Bank of Finland

Displaying 1-40 of 77 results

  • White Papers // Jun 2011

    The Economic Transmission Of Fiscal Policy Shocks From Western To Eastern Europe

    This paper studies the transmission of a foreign fiscal policy shock (assumed to be generated in Germany) to key macroeconomic variables in Five Central and Eastern European economies (CEE-5). The authors use quarterly data from 1995 to 2009 and estimate an open economy Structural Vector AutoRegressive (SVAR) model identified by...

    Provided By Bank of Finland

  • White Papers // Apr 2011

    Growth, Expectations And Tariffs

    The authors study a many-country endogenous growth model in which decisions about innovation and new investment are influenced by growth expectations. Adaptive learning dynamics determine the country-specific short-run transition paths. The countries differ in basic structural parameters and may impose tariffs on imports of capital goods. Numerical experiments illustrate the...

    Provided By Bank of Finland

  • White Papers // Apr 2011

    The Euro And Corporate Financing

    In this paper, the authors study how the introduction of the euro has affected corporate financing in Europe. They use firm-level data from eleven euro area countries as well as from a control group of five other European countries spanning the years 1991-2006. They show that firms from euro area...

    Provided By Bank of Finland

  • White Papers // Apr 2011

    Do Markets Perceive Sukuk And Conventional Bonds As Different Financing Instruments?

    The last decade witnessed a proliferation in issues of sukuk, Islamic financial instruments structured to replicate the cash flows of conventional bonds. Using a market-based approach on Malaysian data, the authors consider whether investors react differently to the announcements of sukuk and conventional bond issues. Their findings suggest the stock...

    Provided By Bank of Finland

  • White Papers // Feb 2011

    What Explains Risk Premia In Crude Oil Futures?

    This paper studies the existence of risk premia in crude oil futures prices with simple regression and Bayesian VAR models. It also studies the importance of three main risk premia models in explaining and forecasting the risk premia in practice. Whilst the existence of the premia and the validity of...

    Provided By Bank of Finland

  • White Papers // Feb 2011

    Financial Factors In The Boom-Bust Episode In Finland In The Late 1980s And Early 1990s

    This paper proposes a framework for studying the boom and bust in Finland in the late 1980s and early 1990s. The authors develop a small open economy DSGE model with balance sheet-constrained firms ? la BGG and calibrate it to the Finnish economy. They use the model to simulate three...

    Provided By Bank of Finland

  • White Papers // Jan 2011

    Moral Hazard In The Credit Market When The Collateral Value Is Stochastic

    This paper explores the effects of costly and non-costly collateral on moral hazard, when collateral value may fluctuate. Given that all collateral is costly, stochastic collateral will entail the same positive incentive effects as non-stochastic collateral, provided the variation in collateral value is modest. If it is large, the incentive...

    Provided By Bank of Finland

  • White Papers // Dec 2010

    Central Bank Liquidity Operations During The Financial Market And Economic Crisis: Observations, Thoughts And Questions

    The paper concentrates on illustrating and assessing central banks' liquidity operations during the crisis that started in August 2007. In addition to the ECB, the central banks of Sweden, Switzerland, the United Kingdom, Australia, Japan, Canada and the United States are analyzed. During the crisis the liquidity operations of central...

    Provided By Bank of Finland

  • White Papers // Dec 2010

    Effect Of Finance On Growth Through More Efficient Utilization Of Technological Innovations

    This paper models the effects of financial development on economic growth through better or more efficient utilization of technological innovations. The model is based on the endogenous growth theory of Aghion and Howitt and its derivatives, especially the growth model of Aghion, Howitt and Mayer-Foulkes, which covers the effect of...

    Provided By Bank of Finland

  • White Papers // Dec 2010

    Realized Volatility And Overnight Returns

    No consensus has emerged on how to deal with overnight returns when calculating realized volatility in markets where trading does not take place 24 hours a day. This paper explores several common volatility applications, investigating how the chosen treatment of overnight returns affects the results. For example, the selection of...

    Provided By Bank of Finland

  • White Papers // Dec 2010

    The Effect Of Openness In A Small Open Monetary Union

    In this paper the authors build a dynamic stochastic general equilibrium model of a small open monetary union with optimal monetary and fiscal policy, to study the transmission of country specific shocks and associated exchange rate fluctuations. They show that movements of the monetary union's exchange rate stabilize the output...

