ECONOMICS
School of Business and Economics
University of Jyväskylä
Finland
I: An introduction to research
in economics in Jyväskylä
Index
I.
Introduction
1. Staff and orientation in research
2. Publishing
3. Doctoral training
4. Research collaboration
5. Societal influence
II.
Applied research on regional labour markets
III. Applied research on financial markets
3
1. Staff and orientation in
research: Staff

4 professors



Jaakko Pehkonen – empirical labour economics
Hannu Tervo – empirical regional economics
Markku Lanne – empirical financial economics



on leave 2005-06, Ari Hyytinen deputizing for
Kari Heimonen (fixed term) – empirical international and financial
economics
Other staff






Esa Mangeloja, Ph.D., lecturer – empirical economics
Mika Haapanen, Ph.D., senior assistant – empirical labour economics
Juhani Raatikainen, senior assistant – empirical financial economics
Tuomo Nenonen, Ph.D., lecturer – empirical regional economics
Jani Luoto, university lecturer – empirical macro economics
Jutta Moisala, assistant – empirical labour economics


on leave, Riikka Penttinen deputizing for – empirical regional economics
Jari Ritsilä, leading researcher (Expert services) – empirical regional
economics
4
Staff and ….:
Orientation in research

Applied research

Two main fields:

Labour and regional economics


Regional labour markets
Financial economics
5
2. Publishing


Number of WP-publications in 2000-2004 is 55 (see the attached list)
Refereed articles in 2004-2005
Hynninen, S. (2005): Matching across space: Evidence from Finland, Labour: Review of
Labour Economics and Industrial Relations, 19 (4) (Forthcoming).
 Hynninen, S. (2005): Labour market status of job seekers in regional matching processes,
45th Congress of the European Regional Science Association, Amsterdam. Paper presented
in R-sessions (refereed-paper sessions), CD-ROM.
 Hyytinen A. & Ilmakunnas, P. Entrepreneurial aspirations: Another form of job search, Small
Business Economics, forthcoming.
 Hyytinen A. & Takalo, T. Corporate law and small business finance: Mandatory v. enabling
rules, European Business Organization Law Review, forthcoming.
 Kangasharju, A., Pehkonen, J. & Pekkala, S. (2005): Returns to scale in a matching model,
Applied Economics 37: 115-118.
 Pehkonen, J., Kangasharju, A. & Pekkala, S. (2004): Matches, on-the-job search and
temporal aggregation: evidence from the Finnish panel data, the 16th Annual EALE
Conference, Lissabon,, congress CD-ROM.
 Koskinen, H. (2004), Modelling of structural changes in demand for money cointegration
relations, Finnish Economic Papers 17: 63-72.
 Lahtonen, J. (2004): Open vacancies and educational level of job seekers in Finland, The
16th Annual EALE Conference, Lissabon, congress CD-ROM.
 Lanne, M., Liski, M. (2004): Trends and Breaks in Per-Capita Carbon Dioxide Emissions,
1870 – 2028, Energy Journal 25: 41-65.

6
2. Publishing


Number of WP-publications in 2000-2004 is 55 (see the attached list)
Refereed articles in 2004-2005
Mukkala, K. (2004) Agglomeration economies in the Finnish manufacturing sector. Applied
Economics, 36: 2419-2427.
 Niittykangas, H., Tervo, H. (2005): Spatial variations in intergenerational transmission of selfemployment, Regional Studies (2005): 319-332
 Ollikainen, V. (2005): Gender differences in transitions from unemployment: Micro evidence
from Finland, Labour: Review of Labour Economics and Industrial Relations
 Tervo, H. (2005): Regional population development in Finland – an economic perspective,
Abwanderung, Geburtenrückgang und regionale Entwicklung, (ed.) Christiane Dienel
(forthcoming).
 Tervo, H. (2004): Self-employment dynamics in rural and urban labour markets, Regional
Science Association International & European Regional Science Association – 44th European
Congress, Porto. Paper presented in R-sessions (refereed-paper sessions), CD-ROM.
 Tervo, H. (2005):Regional policy lessons from Finland, Berlin: Springer-Verlag. Regional
disparities in small countries / (eds.) D. Felsenstein, B.A. Portnov , 2005, 267-282.
 Tervo H. (2005) Regional unemployment, self-employment and family background. Applied
Economics (forthcoming)
 Heimonen, K. (2005) Time-varying fundamentals of the euro-dollar exchange rate,
International Economic Journal, (forthcoming).
 Heimonen, K. (2005) Nonlinear adjustment in PPP – Evidence from threshold cointegration,
Empirical Economics, (forthcoming)
 Tohmo, T. (2004): New Developments in the Use of Location Quotients to Estimate Regional
Input-Output Coefficients and Multipliers. Regional Studies, 38, 1: 43-54.

