HOLDINGS OF NATIONAL AND LOCAL GOVERNMENTS IN COMPANIES IN FINLAND: PERSISTENCE AND CHANGE IN THE LONGER TERM

Applying an approach of neo‐institutional research, this article examines the history of company holdings of the national government and local governments in Finland in the longer term. The article examines the genealogy of the institutional forms of these holdings, the diffusion, adoption and adaptation of these forms, and the political legitimacy of new forms and the political de‐legitimation of earlier forms. For theory, the results indicate that the individual tailoring of institutional forms offers flexibility but increases complexity. For practice, the results suggest that the company form may too easily marginalize alternative institutional forms such as co‐operatives, associations, and foundations.     

REDISTRIBUTIVE POLITICS AND GOVERNMENT DEBT IN A BORROWING‐CONSTRAINED ECONOMY

We develop a two‐period, three‐class of income model where low‐income agents are borrowing constrained because of capital market imperfections, and where redistributive expenditure is financed by tax and government debt. When the degree of capital market imperfection is high, there is an ends‐against‐the‐middle equilibrium where the constrained low‐income and the unconstrained high‐income agents favour low levels of government debt and redistributive expenditure; these agents form a coalition against the middle. In this equilibrium, the levels of government debt and expenditure might be below the efficient levels, and the spread of income distribution results in a lower debt‐to‐GDP ratio.     

Australia's Carbon Tax: An Economic Evaluation

Australia's carbon tax has been in place since July 2012. Following the 2013 federal election and change of government, it is likely that the tax will be abolished. This paper evaluates Australia's carbon tax experience and draws lessons for policymakers in other jurisdictions who may be considering following the Australian example and implementing their own carbon taxes or cap and trade schemes. Overall, the policy was poorly thought through, badly implemented, and lacked majority public support before it began. Australia's carbon tax experience is an interesting case study in how not to go about implementing climate change policy.     

The VIX,the variance premium and stock market volatility

We decompose the squared VIX index, derived from US S&P500 options prices, into the conditional variance of stock returns and the equity variance premium. We evaluate a plethora of state-of-the-art volatility forecasting models to produce an accurate measure of the conditional variance. We then examine the predictive power of the VIX and its two components for stock market returns, economic activity and financial instability. The variance premium predicts stock returns while the conditional stock market variance predicts economic activity and has a relatively higher predictive power for financial instability than does the variance premium.     

Optimal interest rate rule in a DSGE model with housing market spillovers

This paper studies the optimal interest rate rule in a DSGE model with housing market spillovers (Iacoviello and Neri, 2010). We find that the optimal rule responds to house price inflation even when the stabilization of house price is not among the objectives of the policymaker, and that the strength of the response depends crucially on a few structural parameters.     

Evaluating quantile forecasts in the M5 uncertainty competition

Probabilistic forecasts are necessary for robust decisions in the face of uncertainty. The M5 Uncertainty competition required participating teams to forecast nine quantiles for unit sales of various products at various aggregation levels and for different time horizons. This paper evaluates the forecasting performance of the quantile forecasts at different aggregation levels and at different quantile levels. We contrast this with some theoretical predictions, and discuss potential implications and promising future research directions for the practice of probabilistic forecasting.     

The antecedents of digital collaboration through an enhanced digital platform for destination management: A micro-DMO perspective

While the tourism sector shifts towards digital transformation, Destination Management Organisations (DMOs) often struggle to adapt to their changing technological environment. This study explores the antecedents of digital collaboration and develops a framework for micro-DMOs to enhance effective destination management through digital technologies. An integrated sequential qualitative approach was adopted by conducting multi-phase interviews, in addition to designing and trialling a real-world trial digital platform. The research provides empirical evidence that digital collaboration is essential for micro-DMOs, necessitating them to transform their current “websites” into digital platforms which act as a hub for business stakeholders to actively be involved in. Antecedents of successful digital collaboration include mutuality, trust, control, and leadership which may be manifested differently from non-digital collaboration. Additionally, the study identifies three aspects for digital collaboration; marketing, networking and knowledge sharing that demands specific attention. Our results have theoretical, methodological, and practical implications for academia, industry and policymakers.     

Seven Fallacies Concerning Milton Friedman's “The Role of Monetary Policy”

This paper analyzes Milton Friedman's (1968a) article “The Role of Monetary Policy,” via a discussion of seven fallacies concerning the article. These fallacies are as follows: (i) “The Role of Monetary Policy” was Friedman's first public statement of the natural rate hypothesis. (ii) The Friedman–Phelps Phillips curve was already present in Samuelson and Solow's (1960) analysis. (iii) Friedman's specification of the Phillips curve was based on perfect competition and no nominal rigidities. (iv) Friedman's (1968a) account of monetary policy in the Great Depression contradicted the Monetary History’s version. (v) Friedman (1968a) stated that a monetary expansion will keep the unemployment rate and the real interest rate below their natural rates for two decades. (vi) The zero lower bound on nominal interest rates invalidates the natural rate hypothesis. (vii) Friedman's (1968a) treatment of an interest-rate peg was refuted by the rational expectations revolution. The discussion lays out the reasons why each of these seven items is a fallacy and infers key aspects of the framework underlying Friedman's (1968a) analysis.     

FX Intervention in the New Keynesian Model

We develop an open-economy New Keynesian Model with foreign exchange (FX) intervention in the presence of a financial accelerator and shocks to risk appetite in international capital markets. We obtain closed-form solutions for optimal monetary and FX intervention policies assuming the central bank cannot commit to future policies, and we compare the solution to that under policy commitment. We show how FX intervention can help reduce the volatility of the exchange rate, of inflation, and of the output gap, thus mitigating welfare losses associated with shocks in the international capital markets. We also show that, when the financial accelerator is strong, there is a risk of indeterminacy (self-fulfilling currency and inflation movements) although FX intervention can reduce this risk and thus reinforce the credibility of the inflation targeting regime. Model simulations match well the impact of a VIX shock obtained by local projections on a panel of inflation targeting emerging markets.