This paper deals with the interaction of fiscal and monetary policy when the central bank is pursuing a price stability-oriented monetary policy. In particular, we study the durability of the price stability regime when public debt accumulates as a result of ultimately unsustainable deficits. The growth of indebtedness causes the collapse of the price stability [...]
The 1990’s financial crises in Nordic countries
The current financial crisis, which has lasted almost one and a half years, is the 19th such crisis in the post-war period in advanced economies. Recent literature classifies the Nordic crises in Norway, Sweden and Finland in late 1980′s and early 1990’s among the Big Five crises that have happened before the current crisis, which [...]
The Nonlinearity of the Phillips Curve and European Monetary Policy
This paper deals with the question of whether the euro area Phillips curve is nonlinear. There has recently been a great deal of discussion and studies concerning the same question in the US context. The data set includes most of the euro area countries, namely Austria, Germany, Finland, France, Italy, the Netherlands and Spain. Estimation [...]
Payments Remain Fundamental for Banks and Central Banks
Is commercial banking in the traditional sense obsolete? Are we in fact witnessing the emergence of a fundamentally new era of finance and payments intermediation? These questions are raised in this paper. Instead of a formal analysis, an attempt is made here to approach these questions from a historical perspective and a practitioner’s standpoint. Which [...]
Expectational business cycles
I introduce Expectational Business Cycles where aggregate activity fluctuates due to learning, heterogeneous updating rules and random changes in the social norm predictor. Agents use one of two updating rules to learn the equilibrium values while heterogeneity is dictated via an evolutionary process. Uncertainty of a new equilibrium, due to a shock to the structure [...]
Are there Economies of Scale in Stock Exchange Activities?
This is the first paper that examines economies of scale in stock exchanges. The data employed in the study include cost and output statistics for 37 stock exchanges in four continents around the world for the year 1997. I estimate two traditional cost functions and find that ray (overall) scale economies exist only in the [...]
Transnational development projects in MNCs: A study of Ericsson
Background: The past decades two trends has been detected in the society. First of all, the new economy has brought along globalisation as a striking trend, and secondly we have been hit by some kind o f”projectification”. The two trends seem to work against each other on several levels and global companies have a hard [...]
Policy interaction, learning and the fiscal theory of prices
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, [...]
Unemployment in a Small Open Economy: Finland and New Zealand
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 which unemployment has been [...]
Stability consequences of fiscal policy rules
Using an optimisation-based model with endogenous labour supply and a proportional tax rate, we compare the stabilising properties of different fiscal policy rules. The economy is affected by shocks from both government spending and technology. The fiscal policy rule can be based on government liabilities or the government budget deficit. As both are given as [...]