis of Fahlenbrach et al. (2012), suggesting that the Nordic banks were able internalize the lessons from the Nordic systemic banking crisis of the early 1990s.
  • Gibbs, Christopher G.; McClung, Nigel (2019)
    Bank of Finland Research Discussion Papers 19/2019
    We provide suffcient conditions for when a rational expectations structural model predicts bounded responses of endogenous variables to forward guidance announcements. The conditions coincide with a special case of the well-known (E)xpectation-stability conditions that govern when agents can learn a Rational Expectations Equilibrium. Importantly, we show that the conditions are distinct from the determinacy conditions. We show how the conditions are useful for diagnosing the features of a model that contribute to the Forward Guidance Puzzle and reveal how to construct well-behaved forward guidance predictions in standard medium-scale DSGE models.
  • Evans, George W.; Honkapohja, Seppo; Kaushik, Mitra (2010)
    Bank of Finland Research Discussion Papers 13/2010
    Published in Journal of Money, Credit and Banking, 44. 7 (Oct 2012): 1259-1283
    This paper shows that the Ricardian Equivalence proposition can continue to hold when expectations are not rational and are instead formed using adaptive learning rules. In temporary equilibrium, with given expectations, Ricardian Equivalence holds under the standard conditions for its validity under rational expectations. Furthermore, Ricardian Equivalence holds for paths of temporary equilibria under learning provided suitable additional conditions on learning dynamics are satisfied. New cases of failure of the Ricardian proposition emerge under learning. Most importantly, agents expectations must not depend on government financial variables under deficit financing.
  • McClung, Nigel (2020)
    Journal of Economic Dynamics and Control December
    This paper examines E-stability, determinacy, and indeterminacy in a general class of regime-switching models with lagged endogenous variables. Using determinacy conditions from Cho (2016, 2020), our first result extends McCallum (2007) to models with time-varying parameters: the unique mean-square stable equilibrium is E-stable if agents have current information and one-period-ahead decision rules. Further, we address the existence of E-stable non-fundamental equilibria, and find that Iteratively E-stable equilibria of indeterminate switching models can exist. Finally, we show that indeterminate New Keynesian models with persistent, recurring interest rate peg regimes admit Iteratively E-stable equilibria. In special cases, the Iterative E-stability condition coincides with the Long Run Taylor Principle.
  • Evans, George W.; Honkapohja, Seppo (2009)
    Bank of Finland Research Discussion Papers 24/2009
    We examine global economic dynamics under infinite-horizon learning in a New Keynesian model in which the interest-rate rule is subject to the zero lower bound. As in Evans, Guse and Honkapohja, European Economic Review (2008), we find that under normal monetary and fiscal policy the intended steady state is locally but not globally stable. Unstable deflationary paths can arise after large pessimistic shocks to expectations. For large expectation shocks that push interest rates to the zero lower bound, temporary increases in government spending can effectively insulate the economy from deflation traps
  • Evans, George W.; Honkapohja, Seppo (2007)
    Bank of Finland Research Discussion Papers 32/2007
    Expectations about the future are central for determination of current macroeconomic outcomes and the formulation of monetary policy. Recent literature has explored ways for supplementing the benchmark of rational expectations with explicit models of expectations formation that rely on econometric learning. Some apparently natural policy rules turn out to imply expectational instability of private agents' learning. We use the standard New Keynesian model to illustrate this problem and survey the key results for interest-rate rules that deliver both uniqueness and stability of equilibrium under econometric learning. We then consider some practical concerns such as measurement errors in private expectations, observability of variables and learning of structural parameters required for policy. We also discuss some recent applications, including policy design under perpetual learning, estimated models with learning, recurrent hyperinflation, and macroeconomic policy to combat liquidity traps and deflation. Keywords: imperfect knowledge, learning, interest-rate setting, fluctuations, stability, determinacy JEL classification numbers: E52, E31, D84
  • Evans, George W.; Honkapohja, Seppo; Mitra, Kaushik (2016)
    Bank of Finland Research Discussion Papers 25/2016
    Stagnation as the new norm and fiscal policy are examined in a New Keynesian model with adaptive learning determining expectations. We impose inflation and consumption lower bounds, which can be relevant when agents are pessimistic. The inflation target is locally stable under learning. Pessimistic initial expectations may sink the economy into steady-state stagnation with deflation. The deflation rate can be near zero for discount factors near one or if credit frictions are present. Following a severe pessimistic expectations shock a large temporary fiscal stimulus is needed to avoid or emerge from stagnation. A modest stimulus is sufficient if implemented early.