    Provided By Bank of Finland

  • White Papers // Nov 2010

    Credit Allocation, Capital Requirements And Output

    The authors show how banks' excessive risk-taking, stemming from informational asymmetries in loan markets, can lead to an excessive output loss when a recession starts. Risk-based capital requirements can alleviate the output loss by reducing excessive risk-taking in 'Normal' times. Model simulations suggest that the differentiation of risk-weights in the...

    Provided By Bank of Finland

  • White Papers // Sep 2010

    A New Approach To Analyzing Convergence And Synchronicity In Growth And Business Cycles: Cross Recurrence Plots And Quantification Analysis

    Convergence and synchronization of business and growth cycles are important issues in the efficient formulation of euro area economic policies, and in particular European Central Bank (ECB) monetary policy. Although several studies in the economics literature address the issue of synchronicity of growth within the euro area, this is the...

    Provided By Bank of Finland

  • White Papers // Sep 2010

    Credit Constraints And Durable Consumption A New Empirical Approach

    The author finds quantitative evidence of a significant effect for credit constraints on durable consumption during a post-deregulation consumer spending spree. The effect varied markedly across age and educational groups. Young households with low levels of education displayed high sensitivity to credit conditions. In contrast, older highly educated households were...

    Provided By Bank of Finland

  • White Papers // Sep 2010

    Managers And Efficiency In Banking

    This paper presents evidence on the impact of managers on cost efficiency in banking. Stochastic frontier analysis is applied to a unique Finnish data set. The paper finds that manager age and education have strong yet complicated effects. University education enhances efficiency if the manager is running a large bank....

    Provided By Bank of Finland

  • White Papers // Aug 2010

    The Feasibility Of Through-The-Cycle Ratings

    It has been proposed that the potential pro-cyclicality of Basel II could be alleviated by using Through-The-Cycle (TTC) ratings in IRBA models. A TTC rating would be based on the structural component of the debtor's credit risk ignoring cyclical fluctuations. This paper tests for the existence of such fluctuations in...

    Provided By Bank of Finland

  • White Papers // Aug 2010

    The Crisis As A Wake-Up Call: Do Banks Tighten Screening And Monitoring During A Financial Crisis?

    To what extent was the credit contraction during the global financial crisis due to more intense screening and monitoring by banks? The authors address this question by analyzing changes in the structure of a large number of syndicated loans to private, non-financial corporations. They find an increase in retention rates...

    Provided By Bank of Finland

  • White Papers // Jul 2010

    China's Monetary Policy And The Exchange Rate

    The paper models monetary policy in China using a hybrid McCallum-Taylor empirical reaction function. The feedback rule allows for reactions to inflation and output gaps, and to developments in a trade-weighted exchange rate gap measure. The investigation finds that monetary policy in China has, on average, accommodated inflationary developments. But...

    Provided By Bank of Finland

  • White Papers // May 2010

    Does Ricardian Equivalence Hold When Expectations Are Not Rational?

    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...

    Provided By Bank of Finland

  • White Papers // Apr 2010

    New Evidence On Implicit Contracts From Linked Employer-Employee Data

    The authors improve the precision of the test of the implicit contract model that Beaudry and DiNardo proposed twenty years ago. This data set allows them to define the precise industry and plant of a particular employment relationship, link local labor market characteristics and company characteristics to the individual level...

    Provided By Bank of Finland

  • White Papers // Apr 2010

    Risk-Based Classification Of Financial Instruments In The Finnish Statutory Pension Scheme TyEL

    Sufficient solvency of a pension insurance company responsible for defined benefit pensions guarantees that the pensions are paid regardless of turbulence in the financial market. In the Finnish occupational pension system TyEL, the required level of solvency capital (solvency limit) and its computation are specified in the statutes. Before the...

    Provided By Bank of Finland

  • White Papers // Apr 2010

    Stock Market Conditions And Monetary Policy In A DSGE Model For The US

    This paper investigates the relationship between stock market fluctuations and monetary policy in a DSGE model for the US economy. The authors initially adopt a framework in which fluctuations in households' financial wealth are allowed - but not required - to influence current consumption. This is due to interaction in...

    Provided By Bank of Finland

  • White Papers // Mar 2010

    Simultaneous Monetary Policy Announcements And International Stock Markets Response: An Intraday Analysis

    This paper investigates the return and volatility responses of major European and the US equity indices to monetary policy surprises using extensive intraday data on 5-minute price quotes along with a comprehensive dataset on monetary policy decisions and macroeconomic news. These results show that monetary policy decisions generally exert an...

