This document reports the currently used term structure estimation method at the Bank of Finland and discusses interpretation of the results it generates. We start by introducing two widely used term structure estimation methods: the Cubic Spline Function method and the Nelson-Siegel approach. We compare their results, paying special attention to the smoothness of forward [...]
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 [...]
Monetary Policy in Closed and Open Economies
Two DSGE models are calibrated and simulated to investigate how the role of monetary policy differs between a closed and an open economy. The central bank conducts monetary policy according to a Taylor (1993) rule, reacting to inflation- and output deviations. Prices are sticky and there are habit components which slow down adjustment of consumption [...]
The Exchange Rate Pass-through Into Domestic Manufacturing Prices During Two Inflation Regimes
In the beginning of 1990s Sweden implemented several measures in order to maintain price stability. These measures have resulted in an environment in which inflation is lower and more stable. The same development could be seen in other OECD countries. At the same time a decrease in exchange rate pass-through was noticed in many countries. [...]
Project: Real exchange rate in China
Title: Determination of real exchange rate in China : a productivity approach There is increasing evidence that exchange rate movements depend upon a country’s productivity growth (or stage of development), and this effect is dubbed the Balassa-Samuelson theorem. This paper examines the evidence for a Balassa-Samuelson based explanation for real exchange rate movements of China [...]