  • Mitra, Kaushik; Evans, George W.; Honkapohja, Seppo (2012)
    Bank of Finland Research Discussion Papers 5/2012
    Published as Fiscal Policy Multipliers in an RBC Model with Learning, Macroeconomic Dynamics, 2019 ; 23 ; 1.
    Using the standard real business cycle model with lump-sum taxes, we analyze the impact of fiscal policy when agents form expectations using adaptive learning rather than rational expectations (RE). The output multipliers for government purchases are significantly higher under learning, and fall within empirical bounds reported in the literature (in sharp contrast to the implausibly low values under RE). Effectiveness of fiscal policy is demonstrated during times of economic stress like the recent Great Recession. Finally it is shown how learning can lead to dynamics empirically documented during episodes of "fiscal consolidations." JEL classification: E62, D84, E21, E43 Key words: Government Purchases, Expectations, Output Multiplier, Fiscal Consolidation, Taxation
  • Mitra, Kaushik; Evans, George W.; Honkapohja, Seppo (2019)
    Macroeconomic Dynamics 1
    Published in Bank of Finland Research Discussion Papers 5/2012 http://urn.fi/URN:NBN:fi:bof-20140807316
    Using the standard real business cycle model with lump-sum taxes, we analyze the impact of fiscal policy when agents form expectations using adaptive learning rather than rational expectations (RE). The output multipliers for government purchases are significantly higher under learning, and fall within empirical bounds reported in the literature, which is in sharp contrast to the implausibly low values under RE. Positive effects of fiscal policy are demonstrated during times of economic stress like the recent Great Recession. Finally, it is shown how learning can lead to consumption and investment dynamics empirically documented during some episodes of “fiscal consolidations.”
  • Eusepi, Stefano; Gibbs, Chris; Preston, Bruce (2021)
    Bank of Finland Research Discussion Papers 11/2021
    We study zero interest-rate policy in response to a large negative demand shock when long-run expectations can fall over time. Because falling expectations make monetary policy less effective by raising real interest rates, the optimal forward guidance policy makes large front-loaded promises to stabilize expectations. Policy is too stimulatory in the event of transitory shocks, but provides insurance against persistent shocks. The optimal policy is well-approximated by a constant calendar-based forward guidance, independent of the shock’s realised persistence. The insurance property distinguishes our paper from other bounded rationality papers that solve the forward guidance puzzle and generates important quantitative differences.
  • Hasan, Iftekhar; Schmiedel, Heiko; Song, Liang (2010)
    Bank of Finland Research Discussion Papers 2/2010
    Published in Financial Review, Volume 47, Issue 3, August 2012: 469-499 and ECB WP 1201/2010.
    In recent years, demutualized stock exchanges have increasingly engaged in M&A and alliance activities. To shed light on this topic, we investigate short-run share price responses to the formation of 110 stock exchange M&As and alliances in the period 2000 2008. Our ?ndings show that the average stock-price responses to a stock-exchange M&A or alliance is positive. Stock exchange M&As create more value than alliances. For alliances, joint ventures generate more value than non-equity alliances. More value is created when the integration is horizontal and cross-border than when it is vertical and domestic. Evidence is also found for learning-by-doing effects in stock exchange integration activities. Finally, we find that the better the shareholder protection, accounting standards and degree of capital market development in the partnering exchange s country, the higher the merger and alliance premium. These patterns also obtain when we examine long-run performance measures such as the three-year buy-and-hold abnormal return, change in ROA (ROE), change in liquidity, and change in market capitalization of IPO between years t-2 and t+2.
