Browsing by Subject "rationaaliset odotukset"

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  • Kortelainen, Mika (2001)
    Suomen Pankin keskustelualoitteita 3/2001
    We present a dynamic general equilibrium model with some nominal rigidities and calibrate it to euro area data.The most important features of the model include consumption/saving decisions according to Blanchard's stochastic lifetimes approach; valuation of private financial wealth according to the present value of capital income; overlapping Calvo wage contracts in the labour market; and a neoclassical supply side with Cobb-Douglas technology.The model is developed for use in analysing differences between perceived and actual monetary policy rules, which is then done as a means of evaluating the macroeconomic benefits of credibility in monetary policy.General properties of the model are analysed with a variety of simulation experiments.Key words: EDGE, rational expectation, DGE models, nominal rigidites
  • 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
  • Bask, Mikael (2006)
    Bank of Finland Research Discussion Papers 6/2006
    Published in International Journal of Finance and Economics, Volume 14, Issue 1, January 2009: 64-84
    The aim of this paper is to analyse the announcement effects on exchange rate movements using the basic asset pricing model, where currency trade is partly determined by technical trading in the form of moving averages since it is the most commonly used technique according to questionnaire surveys.Specifically, the announcement and implementation of temporary as well as permanent monetary policy are analysed, where the exchange rate model developed is summarised in a linear difference equation in current exogenous fundamentals, a large number of lags of the endogenous exchange rate and time-t dating of exchange rate expectations. However, since there are a large number of rational expectations equilibria, continuity is proposed as a selection criterion among the equilibria, meaning that the parameter for the time-t - 1 exchange rate should have the limit 0 when there is no technical trading to have an economically meaningful equilibrium.It turns out that there is a unique rational expectations equilibrium that satisfy the continuity criterion, and focusing on this equilibrium, it is shown that the exchange rate is much more sensitive to changes in money supply than when technical trading is absent in currency trade.This result is important since it sheds light on the so-called exchange rate disconnect puzzle in international finance.Key words: asset pricing, exchange rate disconnect puzzle, heterogeneous agents, least squares learnability, monetary policy and technical trading. JEL classification numbers: E51, E52, 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
  • Juselius, Mikael (2008)
    Bank of Finland Research Discussion Papers 6/2008
    This paper derives the cointegration spaces that are implied by linear rational expectations models when data are I(1). The cointegration implications are easy to calculate and can be readily applied to test if the models are consistent with the long-run properties of the data. However, the restrictions on cointegration only form a subset of all the cross-equation restrictions that the models place on data. The approach is particularly useful in separating potentially data-consistent models from the remaining models within a large model family. Moreover, the approach provides useful information on the empirical shock structure of the data. Keywords: rational expectations, cointegration JEL classification numbers: C52
  • 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 and CEPR DP 7792 (2010).
    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.
