In this study we present a closed form solution to the moments and, in particular, correlation of two log-normally distributed random variables, when the underlying log-normal distribution is potentially truncated or censored at both tails. The closed form solution that we derive also covers the...

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 perceived possibility of discrete shifts in monetary policy. These discrete shifts are modelled as possible...

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...

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....

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...

This paper summarizes the basic arguments given by professors Christian Bordes, David Currie and Hans Söderström in their reports on the state and behaviour of the Finnish economy prior to mid 1993. The focus is primarily on the analytical frameworks or models used by the professors to...

In this paper we address the issue of how parameter uncertainty affects the optimal degree of central bank conservatism. The analysis is conducted in the standard macroeconomic model of a monetary policy game embedding an expectational Phillips-curve. Multiplicative "Brainard" uncertainty is...

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 VEC model this paper seeks to cast light on three questions: the degree to...

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...

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...