    Provided By Bank of Finland

  • White Papers // Feb 2010

    Long Cycles In Growth: Explorations Using New Frequency Domain Techniques With US Data

    In his celebrated 1966 Econometrica article, Granger first hypothesized that there is a 'Typical' spectral shape for an economic variable. This 'Typical' shape implies decreasing levels of energy as frequency increases, which in turn implies an extremely long cycle in economic fluctuations and therefore in growth. Spectral analysis is however...

    Provided By Bank of Finland

  • White Papers // Feb 2010

    Information Acquisition During A Dutch Auction

    In this paper the authors consider equilibrium behavior in a Dutch (descending price) auction where the bidders are uninformed of their valuations with probability 1-q and can acquire information about their valuation at a positive cost during the auction. They assume that the information acquisition activity is covert. They characterize...

    Provided By Bank of Finland

  • White Papers // Jan 2010

    Financial Market Disturbances As Sources Of Business Cycle Fluctuations In Finland

    This paper studies financial market disturbances as sources of investment fluctuations in Finland during 1995 - 2008. The authors construct a DSGE model of the Finnish economy that incorporates two domestic financial market shocks and financial frictions in the form of a BGG financial accelerator. They investigate empirically the importance...

    Provided By Bank of Finland

  • White Papers // Jan 2010

    Cross-Border Bank M&As And Risk: Evidence From The Bond Market

    The impact of cross-border bank M&As on bank risk remains an open question. Though geographically diversifying bank M&As have the potential to reduce the risk of bank insolvency, they also have the potential to increase that risk due to the increase in risk-taking incentives for bank managers and stockholders following...

    Provided By Bank of Finland

  • White Papers // Jan 2010

    Return From Retail Banking And Payments

    The European banking industry joined forces to achieve a fully integrated market for retail payment services in the euro area: the Single Euro Payments Area (SEPA). Against this background, the present paper examines the fundamental relationship between retail payment business and overall bank performance. Using data from across 27 European...

    Provided By Bank of Finland

  • White Papers // Jan 2010

    Law And Stock Markets: Evidence From An Emerging Market

    A sweeping and protracted reform of corporate law took place in Finland in the 1970s. The reform brought significant improvements to investor protection and, similar to the US Sarbanes-Oxley Act, tightened disclosure rules at the cost of increasing the work load in corporate reporting. The authors find that the Finnish...

    Provided By Bank of Finland

  • White Papers // Jan 2010

    Growth Strategies And Value Creation: What Works Best For Stock Exchanges?

    In recent years, demutualized stock exchanges have increasingly engaged in M&A and alliance activities. To shed light on this topic, the authors investigate short-run share price responses to the formation of 110 stock exchange M&As and alliances in the period 2000 - 2008. These findings show that the average stock-price...

    Provided By Bank of Finland

  • White Papers // Dec 2009

    Bank Relationships And Firms' Financial Performance: The Italian Experience

    The authors examine the connection between the number of bank relationships and firms' performance using a unique data set on Italian small firms for which banks are a major source of financing. The evidence indicates that return on equity and return on assets decrease as the number of bank relationships...

    Provided By Bank of Finland

  • White Papers // Dec 2009

    Financial Crises And Bank Failures: A Review Of Prediction Methods

    In this paper the authors provide a summary of empirical results obtained in several economics and operations research papers that attempt to explain, predict, or suggest remedies for financial crises or banking defaults, as well as outlines of the methodologies used. They analyze financial and economic circumstances associated with the...

    Provided By Bank of Finland

  • White Papers // Nov 2009

    The Determinants Of Option-adjusted Delta Credit Spreads: A Comparative Analysis Of The United States, The United Kingdom And The Euro Area

    The authors analyse the determinants of the variation of Option-Adjusted credit Spreads (OASs) on a unique database that enlarges the traditional scope of analysis to more disaggregated indexes (combining industry, grade and maturity levels), new variables (volumes of sales and purchases of institutional investors) and a complete set of markets...

    Provided By Bank of Finland

  • White Papers // Nov 2009

    An Analysis Of The Embedded Frequency Content Of Macroeconomic Indicators And Their Counterparts Using The Hilbert-Huang Transform

    Many indicators of business and growth cycles have been constructed by both private and public agencies and are now in use as monitoring devices of economic conditions and for forecasting purposes. As these indicators are largely composite constructs using other economic data, their frequency composition is likely different to that...