  • Paloviita, Maritta (2007)
    Bank of Finland Research Discussion Papers 14/2007
    Using European panel data and GMM system estimation, we explore the empirical performance of the standard three-equation New Keynesian macro model under different informational assumptions. As a benchmark, we consider the performance of the model under rational expectations and revised (final) data. Alternatively, instead of imposing rational expectations hypothesis we use realtime information, ie Consensus Economics survey data, to generate empirical proxies for expectations in the model and the current output gap in the Taylor rule. We demonstrate that, contrary to the assumption of rational expectations, the errors in measured expectations and real-time current output gaps are positively autocorrelated. We produce evidence that the use of real-time variables (including measured expectations) improves the empirical performance of the New Keynesian model. Relaxation of the rational expectations hypothesis makes a noticeable difference for the parameters of the New Keynesian model, especially in the Taylor rule. Keywords: DSGE model, survey expectations, GMM system estimation, expectations, estimation JEL classification numbers: C52, E52, E20
  • Männistö, Hanna-Leena (2005)
    Bank of Finland Research Discussion Papers 21/2005
    To develop forecasting procedures with a forward-looking dynamic general equilibrium model, we built a small New-Keynesian model and calibrated it to euro area data.It was essential in this context that we allowed for long-run growth in GDP.We brought additional asset price equations based on the expectations hypothesis and the Gordon growth model, into the standard open economy model, in order to extract information on private sector long-run expectations on fundamentals, and to combine that information into the macro economic forecast.We propose a method of transforming the model in forecasting use in such a way, as to match, in an economically meaningful way, the short-term forecast levels, especially of the model's jump-variables, to the parameters affecting the long-run trends of the key macroeconomic variables.More specifically, in the model we have used for illustrative purposes, we pinned down the long-run inflation expectations and domestic and foreign potential growth-rates using the model's steady state solution in combination with, by assumption, forward looking information in up-to-date financial market data.Consequently, our proposed solution preserves consistency with market expectations and results, as a favourable by-product, in forecast paths with no initial, first forecast period jumps.Furthermore, no ad hoc re-calibration is called for in the proposed forecasting procedures, which clearly is an advantage from point of view of transparency in communication.Key words: forecasting, New Keynesian model, DSGE model, rational expectations, open economy JEL classification numbers: E17, E30, E31, F41
  • 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
  • Tuovinen, Marja (1979)
    Suomen Pankki. D 44
  • 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.
  • 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
  • Ripatti, Antti (1997)
    Suomen Pankin keskustelualoitteita 3/1997
    We compare parameter estimates of the intertemporal money-in-the-utility-function model estimated using the Generalized Method of Moments and the Full Information Maximum Likelihood method.The process driving the forcing variables is approximated with vector autoregression.The FIML estimates of the deep parameters are reasonable, although some of them differ from the corresponding GMM estimates.The simulation experiments suggest that the differences are not very big in practice and that they are connected with adjustment costs.The cross-equation restrictions are clearly rejected, as is typical for these kinds of models; exogeneity restrictions are rejected as well. Keywords: money-in-the-utility-function model, demand for money, narrow money, Generalized Method of Moments, Full Information Maximum Likelihood
  • Evans, George W.; Honkapohja, Seppo (2002)
    Suomen Pankin keskustelualoitteita 18/2002
    Ilmestynyt myös Macroeconomic Dynamics 11 ; 5 ; 2007, Helsingin yliopiston kansantaloustieteen laitoksen keskustelualoitteita sekä CEPR Discussion Paper 3564.
    We investigate both the rational explosive inflation paths studied by McCallum (2001) and the classification of fiscal and monetary policies proposed by Leeper (1991) for stability under learning of rational expectations equilibria (REE).Our first result is that the fiscalist REE in the model of McCallum (2001) is not locally stable under learning.By contrast, in the setting of Leeper (1991), different possibilities can obtain.We find, in particular, that there are parameter domains for which the fiscal theory solution - in which fiscal variables affect the price level - can be a stable outcome under learning.For other parameter domains, the monetarist solution is the stable equilibrium.Key words: inflation, expectations, fiscal and monetary policy, explosive price paths JEL classification numbers: E52, E31, D84
  • Lempinen, Urho (1980)
    Suomen Pankki. D 46
    Tässä tutkielmassa pyritään selvittämään, mitä tarkoittaa rationaalisten odotusten hypoteesi sekä mihin keskeisimpiin johtopäätöksiin hypoteesin soveltaminen talous teoriaan johtaa. Tämän ohella pyritään erityisesti kokoamaan laajahko hypoteesin ja sen sovellutusten kritiikki. Tutkielman kohdealue on huomattavan laaja. Tämän vuoksi tutkielman tarkastelutapa on pääosin yleisluonteinen ja katsauksenomainen. Käytännössä tämä näkyy esim. siinä, että eri luvuissa käsiteltyjen mallien johtopäätöksiä ei tässä yhteydessä yleensä johdeta matemaattisesti, vaan tyydytään viittaamaan alkuperäislähteisiin. Hypoteesin testausta ja kritiikkiä käsittelevät kohdat on pyritty esittämään hieman perusteellisemmin.
