Vol. 3, No. 2

Peter Englund and Anders Vredin:
The current account, supply shocks and accommodative fiscal policy: interpretations of Swedish post-war data (pp. 89–107)


The aim of the paper is to assess empirically the importance of different types of shocks in explaining the Swedish current account. We do this by first estimating an unrestricted vector autoregression system in these four variables: the real wage, the terms of trade, government consumption, and the current account. We then perform innovation accounting and impulse response studies based on a particular structural model with labour-union determined wages and government consumption taken to be accommodative in response to private sector labour demand.

A principal finding is that the forecast error variance in the current account is to a very limited extent (less than 20 per cent over a couple of years) explained by innovations to the wage, terms-of-trade, or government-consumption equations. This is in contrast with the »conventional wisdom» and also with the results for some of the other variables. For example, innovations in the terms-of-trade equation explain more than half of the variance of the wage.

Tom Berglund and Eva Liljeblom:
The impact of trading volume on stock return distributions: an empirical analysis (pp. 108–124)


This paper studies the relationship between the trading volume on the stock exchange and the properties of corresponding stock returns. The properties to be analyzed are: the dispersion of the returns, i.e. the volatility of the stock prices, the degree of leptokurtosis in the returns, and finally, the serial correlation in returns. The comparison of a low turnover with a high turnover period for the Helsinki Stock Exchange reveals that for the high turnover period the leptokurtosis of the return distributions is lower, as expected. Contrary to expectations stock price volatility is higher. Finally, on serial correlation the results are mixed, which can be explained by a non-linear pattern of serial correlation during the high turnover period. The results imply that considerable caution is warranted in empirical research which covers substantial shifts in the level of trading activity on the exchange.

Jukka Perttunen and Teppo Martikainen:
Distributional characteristics and proportionality of market-based security ratios (pp. 125–133)


The distributional characteristics and the proportionality of two market-based security ratios, the Earnings Yield and the Dividend Yield, are tested using Finnish data. The results indicate both of the ratios to be proportional in nature. However, being positively skewed, the Dividend Yield ratio requires transformation to achieve normality. This is due to the fact that this ratio has a technical limit to zero.

Eero Lehto:
Productivity in the Finnish customs (pp. 134–145)


This study examines the productivity of the Finnish Customs. Though the main emphasis is on the evaluation of total factor productivity, the anatomy of total factor productivity is examined as well. The results show that productivity growth in the Customs has been faster than in the other areas of the economy.

Urmas Sepp:
Estimating the technical efficiency of a firm by eliminating the effects of exogenous factors (pp. 146–155)


The paper discusses the problem of estimating technical efficiency in a way objective from the standpoint of firms. Such estimation is possible if the effect of factors uncontrollable by the firm is eliminated. To carry out the corresponding analysis a system of factors of technical efficiency and possibilities for solving this system are presented. An approach based on a deterministic model of the effect of factors noncontrollable by the firm is recommended. The application of this technique is possible in case of limited information when only time-series data can be used. In connection with this also the way technical efficiency is to be estimated is referred to. For practical application of this approach an optimal programming problem is formulated. A numerical example is given.

Vidar Christiansen:
Optimum taxation of interest and imputed rent from consumer durable goods (pp. 156–160)


A simple two-period model is set up to carry out a normative analysis of the taxation of interest income and imputed rent from consumer durable goods. It is demonstrated how the optimum structure of this capital income taxation depends on savings and investment elasticities and cross effects with the labour market when labour income is also taxed.

Kai A. Konrad:
A note on depreciation allowances, taxation and risk-taking (pp. 161–165)


Incentive effects of depreciation rules for risk-taking are considered. If true economic depreciation is stochastic, profit taxes with expected-value depreciation allowances decrease risk-taking. However, if real capital is used only in the risky sector, more generous depreciation allowances increase risk-taking. It is also shown that the incentive effect of risk-taking-revenue taxes to increase the risky fraction ofinvestment is stronger in the case ofmore generous depreciation allowances.

Hannu Salonen:
Quality choice, signalling, and moral hazard (pp. 166–171)


In this paper it is argued that prices should not reveal the quality of the good to the consumers, when there is asymmetric information about quality between the firm and the consumers, and the firm can affect the quality of its product. Instead, prices should be completely uninformative, so that firms are able to make larger investments to improve the quality, and increase the expected utility of the consumers.

Finnish Economic Papers 2/1990