Estimating a small DSGE model under rational and measured expectations: some comparisons

Using European panel data and GMM system estimation, we explore the empirical performance of the standard three-equation New Keynesian macro model under different informational assumptions. As a benchmark, we consider the performance of the model under rational expectations and revised (final) data. Alternatively, instead of imposing rational expectations hypothesis we use real- time information, ie Consensus Economics survey data, to generate empirical proxies for expectations in the model and the current output gap in the Taylor rule. We demonstrate that, contrary to the assumption of rational expectations, the errors in measured expectations and real-time current output gaps are positively autocorrelated. We produce evidence that the use of real-time variables (including measured expectations) improves the empirical performance of the New Keynesian model. Relaxation of the rational expectations hypothesis makes a noticeable difference for the parameters of the New Keynesian model, especially in the Taylor rule.DSGE model; survey expectations; GMM system estimation; expectations; estimation

Estimating open economy Phillips curves for the euro area with directly measured expectations

This paper examines euro area inflation dynamics by estimating open economy New Keynesian Phillips curves based on the assumption that all imports are intermediate goods. Instead of imposing rational expectations a priori, Consensus Economics survey data and OECD inflation forecasts are used to proxy inflation expectations. The results suggest that, compared with a closed economy New Keynesian Phillips curve, euro area inflation dynamics are better captured by the open economy specification. Moreover, in the open economy context, and even if we allow for persistence in expectations, the hybrid specification of the New Keynesian Phillips curve is needed in order to capture the euro area inflation process properly. We also provide some evidence that in recent years of low and stable inflation, euro area inflation dynamics have become more forward-looking and the link between inflation and domestic demand has weakened (ie the euro area Phillips curve has flattened). On the other hand, in low-inflation euro area countries the inflation process seems to have been more forward-looking already since the early 1980s.New Keynesian Phillips curve; open economy; expectations; euro area

Comparing alternative Phillips curve specifications: European results with survey-based expectations

This paper examines inflation dynamics in Europe. Econometric specification tests with pooled European data are used to compare the empirical performance of the New Classical, New Keynesian and Hybrid specifications of the Phillips curve. Instead of imposing any specific form of expectations formation, di-rect measures, ie Consensus Economics survey data are used to proxy economic agents’ inflation expecta-tions. According to the results, the New Classical Phillips curve has satisfactory statistical properties. Moreover, the purely forward-looking New Keynesian Phillips curve is clearly outperformed by the New Classical and Hybrid Phillips curves. We interpret our results as indicating that the European inflation process is not purely forward-looking, and inflation cannot instantaneously adjust to changes in expecta-tions. Consequently, even allowing for possible non-rationality in expectations, a lagged inflation term enters the New Keynesian Phillips curve for inflation dynamics in Europe.Phillips curve; expectations; Europe

Real time analysis of euro area fiscal policies: adjustment to the crisis

Using real time data from the OECD and fiscal policy reaction functions, this study explores euro area fiscal policies since the late 1990s. Both discretionary plans for the budget year and policy changes during budget implementation stages are investigated. The main focus is on the fiscal adjustment to the recent financial and economic crisis. The results suggest that during the time of monetary union (EMU) euro area planned fiscal policies have been long-term oriented and counter-cyclical. In the implementation stages new policy decisions have been made in response to unexpected economics developments. We provide evidence that the crisis had a clear impact on discretionary policies. Due to the resultant increase in uncertainty, the crisis spotlighted the impact of cyclical developments on fiscal planning. In the implementation stages, huge forecast errors in connection with planned policy were observed. As a consequence, new decisions were made in order to alleviate the negative impacts of the crisis on euro area economies.fiscal policy; real time data; planning stage; implementation stage; cyclical sensitivity; economic crisis

The use of real-time information in Phillips curve relationships for the euro area

The dynamics of the Phillips Curve in New Keynesian, Expectations Augmented and Hybrid forms are extremely sensitive to the choice, timing and restrictions on variables. An important element of the debate revolves round what information decision-makers took into account at the time and round what they thought was going to happen in the future. The original debate was conducted using up to date, revised estimates of the data as in the most recent official publications. In this paper, however, we explore how much three aspects of the specification of the information available at the time affect the performance of the various Phillips curves and the choice of the most appropriate dynamic structures. First we consider the performance of forecasts, published at the time, as representations of expectations. Second, we explore the impact of using 'real time data' in the sense of what were the most recently available estimates of the then present and past. Finally we review whether it helps to use the information that was available at the time in the choice of instruments in the estimation of the relationships rather than the most up to date estimate of the data series that has been published. Thus different datasets are required in the instrument set for every time period. We use a single consistent source for 'real-time' data on the past, estimates of the present and forecasts, from OECD Economic Outlook and National Accounts. We set this up as a panel for the euro area countries covering the period since 1977. The OECD publishes forecasts twice a year, which permits a more detailed exploration of the importance of the timing of information. Our principal conclusions are (1) that the most important use of real time information in the estimation of the Phillips curve is in using forecasts made at the time to represent expectations; (2) real time data indicate that the balance of expectations formation was more forward than backward-looking; (3) by contrast using the most recent, revised, data suggests more backward-looking and less well-determined behaviour. --real-time data,Phillips curve,euro area

