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Weak Economic Conditions and the Objective of the Government Programme

Author

Listed:
  • Anttonen, Jetro
  • Lehmus, Markku
  • Vihriälä, Vesa

Abstract

The key economic objectives of the current Finnish government are valid only in normal international economic conditions. However, weaker than normal conditions have not been defined. We propose to base such a definition on the expected negative deviation from the euro-area gdp path projected by a statistical model. This implies that the probability of weak economic conditions would be about 20 per cent. Our simulations suggest that a negative deviation of international economic conditions from the normal conditions as defined by us would weaken GDP, employment and public finances in Finland significantly. The employment rate could end up even 2 percentage points smaller than in the baseline.

Suggested Citation

  • Anttonen, Jetro & Lehmus, Markku & Vihriälä, Vesa, 2020. "Weak Economic Conditions and the Objective of the Government Programme," ETLA Brief 86, The Research Institute of the Finnish Economy.
  • Handle: RePEc:rif:briefs:86
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    More about this item

    Keywords

    Government programme; Employment objective; Normal economic conditions;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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