  • Aurikko, Esko (1988)
    Bank of Finland Research Discussion Papers 12/1988
    In this paper a small aggregative model of the Finnish economy with rational exchange rate and price expectations is specified and estimated with quarterly data. Optimal exchange rate regimes are assessed by simulating effects of various unanticipated and permanent shocks. According to the simulation results fixed exchange rates seem to insulate the domestic economy from monetary shocks while floating rates are preferable if shocks are real.
  • Lahti, Ari (1989)
    Bank of Finland. Series D 72
    This study deals with rational expectations in a macromodel framework on an empirical level. The aim of this study is to analyze the effects of rational expectations in an empirical macromodel. If one tries to scrutinize the aim of this study in questions to be answered, those questions would include the following: How should the ,expectations be modelled in a macromodel framework? What are the reasons for adding rational expectations into the model? How do different forms of expectation formation hypothesis affect the outcome of policy simulations in a macromodel? What are the special features of the policy simulations with rational expectations model?
  • Bask, Mikael; Selander, Carina (2007)
    Bank of Finland Research Discussion Papers 6/2007
    Published in International Economics and Economic Policy, Volume 6, Number 3, October 2009: 283-313
    The aim of this paper is threefold: (i) to investigate if there is a unique rational expectations equilibrium (REE) in the small open economy in Gall and Monacelli (2005) that is augmented with technical trading in the foreign exchange market; (ii) to investigate if the unique REE is adaptively learnable in a recursive least squares sense; and (iii) to investigate if the unique and adaptively learnable REE is desirable in an inflation rate targeting regime in the sense that a low and not too variable CPI inflation rate in equilibrium is achieved. The monetary authority is using a Taylor rule when setting the nominal interest rate, and we investigate numerically the properties of the model developed. A main conclusion is that the monetary authority should increase (decrease) the interest rate when the CPI inflation rate increases (decreases) and when the currency gets stronger (weaker) to have a desirable rule that is robust with respect to the degree of technical trading in the foreign exchange market. Thus, the value of the currency is a better response variable than the output gap in the most desirable parametrizations of the interest rate rule. JEL classification numbers: E52, F31 Key words: determinacy, foreign exchange, inflation rate targeting regime, interest rate rule, robust monetary policy, technical trading
  • Lahti, Ari; Virén, Matti (1989)
    Bank of Finland Research Discussion Papers 23/1989
    This paper reports some policy experiments carried out with the QMED model of the Bank of Finland. These experiments illustrate the dynamic and long-run properties of this model. Thus, it is investigated how different temporary and permanent, random and nonrandom, shocks affect the cyclical path and long-run growth rate of total output. The main issue is, however, the role of expectations. Thus, we compare a static expectations version with two rational expectations versions of the model. These two versions differ in terms of the time horizon of expectations. When various policy simulations are carried out with these different versions - both in terms of anticipated and unanticipated shocks - it turns out that the whole short-run dynamics is cruci ally affected by the way in which expectations are modelled. In particular, we find the advance effects in the case of the rati onal expectati ons versi ons can be af considerable magnitude.
  • Aurikko, Esko (1990)
    Suomen Pankki. D 74
    Tässä tutkimuksessa selvitetään ensinnäkin valuuttakurssipolitiikan vaihtoehtoja ja talouden sopeutumista, kun ulkomainen ja kotimainen talouskehitys sekä odotukset muuttuvat. Toiseksi tarkastellaan rahapolitiikan tehokkuutta valuuttakurssin joustavuuden ja pääomanliikkeiden herkkyyden muuttuessa. Näitä kysymyksiä selvitetään sekä teoreettisesti malleilla, joissa odotukset ovat rationaalisia ja lisäksi ulkomaisen pääoman liikkuvuus muuttuu, että Suomen Pankin rationaaliset odotukset sisältävän ekonometrisen kokonaistaloudellisen BOF4-mallin avulla.