Research Newsletter Online 2/2009

2/2009

Editorial

The idea of economic agents, most notably households, facing borrowing constraints which, if binding, make it more difficult for them to smooth their life-cycle consumption stream has been an essential part of the macroeconomics of consumption behaviour almost from the outset, when modern theories of life-cycle consumption were first introduced into economics more than 50 years ago. Although evidence is mounting against some parameterisations of life-cycle models, the framework has retained its position at the centre of thinking on inter-temporal consumption allocation and, more generally, on the dynamics of aggregate demand.
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Borrowing constraints or non-separability? Seeking an answer from the data

The relationship between consumption and income variability has been an integral part of the research on household consumption behaviour for at least most of the time since systematic modelling of optimal life-cycle consumption behaviour was first introduced into economics more than fifty years ago. Recent vintages of models seeking to account for the relationship between consumption and income variability have started to employ ideas from the class of private information models with asset accumulation to derive empirical implications to be tested on data.
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Banks' risk taking under Basel II capital requirements: does mandatory information disclosure affect banks' risk taking?

One conclusion that has been drawn from the ongoing financial crisis, and in particular from the original subprime crisis, seems to be that there were serious shortcomings in financial institutions’ risk management and the transparency of their actions. This is despite the perhaps more controversial observation that it was the realization of adverse macro or aggregate shocks that triggered the crisis and that the relatively long period of apparent macroeconomic stability was conducive to the perception of reduced macroeconomic risks.
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Institutions to play a key role in growth in transition economies and China

The effects of institutions on economic performance have been widely debated in evolutionary economics. It basically seems that well-functioning economic and political institutions (laws and related monitoring, governance structures, democracy, economic policy, etc) underpin a free market economy and contribute to growth. Accordingly, institutions and their functioning are one of the key areas of research in transition economies, in which the institutions inherited from communist regimes have degenerated and become corrupt, no longer operating as hoped for.
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Events 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 2/2009 (PDF)