Vol. 11, No. 1

Ken Angelin and L. Peter Jennergren:
Partner leasing in Sweden: a case study in financial innovation and reregulation (pp. 3–18)


Partner leasing is a form of financial leasing which is driven primarily by tax considerations. We discuss how partner leasing flourished in Sweden as a financial innovation in response to particular tax rules around 1983, and how the authorities attempted to eliminate it. Specific reference is made to the Tjädern case, an authentic and sophisticated piece of financial engineering. The lowering of the corporate income tax rate through the 1991 tax reform and the subsequent fall in interest rates seem to have made partner leasing relatively uninteresting today as a corporate tax planning device.

(JEL: G28, H25, H26)

Mika Vaihekoski:
Short-term returns and the predictability of Finnish stock returns (pp. 19–36)


The predictability of Finnish stock returns is studied using the framework of Ferson and Harvey (1993). We employ a conditional asset pricing model where risk premia and risk sensitivities are conditioned on a range of financial information variables. In particular, we study the effect of the return interval on the predictability of short-term stock returns. Using daily, weekly, and monthly returns on Finnish size and industry-sorted portfolios, we find that the predictability of returns increases with the length of the return interval, but so does the power of the conditional pricing model to explain the predictability. Consistent with the earlier results, we report that the time variation in risk premium accounts for most of the predictability. However, the results also show a sizable positive interaction between the beta and the risk premium which seems to increase for smaller companies.

(JEL: G12, G14)

Hannu Tervo:
The development of regional unemployment differentials in Finland in the 1990s (pp. 37–49)


This paper addresses the issue of regional response to national economic cycles. Two basic alternatives for a region to react to national development are presented. The empirical analysis deals with the unemployment situation in Finland which has undergone rapid changes in the 1990s. The main questions are: Has a significantly different regional pattern of unemployment begun to arise in Finland? Has the dynamics of regional unemployment differentials changed? In analysing regional unemployment differentials, methods based on sequential and recursive estimations are used. The results suggest that unemployment has been more equally shared among regions than in previous recessions. The dynamics seems to have met with changes.

(JEL: J64, R11)

Aki Kangasharju:
Growth and convergence in Finland: effects of regional features (pp. 51–61)


This paper analyses convergence across the 88 subregions in Finland from 1934 to 1993. The results indicate a rather strong a convergence and intra-distribution dynamics of income levels. This indicates that, although the dispersion in subregional income levels has diminished, some ofthe poorer subregions have risen into a higher income category, whereas some of the middle income subregions have fallen into a lower category. Since this development has not been deterministic, the paper also tests for the existence of distinct regional features that determine growth and convergence. Major finding is that though some regional features tend to determine growth, only a few of them actually pass the test of robustness.

(JEL: O4, R1)

Finnish Economic Papers 1/1998