    Provided By Bank of Finland

  • White Papers // Nov 2009

    Transmission Of Macro Shocks To Loan Losses In A Deep Crisis: The Case Of Finland

    Building on the work of Sorge and Virolainen (2006), the authors revisit the data on aggregate Finnish bank loan losses from the corporate sector, which covers the 'Big Five' crisis in Finland in the early 1990s. Several extensions to the empirical model are considered. These extensions are then used in...

    Provided By Bank of Finland

  • White Papers // Nov 2009

    The Quality Of Monetary Policy And Inflation Performance: Globalization And Its Aftermath

    With a few unfortunate exceptions the last three decades have seen reductions in inflation around the world to the point that many would argue that further improvements in price stability would offer only limited welfare gains. This experience is the result of many factors, some of which are country-specific. In...

    Provided By Bank of Finland

  • White Papers // Nov 2009

    Bank Safety Under Basel II Capital Requirements

    The authors consider the impact of mandatory information disclosure on bank safety in a spatial model of banking competition in which a bank's probability of success depends on the quality of its risk measurement and management systems. Under Basel II capital requirements, this quality is either fully or partially disclosed...

    Provided By Bank of Finland

  • White Papers // Nov 2009

    Export Pricing And The Cross-Country Correlation Of Stock Prices

    This paper analyses cross-country correlations of stock prices (values of firms) using the basic New Open Economy Macroeconomics model. The authors show that cross-country correlations of stock prices greatly depend on the currency of export pricing in the case of monetary shocks but not notably for temporary technology shocks. In...

    Provided By Bank of Finland

  • White Papers // Oct 2009

    Inferring Market Power From Retail Deposit Interest Rates In The Euro Area

    This paper tests for the existence of market power in banking, using data on demand deposit rates of households and corresponding market rates in five euro area countries. An implicit measure for market power is based on a partial adjustment model that also allows for an asymmetric response of deposit...

    Provided By Bank of Finland

  • White Papers // Oct 2009

    Risk-Adjusted Measures Of Value Creation In Financial Institutions

    Measuring value creation by comparing the RAROC of an exposure (the return on risk capital) with a single institution-wide hurdle rate is inconsistent with the standard theory of financial valuation. The authors use asset pricing theory to determine the appropriate hurdle rate for such a RAROC performance measure. They find...

    Provided By Bank of Finland

  • White Papers // Apr 2011

    Growth, Expectations And Tariffs

    The authors study a many-country endogenous growth model in which decisions about innovation and new investment are influenced by growth expectations. Adaptive learning dynamics determine the country-specific short-run transition paths. The countries differ in basic structural parameters and may impose tariffs on imports of capital goods. Numerical experiments illustrate the...

    Provided By Bank of Finland

  • White Papers // Sep 2008

    History Of Finance Research And Education In Finland: The First Thirty Years

    This paper reviews the first thirty years of finance research and education in Finland, starting with publication of the first dissertation in finance in 1977. That was also the year when the first department of finance was established in Finland - among the first in the Nordic countries. This paper...

    Provided By Bank of Finland

  • White Papers // Apr 2011

    The Euro And Corporate Financing

    In this paper, the authors study how the introduction of the euro has affected corporate financing in Europe. They use firm-level data from eleven euro area countries as well as from a control group of five other European countries spanning the years 1991-2006. They show that firms from euro area...

    Provided By Bank of Finland

  • White Papers // Jun 2008

    Investment-cash Flow Sensitivities, Credit Rationing And Financing Constraints

    The controversy over whether investment-cash flow sensitivity is a good indicator of financing constraints is still unresolved. The authors tackle it from several different angles and cross-validate their analysis with both balance sheet and qualitative data on self-declared credit rationing and financing constraints. Their qualitative information shows that (self-declared) credit...

    Provided By Bank of Finland

  • White Papers // Sep 2008

    Adverse Selection And Financing Of Innovation: Is There A Need For R&D Subsidies?

    The authors study the interaction between private and public funding of innovative projects in the presence of adverse-selection based financing constraints. Government programmes allocating direct subsidies are based on ex-ante screening of the subsidy applications. This selection scheme may yield valuable information to market-based financiers. They find that under certain...

    Provided By Bank of Finland

  • White Papers // Apr 2011

    Do Markets Perceive Sukuk And Conventional Bonds As Different Financing Instruments?

