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Use of unit root methods in early warning of financial crises
(03.11.2016)
Bank of Finland Research Discussion Papers 27/2016
Bank of Finland Research Discussion Papers 27/2016
Unit root methods have long been used in detection of financial bubbles in asset prices. The basic idea is that fundamental changes in the autocorrelation structure of relevant time series imply the presence of a rational ...
The equity risk premium and the low frequency of the term spread
(03.04.2018)
Bank of Finland Research Discussion Papers 7/2018
Bank of Finland Research Discussion Papers 7/2018
We extract cycles in the term spread (TMS) and study their role for predicting the equity risk premium (ERP) using linear models. The low frequency component of the TMS is a strong and robust out-of-sample ERP predictor. ...
On the long-run calibration of the credit-to-GDP gap as a banking crisis predictor
(22.02.2019)
Bank of Finland Research Discussion Papers 6/2019
Bank of Finland Research Discussion Papers 6/2019
The trend deviation of the Credit-to-GDP ratio (“Basel gap”) is a widely used early warning indicator of banking crises. It is calculated with the one-sided Hodrick-Prescott filter using an extremely large value of the ...
Forecasting inflation with the New Keynesian Phillips curve : Frequency matters
(21.04.2020)
Bank of Finland Research Discussion Papers 4/2020
Bank of Finland Research Discussion Papers 4/2020
We show that the New Keynesian Phillips Curve (NKPC) outperforms standard benchmarks in forecasting U.S. inflation once frequency-domain information is taken into account. We do so by decomposing the time series (of inflation ...
Time-frequency forecast of the equity premium
(27.04.2020)
Bank of Finland Research Discussion Papers 6/2020
Bank of Finland Research Discussion Papers 6/2020
Any time series can be decomposed into cyclical components fluctuating at different frequencies. Accordingly, in this paper we propose a method to forecast the stock market's equity premium which exploits the frequency ...
Specifying a Bayesian vector autoregression for short-run macroeconomic forecasting with an application to Finland
(14.03.1991)
Bank of Finland Research Discussion Papers 4/1991
Bank of Finland Research Discussion Papers 4/1991
The aim of this paper is to specify a small econometric model capable of generating adjustment-free, short-run forecasts of key macroeconomic variables on a monthly basis. The aim is carried out using the vector autoregression ...
The KTKV model of the economics department of the Bank of Finland
(19.06.1988)
Bank of Finland Research Discussion Papers 10/1988
Bank of Finland Research Discussion Papers 10/1988
This is a report on an updated version of the KTKV-model of Bank of Finland's Economics Department. The model was originally designed in the early 80's for the forecasting of short-term international economic developments. ...
Testing the Q theory of investment in the frequency domain
(20.12.2016)
Bank of Finland Research Discussion Papers 32/2016
Bank of Finland Research Discussion Papers 32/2016
We revisit the empirical performance of the Q theory of investment, explicitly taking into account the frequency dependence of investment, Tobin’s Q, and cash flow. The time series are decomposed into orthogonal components ...
Conditional risk and predictability of Finnish stock returns
(28.10.1992)
Bank of Finland Research Discussion Papers 31/1992
Bank of Finland Research Discussion Papers 31/1992
This paper studies the driving forces of predictable variation in Finnish stock returns. The dynamics of Ferson and Harvey's (1991) methodology are extended and applied within the Sharpe-Lintner CAPM. We find that market ...
Formation of inflation expectations in turbulent times : Can ECB manage inflation expectations of professional forecasters?
(28.06.2017)
Bank of Finland Research Discussion Papers 13/2017
Bank of Finland Research Discussion Papers 13/2017
This paper studies the formation of inflation expectations in the euro area. We first analyse the forecast accuracy of ECB inflation projections relative to private sector forecasts. Then, using the ECB Survey of Professional ...