The role of expectations in the inflation process in the euro area

This paper analyses the role of inflation expectations in the euro area. On one hand, the question is how inflation expectations affect both inflation and output, and, on the other hand, how inflation expectations reflect developments in these variables. The analyses make use of a simple VAR model of inflation, inflation expectations and the output gap that allows for an analysis of the dynamic interrelationship between these variables. This model is estimated on aggregate euro area data, pooled euro area country data and individual country data for the period 1979–2003. The empirical results give strong support for the idea that inflation expectations are the key ingredient of the inflationary process for the whole euro area and for most individual countries as well. Inflation expectations also have a significant negative impact on output. As for the determination of inflation expectations, it turns out that they are relatively persistent, almost as persistent as output. Even so, and especially in the medium term, inflation expectations adapt to developments in both output and (actual) inflation.inflation; expectations; monetary policy; Phillips curve

The role of expectations in the inflation process in the euro area

This paper analyses the role of inflation expectations in the euro area. On one hand, the question is how inflation expectations affect both inflation and output, and, on the other hand, how inflation expectations reflect developments in these variables. The analyses make use of a simple VAR model of inflation, inflation expectations and the output gap that allows for an analysis of the dynamic interrelationship between these variables. This model is estimated on aggregate euro area data, pooled euro area country data and individual country data for the period 1979–2003. The empirical results give strong support for the idea that inflation expectations are the key ingredient of the inflationary process for the whole euro area and for most individual countries as well. Inflation expectations also have a significant negative impact on output. As for the determination of inflation expectations, it turns out that they are relatively persistent, almost as persistent as output. Even so, and especially in the medium term, inflation expectations adapt to developments in both output and (actual) inflation.inflation, expectations, monetary policy, Phillips curve

Consumers' perceptions of sustainably produced food - a focus group study

The purpose of this study is to provide information on consumers' perceptions of sustainably produced food products and the main product attributes that influence consumer's buying behaviour in the case of organic, Fair Trade and locally produced food. The paper draws on data from four focus groups. The results provide empirical insight into the motivating as well as the restricting factors which influence consumers' purchasing behaviour in the case of sustainably produced food and introduce the emerging key themes associated with the attributes of sustainably produced food products

Ajouraopastin peltoviljelyssä

Tämä opinnäytetyö käsittelee ajouraopastimen tekniikkaa ja käyttöä peltoviljelyssä. Tarkoitus oli selvittää, pystytäänkö nykyaikaisella ajouraopastimella kohtuullisin kustannuksin toteuttamaan käytännöllinen järjestelmä, jolla tarkennetaan peltoviljelyä. Lisäksi ajouraopastin hankittiin, asennettiin sekä käyttöönotettiin tilalle, josta tämä työ on saatu toimeksiantona. Ajouraopastimen toiminta perustuu satelliittipaikannukseen. Saatuaan yhteyden vähintään kolmeen GNSS- satelliittiin, pystyy laite määrittämään sijaintinsa. Nykyisin saatavilla olevien korjaussignaalien avulla pystytään paikannusta tarkentamaan riittävän luotettavaksi myös tarkkuutta vaativia peltotöitä varten. Ajouraopastinta käytettäessä työskentely helpottuu ja ajotarkkuus paranee, jolloin myös tuotantopanoksia säästyy. Tilalle hankitun ajouraopastimen asennus onnistui vaivattomasti ja lopputulos oli siisti. Koeajon perusteella laitteen käytettävyys osoittautui hyväksi. Luotettavan paikannustarkkuuden ja käytettävyyden ansiosta ajouraopastimella pystyään tarkentamaan tilan olosuhteissa etenkin nurmen lannoitusta. Merkittävästi ajouraopastimesta on apua lannoitettaessa suuria peltolohkoja, jolloin oikeaa ajolinjaa ei tarvitse enää arvailla. Kalliit tuotantopanokset pystytään kohdentamaan oikein.This thesis is about the technology of guidance display and its usage in arable farming. The aim of the thesis is to examine the possibility of using the guidance display for more accurate arable farming with reasonable costs. The guidance display was purchased, installed and implemented to the subject farm. The function of the guidance display is based on the satellite radiodetermination. The device can determinate its location when connected to three different GNSS-satellites. Nowadays the accuracy of the system can be improved for more demanding arable farming with certain correction signals. The guidance display working becomes easier and more accurate which decreases the material costs. The installation of the guidance display on the subject farm was successful and clean. During the test drive the usage of the device proved to be good. Because of the reliable position accuracy and easy usage the guidance display can be taken in to advance especially in fertilization. The guidance display was especially helpful in fertilizing the large field areas, because the right driving direction is easier to remain the same. Using the guidance display the expensive fertilizers can be focused correctly

The non-coding genome in early human development-Recent advancements

Not that long ago, the human genome was discovered to be mainly non-coding, that is comprised of DNA se-quences that do not code for proteins. The initial paradigm that non-coding is also non-functional was soon overturned and today the work to uncover the functions of non-coding DNA and RNA in human early embryogenesis has commenced. Early human development is characterized by large-scale changes in genomic activity and the transcriptome that are partly driven by the coordinated activation and repression of repetitive DNA elements scattered across the genome. Here we provide examples of recent novel discoveries of non-coding DNA and RNA interactions and mechanisms that ensure accurate non-coding activity during human maternal-to -zygotic transition and lineage segregation. These include studies on small and long non-coding RNAs, trans-posable element regulation, and RNA tailing in human oocytes and early embryos. High-throughput approaches to dissect the non-coding regulatory networks governing early human development are a foundation for func-tional studies of specific genomic elements and molecules that has only begun and will provide a wider un-derstanding of early human embryogenesis and causes of infertility.Peer reviewe