    The last decade witnessed a proliferation in issues of sukuk, Islamic financial instruments structured to replicate the cash flows of conventional bonds. Using a market-based approach on Malaysian data, the authors consider whether investors react differently to the announcements of sukuk and conventional bond issues. Their findings suggest the stock...

    Provided By Bank of Finland

  • White Papers // Oct 2008

    Adverse Selection And Financing Of Innovation: Is There Need For R&D Subsidies

    The authors study the interaction of private and public funding of innovative projects in the presence of adverse-selection based financing constraints. Government programs allocating direct subsidies are based on ex-ante screening of the subsidy applications. This selection scheme may yield valuable information to market-based financiers. They find that under certain...

    Provided By Bank of Finland

  • White Papers // Jun 2008

    Mccallum Rule And Chinese Monetary Policy

    This paper evaluates the usefulness of a McCallum monetary policy rule based on money supply for maintaining price stability in mainland China. The authors examine whether excess money relative to rule-based values provides information that improves the forecasting of price developments. The results suggest that their monetary variable helps in...

    Provided By Bank of Finland

  • White Papers // Jul 2010

    China's Monetary Policy And The Exchange Rate

    The paper models monetary policy in China using a hybrid McCallum-Taylor empirical reaction function. The feedback rule allows for reactions to inflation and output gaps, and to developments in a trade-weighted exchange rate gap measure. The investigation finds that monetary policy in China has, on average, accommodated inflationary developments. But...

    Provided By Bank of Finland

  • White Papers // Jun 2009

    The Role Of Banks In Monetary Policy Transmission: Empirical Evidence From Russia

    This paper focuses on the role of the banking sector in monetary policy transmission in an emerging economy with a rapidly developing financial system. Specifically, the authors examine whether the central bank's monetary policy stance affects banks' lending behavior. Based on a comprehensive quarterly dataset on all Russian banks from...

    Provided By Bank of Finland

  • White Papers // Apr 2008

    The Impact Of Chinese Monetary Policy Shocks On East Asia

    The authors study the effects of Chinese monetary policy shocks on China's major trading partners in East Asia by estimating Structural Vector AutoRegressive (SVAR) models for six economies in the region. They find that a monetary expansion in Mainland China leads to an increase in real GDP (temporary) and the...

    Provided By Bank of Finland

  • White Papers // Jun 2011

    The Economic Transmission Of Fiscal Policy Shocks From Western To Eastern Europe

    This paper studies the transmission of a foreign fiscal policy shock (assumed to be generated in Germany) to key macroeconomic variables in Five Central and Eastern European economies (CEE-5). The authors use quarterly data from 1995 to 2009 and estimate an open economy Structural Vector AutoRegressive (SVAR) model identified by...

    Provided By Bank of Finland

  • White Papers // Apr 2008

    Pricing Of The Currency Risk In Stock Markets: Evidence From Finland And Sweden 1970-2005

    In this paper, the authors investigate whether global, local and currency risks are priced in two Nordic stock markets using conditional international asset pricing models. They take the view of US investors. The estimation is conducted using a modified version of the multivariate GARCH framework of De Santis and G?rard...

    Provided By Bank of Finland

  • White Papers // Dec 2010

    Realized Volatility And Overnight Returns

    No consensus has emerged on how to deal with overnight returns when calculating realized volatility in markets where trading does not take place 24 hours a day. This paper explores several common volatility applications, investigating how the chosen treatment of overnight returns affects the results. For example, the selection of...

    Provided By Bank of Finland

  • White Papers // Dec 2010

    The Effect Of Openness In A Small Open Monetary Union

    In this paper the authors build a dynamic stochastic general equilibrium model of a small open monetary union with optimal monetary and fiscal policy, to study the transmission of country specific shocks and associated exchange rate fluctuations. They show that movements of the monetary union's exchange rate stabilize the output...

    Provided By Bank of Finland

  • White Papers // Nov 2010

    Credit Allocation, Capital Requirements And Output

    The authors show how banks' excessive risk-taking, stemming from informational asymmetries in loan markets, can lead to an excessive output loss when a recession starts. Risk-based capital requirements can alleviate the output loss by reducing excessive risk-taking in 'Normal' times. Model simulations suggest that the differentiation of risk-weights in the...