7
3. Doctoral training:
Ph.D. students





Research training is organized by the Graduate School of
the School of Business and Economics and through the
national program FDPE (KAVA)
The number of active Ph.D. students has strongly
increased, being now 18
Funding: 80 % external (Academy of Finland, Yrjö
Jahnsson Foundation, KKsäätiö)
New competent doctoral students are actively recruited
and financing for them is sought for
15 PhDs since 1990. Most of the PhDs work in various
research institutes (e.g. Government Research Institute,
Labour Research Institute, Bank of Finland, Ministry of
Finance) or in Academia (Universities in Jyväskylä,
Joensuu, Kuopio and Turku)
8
Doctoral training: Ph.D. students

Doctoral degrees in 2000-04






Doctoral degrees in 2005


Sari Pekkala, “Regional Convergence and Migration in Finland 1960-95”
Jari Ritsilä, “Studies on the Spatial Concentration of Human Capital”
Antti Moisio, “Essays on Finnish Municipal Finance and Intergovernmental
Grants”
Mika Haapanen, “Studies on the Determinants of Migration and the Spatial
Concentration of Labour”
Esa Mangeloja, “Nordic Stock Market Integration”
Sami Yläoutinen, “Development and Functioning of Fiscal Frameworks in
the Central and Eastern European Countries”
In progress (pending for oral examination)



Virve Ollikainen, financing from the FDPE, “Gender Differences in
Unemployment in Finland”
Jukka Lahtonen, Academy of Finland, “Matching Heterogeneous Jobseekers and Vacancies”
Hannu Koskinen, financing from the University “Studies on Demand for
Money, Inflation and Labour Market Dynamics in Some EU Countries”
9
DOCTORAL TRAINING
Finnish Doctoral Program in Economics
(FDPE)
Graduate School of the
School of Business and
Economics
•Recruiting students
•Support for funding arrangements
•Thesis supervision
•Complementary courses
•Support for interdisciplinary work
•Seminars in fields of expertise
•Courses
•Seminars
•Workshops
•National and international collaboration
Finnish Doctoral Program in Business Studies
(KATAJA)
•Courses
•Seminars
•Tutorials
•Workshops
•National and international collaboration
10
4. Research collaboration (1):
FDPE

Research collaboration with the Finnish Doctoral Programme in
Economics (FDPE)

Economics faculty:




Members of FDPE-board and FDPE-steering committee (previously)
Coordinators of research workshops in
• Econometrics and computational economics
• Macroeconomics and political economy
• Labour economics (previously)
• Applied econometrics (previously)
Expert advisors of research workshops in
• Econometrics and computational economics
• Capital markets and financial economics
• Labour economics
Ph.D. students:


Hold (and have held) FDPE-fellowships
Active participation in FDPE -research workshops
11
Research collaboration (2):
organization of congresses


Economics is an active unit in organizing congresses and
seminars
Since 1983, the unit has organized the Annual Summer
Seminar for Economic Researchers


In 2001, the SBE in co-operation with the EALE Secretariat
organized the 13th annual conference of European
Association of Labour Economists


81 presentations and 165 participants in 2005
300 participants, most of them international
In 2003, the SBE organized the 43rd Congress of the
European Regional Science Association


500 participants, over 400 of them international
The congress was highly praised: “a congress of
innovations” … “the most successful ERSA congress so far”
... (see the attachment)
12
Research collaboration (3):
joint projects (int.)






Markku Lanne & Helmut Lütkepohl (European University
Institute)
Sari Pekkala & Robert E.B. Lucas (Boston University)
Jaakko Pehkonen & Klas Fregert (Lund University)
Esa Mangeloja & Tomi Ovaska (University of Regina)
Timo Tohmo & Anthony Flegg and Don Webber (University of
the West-England)
Ari Hyytinen & Sofia Lundberg (Umeå University) (& Otto
Toivanen (Hecer))
+ Participation in international book projects
13
Research collaboration (4):
joint projects (nat.)





