Research Newsletter Online 3/2008

3/2008

Editorial

An important problem managing technology is the financing of technological advance and innovation. We can often read about firms' technology managers, including interestingly, those of large firms, reporting that they have more projects that they would like to undertake than funds to spend on them. We can think of a number of reasons for this phenomenon, such as low expected returns due to an inability to capture the profits from an invention, the uncertainty and risk associated with the project, and over-optimism on the part of managers.
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Demographic transition, taxes and sustainability of public finances: simulations of alternative policies to smooth the tax burden across generations

A number of developed countries are starting to grey, some – like Finland – sooner than others. Moreover, as these countries advance in age, the worst may not be the physical impact but rather the impact on economic health. How exactly will these economies fare given that, relative to the present, there are, in the not so distant future, perhaps twice as many elderly persons relying on just 15 per cent more workers for their financial support?
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Are subsidies called for when adverse selection hinders the financing of innovation?

Investment in innovation is special. More specifically, from the perspective of investment theory, innovation investment has a number of characteristics that make it different from ordinary investment. First and foremost, perhaps most of the R&D portion of such investment is in the wages and salaries of highly educated scientists and engineers. Their efforts create an intangible asset – the firm’s knowledge base – from which profits will flow in future years. To the extent that this knowledge is “tacit” rather than codified, it is embedded in the human capital of the firm’s employees and is therefore lost if they leave or are fired.
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Monetary policy rules for emerging economies

Since Taylor's (1993) landmark contribution, researchers have made numerous attempts to devise simple decision rules to aid a central bank in gauging its policy actions. These rules assume that the central bank's policy interest rate depends on a few economic variables, eg the gaps between observed and targeted inflation rates and between potential and actual output. Although it is not possible to reduce central bank behaviour to such a simple equation, these rules can be quite useful in analysing policy and in communicating it to the general public.
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Conferences and seminars

Recent Bank of Finland research publications

Forthcoming publications

Editor
Jouko Vilmunen

Publisher
Bank of Finland
ISSN 1796-9131
(online)

PO Box 160,
FI–00101 Helsinki

Email:
research@bof.fi

Research Newsletter 3/2008 (PDF)