    Provided By Bank of Finland

  • White Papers // Sep 2010

    A New Approach To Analyzing Convergence And Synchronicity In Growth And Business Cycles: Cross Recurrence Plots And Quantification Analysis

    Convergence and synchronization of business and growth cycles are important issues in the efficient formulation of euro area economic policies, and in particular European Central Bank (ECB) monetary policy. Although several studies in the economics literature address the issue of synchronicity of growth within the euro area, this is the...

    Provided By Bank of Finland

  • White Papers // Sep 2010

    Credit Constraints And Durable Consumption A New Empirical Approach

    The author finds quantitative evidence of a significant effect for credit constraints on durable consumption during a post-deregulation consumer spending spree. The effect varied markedly across age and educational groups. Young households with low levels of education displayed high sensitivity to credit conditions. In contrast, older highly educated households were...

    Provided By Bank of Finland

  • White Papers // Aug 2010

    The Feasibility Of Through-The-Cycle Ratings

    It has been proposed that the potential pro-cyclicality of Basel II could be alleviated by using Through-The-Cycle (TTC) ratings in IRBA models. A TTC rating would be based on the structural component of the debtor's credit risk ignoring cyclical fluctuations. This paper tests for the existence of such fluctuations in...

    Provided By Bank of Finland

  • White Papers // May 2010

    Does Ricardian Equivalence Hold When Expectations Are Not Rational?

    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...

    Provided By Bank of Finland

  • White Papers // Apr 2010

    New Evidence On Implicit Contracts From Linked Employer-Employee Data

    The authors improve the precision of the test of the implicit contract model that Beaudry and DiNardo proposed twenty years ago. This data set allows them to define the precise industry and plant of a particular employment relationship, link local labor market characteristics and company characteristics to the individual level...

    Provided By Bank of Finland

  • White Papers // Apr 2010

    Stock Market Conditions And Monetary Policy In A DSGE Model For The US

    This paper investigates the relationship between stock market fluctuations and monetary policy in a DSGE model for the US economy. The authors initially adopt a framework in which fluctuations in households' financial wealth are allowed - but not required - to influence current consumption. This is due to interaction in...

    Provided By Bank of Finland

  • White Papers // Jan 2010

    Law And Stock Markets: Evidence From An Emerging Market

    A sweeping and protracted reform of corporate law took place in Finland in the 1970s. The reform brought significant improvements to investor protection and, similar to the US Sarbanes-Oxley Act, tightened disclosure rules at the cost of increasing the work load in corporate reporting. The authors find that the Finnish...

    Provided By Bank of Finland

  • White Papers // Mar 2009

    Euler Consumption Equation With Non-Separable Preferences Over Consumption And Leisure And Collateral Constraints

    This paper derives and estimates an aggregate Euler consumption equation which allows one to compare the importance of collateral constraints and non-separability of consumption and leisure as alternative sources of excess sensitivity of consumption to current income. Estimation results suggest that during a severe financial distress both non-separability and collateral...

    Provided By Bank of Finland

  • White Papers // Mar 2009

    Public Infrastructures, Public Consumption And Welfare In A New Open Economy Macro Model

    This paper focuses on the trade-off faced by governments in deciding the allocation of public expenditures between productivity-enhancing public infrastructures and utility-enhancing public consumption in a two-country model. The results show that a permanent increase in the domestic stock of public capital financed by a reduction in public consumption raises...

    Provided By Bank of Finland

  • White Papers // Jan 2009

    Financial Interlinkages And Risk Of Contagion In The Finnish Interbank Market

    Using the maximum entropy method, this paper estimates the danger of contagion in the Finnish interbank market in 2005 - 2007 as well as the existence of contagion during a Finnish banking crisis. The contagion analysis of the early 1990s is able to predict the most troublesome and defaulting banks...

    Provided By Bank of Finland

  • White Papers // Jan 2009

    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...

    Provided By Bank of Finland

  • White Papers // Jan 2009

    New Small Firms And Dimensions Of Economic Performance

    Using data from US labor market areas, the authors quantify empirical associations between entry by small firms and a vector of economic performance measures encompassing levels, volatilities and growth rates of several income and employment variables. Distinct and robust associations are found for net and gross rates of entry. These...

    Provided By Bank of Finland

  • White Papers // Dec 2009

    Bank Relationships And Firms' Financial Performance: The Italian Experience

    The authors examine the connection between the number of bank relationships and firms' performance using a unique data set on Italian small firms for which banks are a major source of financing. The evidence indicates that return on equity and return on assets decrease as the number of bank relationships...