Markku Lanne & Pentti Saikkonen (HY) (Financial Return
Volatility)
Jaakko Pehkonen & Aki Kangasharju & Sari Pekkala
(Government Institute of Economic Research) (Job Matching)
Kari Heimonen & Juuso Vataja (University of Vaasa)
(Exchange Rate and Equity Markets)
Hannu Tervo & Statistics Finland (Regional Input-Output
project)
Ari Hyytinen & Tuomas Takalo (Bank of Finland) (Law and
Finance -project)
14
Research collaboration (5):
interdisciplinary c-o within JYU


Our Annual Summer Seminar gathers researchers from
many disciplines (history, social sciences, politics, education,
business economics)
Joint projects with





Department of Economic History (Jaakko Pehkonen & Jari
Ojala)
Department of Social Sciences (Hannu Tervo & Jouko Nätti)
Statistics, University of Tampere (Jani Luoto & Jan-Erik
Antipin)
Entrepreneurship (Hannu Tervo & Hannu Niittykangas)
Marketing (Kari Heimonen & Outi Uusitalo)
15
Research collaboration (6):
refereeing, editorial activity

Refereeing activity (selected):


Australian Journal of Labour Economics, Applied Economics,
Contemporary Economic Policy, Economic Journal, Empirical
Economics, European Economic Review, European Journal of Spatial
Planning, European Accounting Review, Finnish Economic Papers,
Finnish Journal of Business Economics, International Regional
Science Review, International Tax and Public Finance, Journal of
Economic Behaviour and Organization, Journal of Economic Studies,
Journal of Macroeconomics, Journal of Comparative Economics,
Journal of Industrial Economics, Labour Economics, Oxford Economic
Papers, Papers in Regional Science, Review of Labour Economics
and Industrial Relations, Regional Studies, Scandinavian Journal of
Economics, Journal of Business, Journal of International Financial
Markets, Institutions and Money
Editorial activity


Finnish Economic Journal (Kansantaloudellinen aikakauskirja)
Finnish Economic Papers
16
5. Societal influence: Policymaking

The expertise of the staff has been materialized




in a number of research projects that have provided funding for PhD
students,
in a number of publications of a good international level; as well as
in policy oriented research for the purpose of regional and national
level decision-making
The expertise and research of the staff has also been utilized in
various policy projects both at regional and national level (selected)






Government’s Employment Committee, 2003
Prime Minister Office’s Economic Council: Working Group Report on
“Regional development and regional policy in Finland” 2001
Economic Council, Ministry of Finance, member 2003-2006
Scientific Council, Statistics Finland, member 2004-2005
Regional Council of Central Finland
Regional Champers of Commerce
17
Societal influence: Participation in
Public Discussion

Active participation in public (policy) discussion

Writings in periodicals, magazines and newspapers


List (selected):




c. 60 columns in newspapers
Keskisuomalainen (major regional news paper)
Helsingin Sanomat (major national news paper)
Suomen Kuvalehti (major Finnish magazine)
Dissemination of scientific knowledge

Active participation in panels, seminars and other social occasions


Both nationally and regionally
Awards: Schild Award, Eero Fredrikson Award, Award for promoting
the dissemination of scientific knowledge
18
Societal influence: Expert services









Evaluation of the Effectiveness and Functioning of the Aid Scheme
under the Aid to Business Act (Ministry of Trade and Industry)
Evaluation of the Structural Fund Activities in the Administrative Sector
of Ministry of Trade and Industry (Ministry of Trade and Industry)
Evaluation of developing regional competence and regional effects of
projects under to European Social Fund (Ministry of Education)
General Framework for Long-Term Social Impact Evaluation of the
Employment Strategy (Ministry of Labour)
Supporting the Contribution of Higher Education Institutions to
Regional Development (OECD)
Innovation Strategies, Local Operational Environments and Interaction
Networks of Small and Medium Sized Enterprises (Ministry of
Agriculture and Forestry)
Evaluation of Jyväskylä Science Park (JSP Oy)
Midterm Evaluation of Objective 2 programme of Western Finland
(Ministry of Interior)
Evaluation of the Horizontal themes of Anticipation and Sustainable
Development in the Context of European Social Fund (Ministry of
Labour)
19
II: Applied research on
regional labour markets
Applied research on regional labour
markets

University of Jyväskylä is well-known about its applied
research on regional labour markets



Empirical research on regions and labour markets has a long
tradition in the University of Jyväskylä
This research is directed at the analysis of functioning,
development, interrelationships and policies of regional
economies and labour markets, the main focus being in
regional labour markets
Advanced econometric methods and both macro and micro
data are utilized

