This report is the basic documentation of the present (fifth) version of the Bank of Finland macroeconomic model, BOF5, built for policy simulation and forecasting. In constructing the model, consistent treatment of expectations is emphasized. Following current theoretical literature,...

To develop forecasting procedures with a forward-looking dynamic general equilibrium model, we built a small New-Keynesian model and calibrated it to euro area data. It was essential in this context that we allowed for long-run growth in GDP. We brought additional asset price equations based on...

Cyclically adjusted government budget balances have become increasingly popular as a means of analysing the fiscal situation and changes in policy that result from the intentional actions of the government. As the actual budget balances are affected both by cyclical factors ('automatic...

We present a dynamic general equilibrium model with some nominal rigidities and calibrate it to euro area data. The most important features of the model include consumption/saving decisions according to Blanchard’s stochastic lifetimes approach; valuation of private financial wealth according...

We present a two country DGE model and estimate it using Bayesian techniques and euro area and US quarterly data for 1977–2004. In analysing the current accounts we find that a lower US rate of time preference or a higher dollar risk premium could render the deficit sustainable, but that these...

We study the effect of the zero bound constraint of interest rates on international transmission of eco-nomic policy and supply shocks. After some preliminary analysis with a simple theoretical model, we ap-ply a rich two-country simulation model to the problem. The model framework consists of...

In this paper we analyze the empirical relevance of exchange rate pass-through for Finland, Sweden and Denmark during the period 1980–1994. Further, we attempt to determine if there has been a structural change in the pass-through relationship in the1990s. We find that about half the changes...

We ask the question: Does it matter whether expections on monetary policy are heterogeneous across agents in the economy? We tackle this issue with the aid of a dynamic general equilibrium model with nominal rigidities. The most important features of the model include consumption/saving...