Willman, Alpo Kortelainen, Mika Männistö, Hanna-Leena Tujula, Mika
Year of Publication:
Bank of Finland Discussion Papers 10/1998
This report is the basic documentation of the present (fifth) version of the Bank of Finland macroeconomic model, BOF5, built for policy simulation and forecasting.In constructing the model, consistent treatment of expectations is emphasized.Following current theoretical literature, intertemporal optimization with rational expectations is taken as the starting point, and Euler equations are applied in the estimation of the key behavioural equations.Consistent treatment of technology on the supply side has been another important aim.We illustrate the properties of the model with some simulation experiments.A complete list of equations and an outline of the derivation of the key equations are presented.We also show how forward-looking equations have been transformed to facilitate simulation under alternative assumptions concerning the formation of expectations.
macroeconomic models Finland econometric modelling policy simulations expectations Euler equations