Longitudinal micro data sets have become more and more
important
21
Researchers


Research leaders are Professors Jaakko Pehkonen and
Hannu Tervo
Multilayered research cooperation

Senior researchers ↔ post doc-researchers
↔ Ph.D. students ↔ master theses

National and international networks
22
Doctoral students











Jukka Haukka, researcher in Expert services, “Evaluation of regional
economic processes and policies in the assisted areas”
Tatu Hirvonen, financing from the University, “Economics of growth and
happiness”
Sanna-Mari Hynninen, Academy of Finland, “Matching of job seekers and
vacant jobs in regional labour markets“
Signe Jauhiainen, Yrjö Jahnsson Foundation, “Regional concentration of
human capital”
Jouni Kaipainen, Chydenius-institute, “Economic value of the countryside”
Kirsi Mukkala, researcher in Expert services, “Regional concentration and
knowledge spillovers”
Jutta Moisala, assistant (at present researcher in the Labour Institute for
Economic Research), “Wages and economic adjustment”
Satu Nivalainen, Academy of Finland, “Labour mobility and families in Finland”
Riikka Penttinen, assistant, “Cultural activities in regional development”
Timo Tohmo, financing from the University, “Studies on the regional
development and production structure in Finland”
Anu Tokila, Yrjö Jahnsson Foundation, “Entrepreneurship, self-employment
and public interventions”
23
Achievements

Research results have been presented in various scientific
congresses around the world and published in many edited books as
well as in high-level journals such as:




Organized international congresses – EALE 2001, ERSA 2003
Dissertations
Prizes




Scandinavian Journal of Economics, European Economic Review, Labour,
Applied Economics, Regional Studies, Papers in Regional Science, Small
Business Economics, International Review of Regional Studies, Applied
Economics Letters, Finnish Economic Papers, Oxford Bulletin of
Economics and Statistics
The Epainos Prize for the best paper presented at the ERSA meetings by a
young regional scientist has been awarded three times for a Ph.D. student from
Jyväskylä (Aki Kangasharju 1998, Sari Pekkala 2000 and Mika Haapanen 2001)
The OKO Foundation has rewarded Kari Hämäläinen from the best licentiate
work
The Yrjö Jahnsson Foundation and other foundations have rewarded numerous
students from Jyväskylä for their master theses
Societal activity


Policy projects
Writings and columns in periodicals, magazines and newspapers
24
Research projects: funding


Academy of Finland: 5 projects in 2002 - 2007
(total of about 1 million euro)
Foundations: about 20 research grants in 2000 - 2005
(totalling about 0.4 million euro)
25
Research projects: list of projects
“Externalities, Education, and Job Competition: Matching in
the Finnish Labour Market”

“Labour Market Flows, Mismatch and Structural
Unemployment in Finland”

“Labour Market Flows in Finland in the 1990s and 2000s”

“Migration, Labour Market Adjustment and Convergence”

“Human Capital, Agglomeration Economies and Regional
Concentration”

“Who Becomes an Entrepreneur - When and Why? Who
Survives?”
+ Projects of Expert services

26
Externalities, Education, and Job Competition:
Matching in the Finnish Labour Market




The project is funded by the Academy of Finland for the
period of 2005-2007
Jaakko Pehkonen with Hannu Tervo with researchers SannaMari Hynninen and Jukka Lahtonen. The research team also
includes Dr. Aki Kangasharju (VATT)
The project examines questions related to job matching in
Finnish labour markets. The research focuses on spatial and
temporal aggregation in the matching function as well as
efficiency of matching across labour offices.
Results so far:
 Lahtonen’s PhD under review
 2 refereed articles, 3 under review, 3 conference papers
(ERSA, EALE)
27
Labour Market Flows, Mismatch and
Structural Unemployment in Finland




The project was funded by the Academy of Finland for the
period 2003-2004
Jaakko Pehkonen and Hannu Tervo with a research group
(Dr. Aki Kangasharju (VATT), Dr. Kari Hämäläinen (VATT),
Mika Haapanen, Hannu Koskinen and Virve Ollikainen)
The main questions related to the questions of regional
mobility, gender differences and youth labour markets
The project was successful



1 doctoral dissertations (Haapanen), one PhD under review
(Ollikainen), 1 licentiate thesis (Koskinen)
4 articles in refereed international journals and several
conference papers
Several articles and writings in Finnish journals and
periodicals
28
Labour Market Flows in Finland in the 1990s
and 2000s