  • Schaling, Eric; Eijffinger, Sylvester; Tesfaselassie, Mewael (2004)
    Suomen Pankin keskustelualoitteita 23/2004
    In this paper we incorporate the term structure of interest rates into a standard inflation forecast targeting framework.Learning about the transmission process of monetary policy is introduced by having heterogeneous agents - ie central bank and private agents - who have different information sets about the future sequence of short-term interest rates.We analyse inflation forecast targeting in two environments.One in which the central bank has perfect knowledge, in the sense that it understands and observes the process by which private sector interest rate expectations are generated, and one in which the central bank has imperfect knowledge.In the case of imperfect knowledge, the central bank has to learn about private sector interest rate expectations, as the latter affect the impact of monetary policy through the expectations theory of the term structure of interest rates.Here, following Evans and Honkapohja (2001), the learning scheme we investigate is that of least-squares learning (recursive OLS) using the Kalman filter.We find that optimal monetary policy under learning is a policy that separates estimation and control.Therefore, this model suggests that the practical relevance of the breakdown of the separation principle and the need for experimentation in policy may be limited. Key words: learning, rational expectations, separation principle, Kalman filter, term structure of interest rates JEL classification numbers: C53, E43, E52, F33
  • Evans, George W.; Honkapohja, Seppo (2011)
    Bank of Finland Research Discussion Papers 8/2011
    Expectations play a central role in modern macroeconomics. The econometric learning approach, in line with the cognitive consistency principle, models agents as forming expectations by estimating and updating subjective forecasting models in real time. This approach provides a stability test for RE equilibria and a selection criterion in models with multiple equilibria. Further features of learning such as discounting of older data, use of misspecified models or heterogeneous choice by agents between competing models generate novel learning dynamics. Empirical applications are reviewed and the roles of the planning horizon and structural knowledge are discussed. We develop several applications of learning with relevance to macroeconomic policy: the scope of Ricardian equivalence, appropriate specification of interest-rate rules, implementation of price-level targeting to achieve learning stability of the optimal RE equilibrium and whether, under learning, price-level targeting can rule out the deflation trap at the zero lower bound.
  • Berglund, Tom; Mäkinen, Mikko (2016)
    Bank of Finland Research Discussion Papers 30/2016
    Available also in Research in International Business and Finance 47 ; January ; 2019 http://urn.fi/URN:NBN:fi:bof-201901091019
    To study whether banks retain their lessons from the experience of a severe financial crisis, we examine the effects of the systemic banking crisis of the early 1990s in three Nordic countries (Finland, Norway, and Sweden). While this crisis largely bypassed the rest of Europe, we hypothesize that banks in the three affected Nordic countries took their crisis experiences to heart and as a result outperformed other European banks during the 2008 global financial crisis. Based on a large panel data set of Nordic and European banks for the period 1994–2010, our findings support our main hypothesis that the Nordic banks learned from the 1990s crisis and adjusted their business models accordingly. Our descriptive analysis of Nordic banks finds evidence of “lessons learned” in such precautions as robust capital cushions, improvements in management efficiency and higher credit quality demands relative to the rest of Europe.
  • Schaling, Eric (2003)
    Bank of Finland. Discussion papers 20/2003
    In this paper we analyse disinflation policy in two environments. In the first, the central bank has perfect knowledge, in the sense that it understands and observes the process by which private sector inflation expectations are generated; in the second, the central bank has to learn the private sector inflation forecasting rule.With imperfect knowledge, results depend on the learning scheme that is employed.Here, the learning scheme we investigate is that of least-squares learning (recursive OLS) using the Kalman filter.A novel feature of a learning-based policy as against the central bank's disinflation policy under perfect knowledge is that the degree of monetary accommodation (the extent to which the central bank accommodates private sector inflation expectations) is no longer constant across the disinflation, but becomes state-dependent.This means that the central bank's behaviour changes during the disinflation as it collects more information. Key words: learning, rational expectations, separation principle, Kalman filter, time-varying parameters, optimal control JEL classification numbers: C53, E43, E52, F33