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Financial markets in the BOF4 model of the Finnish economy

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  • Tarkka, Juha
  • Willman, Alpo

Abstract

This paper describes the modelling of financial markets and the balance of payments in BOF4, a quarterly macroeconomic model developed by the Bank of Finland. The short-term interest rate is determined as a result of the interaction of the demand for money and money supply, as in the conventional IS-LM approach. Alternatively, the model may be solved under the assumption that monetary policy is based on pegging interest rates. In that case, the domestic credit of the Central Bank is the equilibrating variable.

Suggested Citation

  • Tarkka, Juha & Willman, Alpo, 1990. "Financial markets in the BOF4 model of the Finnish economy," Bank of Finland Research Discussion Papers 1/1990, Bank of Finland.
    • Handle: RePEc:zbw:bofrdp:rdp1990_001
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    References listed on IDEAS

    as
    1. Tarkka, Juha, 1985. "Monetary policy in the BOF3 quarterly model of the Finnish economy," Economic Modelling, Elsevier, vol. 2(4), pages 298-306, October.
    2. DeAngelo, Harry & Masulis, Ronald W, 1980. "Leverage and Dividend Irrelevancy under Corporate and Personal Taxation," Journal of Finance, American Finance Association, vol. 35(2), pages 453-464, May.
    3. Alhonsuo, Sampo & Söderlund, Kjell Peter & Tarkka, Juha, 1989. "Joukkovelkakirjalainojen tuotto Suomessa 1948 - 1986," Bank of Finland Research Discussion Papers 10/1989, Bank of Finland.
    4. William J. Baumol, 1952. "The Transactions Demand for Cash: An Inventory Theoretic Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 66(4), pages 545-556.
    5. Kouri, Pentti J K & Porter, Michael G, 1974. "International Capital Flows and Portfolio Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 82(3), pages 443-467, May/June.
    6. repec:zbw:bofrdp:1989_010 is not listed on IDEAS
    7. Dobson, Steven W & Sutch, Richard C & Vanderford, David E, 1976. "An Evaluation of Alternative Empirical Models of the Term Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 31(4), pages 1035-1065, September.
    8. Aivazian, Varouj A & Callen, Jeffrey L, 1987. "Miller's Irrelevance Mechanism: A Note," Journal of Finance, American Finance Association, vol. 42(1), pages 169-180, March.
    9. Amemiya, Takeshi, 1977. "The Maximum Likelihood and the Nonlinear Three-Stage Least Squares Estimator in the General Nonlinear Simultaneous Equation Model," Econometrica, Econometric Society, vol. 45(4), pages 955-968, May.
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