    Provided By Bank of Finland

  • White Papers // Dec 2009

    Financial Crises And Bank Failures: A Review Of Prediction Methods

    In this paper the authors provide a summary of empirical results obtained in several economics and operations research papers that attempt to explain, predict, or suggest remedies for financial crises or banking defaults, as well as outlines of the methodologies used. They analyze financial and economic circumstances associated with the...

    Provided By Bank of Finland

  • White Papers // Nov 2009

    The Determinants Of Option-adjusted Delta Credit Spreads: A Comparative Analysis Of The United States, The United Kingdom And The Euro Area

    The authors analyse the determinants of the variation of Option-Adjusted credit Spreads (OASs) on a unique database that enlarges the traditional scope of analysis to more disaggregated indexes (combining industry, grade and maturity levels), new variables (volumes of sales and purchases of institutional investors) and a complete set of markets...

    Provided By Bank of Finland

  • White Papers // Nov 2009

    An Analysis Of The Embedded Frequency Content Of Macroeconomic Indicators And Their Counterparts Using The Hilbert-Huang Transform

    Many indicators of business and growth cycles have been constructed by both private and public agencies and are now in use as monitoring devices of economic conditions and for forecasting purposes. As these indicators are largely composite constructs using other economic data, their frequency composition is likely different to that...

    Provided By Bank of Finland

  • White Papers // Nov 2009

    The Quality Of Monetary Policy And Inflation Performance: Globalization And Its Aftermath

    With a few unfortunate exceptions the last three decades have seen reductions in inflation around the world to the point that many would argue that further improvements in price stability would offer only limited welfare gains. This experience is the result of many factors, some of which are country-specific. In...

    Provided By Bank of Finland

  • White Papers // Dec 2008

    Population Ageing And Fiscal Sustainability Of Finland: A Stochastic Analysis

    This paper analyses the fiscal sustainability of the Finnish public sector using stochastic projections to describe uncertain future demographic trends and asset yields. While current tax rates are unlikely to yield sufficient tax revenue to finance public expenditure with an ageing population, if developments are as expected, the problem will...

    Provided By Bank of Finland

  • White Papers // Dec 2008

    Bank Competition And Collateral: Theory And Evidence

    The authors investigate the impact of bank competition on the use of collateral in loan contracts. They develop a theoretical model incorporating information asymmetries in a spatial competition framework where banks choose between screening the borrower and asking for collateral. They show that presence of collateral is more likely when...

    Provided By Bank of Finland

  • White Papers // Oct 2008

    The Co-Movements Along The Forward Curve Of Natural Gas Futures: A Structural View

    This paper studies the co-movements between the daily returns of forwards on natural gas traded in the NYMEX with maturity of 1, 2 and 3 months. The authors identify a structural multivariate BEKK model using a recursive assumption whereby shocks to the volatility of the returns are transmitted from the...

    Provided By Bank of Finland

  • White Papers // Oct 2008

    A Continuous-Time Model Of The Term Structure Of Interest Rates With Fiscal-Monetary Policy Interactions

    The authors study the term structure implications of the fiscal theory of price level determination. They introduce the intertemporal budget constraint of the government in a general equilibrium model in continuous time. Fiscal policy is set according to a simple rule whereby taxes react proportionally to real debt. They show...

    Provided By Bank of Finland

  • White Papers // Sep 2010

    Managers And Efficiency In Banking

    This paper presents evidence on the impact of managers on cost efficiency in banking. Stochastic frontier analysis is applied to a unique Finnish data set. The paper finds that manager age and education have strong yet complicated effects. University education enhances efficiency if the manager is running a large bank....

    Provided By Bank of Finland

  • White Papers // Jan 2007

    Rating Targeting And The Confidence Levels Implicit In Bank Capital

    The solvency standards implicit in bank capital levels, as reported in Jackson et al (2002), are much higher than those required for top ratings, if standard single period economic capital models are taken seriously. The authors explain this excess capital puzzle by forward looking rating targeting behavior by banks, which...

    Provided By Bank of Finland

  • White Papers // Aug 2010

    The Crisis As A Wake-Up Call: Do Banks Tighten Screening And Monitoring During A Financial Crisis?

    To what extent was the credit contraction during the global financial crisis due to more intense screening and monitoring by banks? The authors address this question by analyzing changes in the structure of a large number of syndicated loans to private, non-financial corporations. They find an increase in retention rates...

    Provided By Bank of Finland