Research Discussion Papers, Bank of Finland
No 10/1998:
The BOF5 Macroeconomic Model of Finland, Structure and Equations
Alpo Willman, Mika Kortelainen ()
, Hanna-Leena Männistö ()
and Mika Tujula
Abstract: 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.
Keywords: macroeconomic models; Finland; econometric modelling; policy simulations; expectations; Euler equations; (follow links to similar papers)
170 pages, June 3, 1998
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