The project was conducted during the period of 2002-2003
Jaakko Pehkonen and Hannu Tervo together with
researchers Virve Ollikainen, Mika Haapanen, and Ulla
Hämäläinen (Labour Institute for Economic Research)
The main questions related to the questions of regional
mobility, gender differences in unemployment and youth
labour markets
The project was successful



1 licentiate thesis (Haapanen) and several master theses
2 articles in refereed international journals
4 articles in compiled books and several articles and writings in
Finnish journals and periodicals
29
Migration, Labour Market Adjustment and
Convergence




The project started already in 1998 and was funded by the
Academy of Finland with 3 different financial decisions
Hannu Tervo together with Jaakko Pehkonen and the
research team Jari Ritsilä, Sari Pekkala, Satu Nivalainen and
Merja Kauhanen (post-doc researcher)
The main questions related to the questions how regional
mobility affects economic growth and regional development,
and how regional income differences have developed
The project was very successful



2 doctoral dissertations (Ritsilä and Pekkala), 2 licentiate
theses and several master theses
15 articles in refereed international journals
4 articles in compiled books and several articles and writings in
Finnish journals and periodicals
30
Human Capital, Agglomeration Economies and
Regional Concentration


The project is funded by the Academy of Finland during the
period of 2003-2006
Hannu Tervo together with Jaakko Pehkonen and Jari Ritsilä


The main objectives




The project has employed several post graduate students: Kirsi
Mukkala, Signe Jauhiainen, Timo Tohmo, Jukka Haukka, Anu Tokila
and Satu Nivalainen
Impacts of geographical concentration and human capital on regional
economic growth
Knowledge spill-overs and the high-tech sector in regional growth
Education and human capital accumulation in regional growth
The publications of the project so far consist of





3 articles in refereed journals and books
3 articles in referee process
3 articles in congress cd-roms
1 article in a Finnish journal
5 working papers
31
Who Becomes an Entrepreneur - When and
Why? Who Survives?





A microeconometric study of self-employment and
entrepreneurship in Finland in 1987-2002
The project has started in 2003 and funding has now been
applied from the Academy of Finland (LIIKE2)
Hannu Tervo together with Jari Ritsilä, Jaakko Pehkonen,
Hannu Niittykangas (professor in entrepreneurship), Jouko
Nätti (academy research fellow, department of social
sciences), Mika Haapanen (senior assistant) and Anu Tokila,
(Ph. D. student)
The main aim is to analyze entries into and exits out of selfemployment as well as dynamics and duration of selfemployment periods
 Special interest will be directed at self-employment of
students and young workers, knowledge-based and highpotential entrepreneurship and regional differences in selfemployment
The project has produced 4 papers so far (2 in refereed
journals)
32
III: Applied research on
financial markets
Overview

Relatively recent initiative

Type of work that is being done:


Mostly applied empirical / econometric work
Past and on-going research:

Econometric modeling of financial data

Applications to asset pricing and risk management

International finance and macro

Empirical corporate finance
34
Researchers

Research leaders

Professor Markku Lanne





Professor (fixed term) Kari Heimonen



Focus on empirical studies on international finance, especially on
exchange rates and currency substitution
On-going work on exchange rates and equity flows
Other researchers



Currently on leave (Jean Monnet Fellow at the European University
Institute Florence)
Focus on econometric modeling of financial time series
On-going work on GARCH models, models for realized volatility, rangebased volatility measures, etc.
Dr., docent Ari Hyytinen deputizes Sept. 2005 →
Ph.D., senior lecturer Esa Mangeloja

Focus on portfolio investments in a global world
Senior assistant Juhani Raatikainen

Focus on modelling FX and stock index returns by linear and non-linear
models
6 doctoral students
35
Doctoral students






Tuuli Koivu, Bank of Finland, “Financial Markets in Transition
Economies” (International Finance and Macro)
Hannu Koskinen, financing from the University “Studies on
Demand for Money, Inflation and Labour Market Dynamics in Some
EU Countries” (International Finance and Macro)
Helinä Laakkonen, financing from the FDPE, “Exchange Role
Volatility and the Role of New Information” (Modeling Financial Data
/ International Finance and Macro)
Jani Luoto, assistant, “Prices and Long-run Growth – Bayesian
Approach” (International Finance and Macro)
Juhani Raatikainen, senior assistant, “Modelling Financial Time
Series with Non-linear Models: A Forecasting Comparison”
(Modeling Financial Data)
Sami Yläoutinen, Ministry of Finance, “Development and
Functioning of Fiscal Frameworks in the Central and Eastern
European Countries” (International Finance and Macro, thesis was
defended in October 27, 2005)
36
Research projects

