Financial markets in the BOF4 model of the Finnish economy
Tarkka, Juha; Willman, Alpo (12.01.1990)
Numero
1/1990Julkaisija
Bank of FinlandSuomen Pankki
1990
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:bof-201807311788Tiivistelmä
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.