This paper presents Aino 2.0 – the dynamic stochastic general equilibrium (DSGE) model currently used at the Bank of Finland for forecasting and policy analysis. The paper provides a detailed theoretical description of the model, its estimation and how it can be used to interpret the evolution...

Macroeconomic models typically assume additively separable preferences where consumption enters the utility function in a logarithmic form. This restriction implies that consumption growth is highly sensitive to movements in real interest rates, which in turn implies an unrealistically steep...

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...

In this paper we present Aino 3.0, the latest vintage of the dynamic stochastic general equilibrium (DSGE) model used at the Bank of Finland for policy analysis. Aino 3.0 is a small-open economy DSGE model at the intersection of the recent literatures on so-called TANK (“Two-Agent New...

We propose a new Bayesian VAR model for forecasting household loan stocks in Finland. The model is designed to work as a satellite model of a larger DSGE model for the Finnish economy, the Aino 2.0 model. The forecasts produced with the BVAR model can be conditioned on projections of several...