BoF Economics Review (2017- )


BoF Economics Review includes analytical studies on monetary policy, financial markets and macroeconomic developments. Articles are published in Finnish, Swedish and English. Readers benefit from previous knowledge of the topic.

Recent Submissions

  • Markkula, Tuomas; Takalo, Tuomas (2021)
    BoF Economics Review 8/2021
    Declining ATM numbers pose a challenge for competition policy and financial regulatory authorities. In this report we review the Finnish experience of regulating the competition in the ATM industry. To analyze the Finnish developments we extend the model of Kopsakangas-Savolainen and Takalo (2014), and draw on the existing literature and benchmarks from the selected other countries. We document how changes in the ATM market regulation and market structure has decoupled the ATM network size from the declining cash use in Finland. The Finnish regulation has almost exclusively focused on foreign fees, while in general it would be better to regulate interchange fees. If the optimal fee regulation is not feasible, the authorities could also consider quantity regulation.
  • Hellqvist, Matti; Korpinen, Kasperi (2021)
    BoF Economics Review 7/2021
    The amount of central bank money, or liquidity, needed to settle payments, depends on the way the settlement is organized. It is largest when payments are settled individually on gross basis and smallest with settlement in one big netting cycle. Retail payments are increasingly processed in instant payment schemes and systems. We evaluate how the result of this transition affects the liquidity needs of the Finnish banks. For the analysis we generate artificial transaction level data, which mimics the Finnish retail payment flows processed in the STEP2 system. This allows us to estimate the difference between the liquidity needs for the settlement in a cycle based model and in a full instant payment mode. We also present a regression model for the bank level additional liquidity needs. A full migration to instant payments is expected to cause only a small aggregate increase in the liquidity needs. However, the variations between banks or between days can be significant and emphasize the need of liquidity bufers.
  • Pönkä, Harri; Sariola, Mikko (2021)
    BoF Economics Review 6/2021
    The output gap is a commonly used tool to assess the state of the business cycle, and as such, a key input for policy makers. In this article, we employ principal components analysis (PCA) to derive an estimate of the output gap in Finland that summarizes the information of widely used cyclical indicators. This methodology produces an output gap that is similar to the ones obtained from the main methods used at the Bank of Finland and the European Commission, but requiring considerably less modelling effort. The method is also flexible and can readily be adopted to internalize additional information that captures special circumstances, such as the current pandemic. In this spirit, we extend our information set to include a service turnover indicator, and find that it clearly improves the method's ability to capture the exceptional downturn in 2020.
  • Oinonen, Sami; Vilmi, Lauri (2021)
    BoF Economics Review 5/2021
    This paper presents the New Keynesian Phillips Curve (NKPC) -based framework for analysing euro area inflation outlook. Our NKPC specification, that relies on market- and surveybased inflation expectations, explains well euro area inflation dynamics. Its forecasting performance is also comparable to the performance of the ECB’s official forecasts in both short- and long-horizons. Overall, the NKPC is a useful tool for monitoring euro area inflation outlook. Thanks to its fast and light updating procedure it provides almost real-time information on inflation outlook.
  • Nelimarkka, Jaakko; Laine, Olli-Matti (2021)
    BoF Economics Review 4/2021
    We assess the macroeconomic impact of pandemic-related monetary policy measures of the ECB. Conditioning on counterfactual interest rate paths that would have materialised in the absence of the policies, the macroeconomic effects are measured using structural vector autoregressions. In the framework, multiple monetary policy measures may simultaneously be analysed. According to our results, the asset purchase programmes implemented during the crisis have increased the annual GDP growth by approximate 2 percentage points in 2020–2021 and inflation by 0.5 percentage points. The longer-term refinancing operations have contributed positively but more mildly to the economic activity.