An analysis of advance effects of anticipated policy actions : Recent results with the finnish MICRO-QMED model

Abstract

This paper reports some policy simulations carried out with the Finnish MICRO-QMED model. This rational expectations model built at the Economics Department of Bank of Finland is used to evaluate the short-run effects of some anticipated policy actions. The role of alternative (income) policy rules is also assessed.All these experiments demonstr-ate the importance of advance effects. In addition, they underline the importance of knowing the nature of the policy actions and the expectations horizon of economic agents. The paper also contains a short desc~iption of the MICRO-QMED model and its computational properties.