Examples of past and on-going work:

Modeling Financial Data






International Finance and Macro




Modeling and forecasting realized and range-based volatility
GARCH models for financial return volatility
The trading dynamics of a stock listed on multiple exchanges
Effect of transaction costs on exchange rate volatility
Identification of shocks in vector autoregressive models
The Euro-Dollar Exchange Rate and Equity Flows
The Euro and the Dollar: Role of Currency Substitution and Equity
Markets
Equity markets and the real euro-dollar exchange rate
Empirical Corporate Finance
 Capital market imperfections and availability of capital to small
businesses
 The effects of legal system on SME finance
37
Modeling Financial Data

Professor Markku Lanne, “Modeling and forecasting realized
and range-based volatility”




The study compare forecasts produced by the long-memory
linear models and short-memory nonlinear models
Extentions of the short-memory multiplicative error model of
Engle (2002)
Model estimated for the logarithm of realized volatily as in
Andersen et al. (2003)
The nonlinear short-memory model is likely to produce more
accurate forecasts
38
Modeling Financial Data

Professor Markku Lanne,
GARCH models for financial return volatility
1. “GARCH-in-Mean models and asset pricing”

Applies the GARCH-in-Mean model in testing the ICAPM

Finds support for the ICAPM theory as well as the presence of
conditional skewness in postwar U.S. excess stock returns
39
Modeling Financial Data

Professor Markku Lanne,
GARCH models for financial return volatility
2. “Mixture CARCH Models”

Formulates GARCH Models to incorporate heterogeneity due
to agents different investment horizons and the uncertainty of
the state of the economy

The mixture GARCH Model should be capable of explaining
the long memory in financial market volatility and have a
relative computational simplicity
40
Modeling Financial Data

Professor Markku Lanne,
GARCH models for financial return volatility
3. “Multivariate factor GARCH Models”

Introduces a new kind of multivariate GARCH Model which
impose a factor structure that both reduces the number of
parameters and allows easier interpretation of in economic
terms

Could be used in large system in empirical finance
41
Modeling Financial Data

Professor Markku Lanne, “The trading dynamics of a stock
listed on multiple exchanges”


Uses Autoregressive Conditional Duration (ACD) of Engle and Russel
(1998) to examine the effects of trading volume on the time between
consecutive price changes both in the domestic and the foreign
markets
Professor Markku Lanne, “The trading dynamics of a stock
listed on multiple exchanges”

Informed investors in Nokia mainly trade in the US market
whereas Helsinki is the more liquidity-oriented trading place
42
Modeling Financial Data

Professor Markku Lanne, “Effect of transaction costs on
exchange rate volatility”

Examines the effects of transaction costs on financial market
volatility using daily intradaily foreign exchange data
(i) Whether an increase in transaction costs stabilize markets
(ii) What factors drive the relationship between transaction costs and
foreign exchange volatility
43
Modeling Financial Data

Professor Markku Lanne, “Identification of shocks in vector
autoregressive models”

Research project with Helmuth Luthkepohl (EUI)

Search for the general conditions required for identification of
stationary VAR models and nonstationary cointegrated vector
error correction models (VECM)

Comparison of results with the traditional identification
schemes
44
International Finance and Macro


Professor Kari Heimonen (fixed term)
Work concentrates on empirical international finance and
macro:

Currency substitution

Determination of exchange rates

Monetary policy in open economy
45
International Finance and Macro

Professor Kari Heimonen, “The Euro-Dollar Exchange Rate
and Equity Flows”




Examines the impacts of the equity flows between the EMU
and the US on the Euro-Dollar exchange rate
Changes in equity returns cause reallocation of equity
portfolio. An increase in the value of EMU equity portfolio
implies equity flows into the US
Portfolio reallocation implies order-flow in foreign exchange
markets, which has an impact on exchange rate
An increase in equity returns in the EMU area causes an
equity flow into the US, which devaluates the euro against the
US dollar
46
International Finance and Macro

Professor Kari Heimonen, “The Euro and the Dollar: Role of
Currency Substitution and Equity Markets”

Examines the economic interdependency between the US and
the EMU in terms of currency substitution and equity flows

The spill-over effects were prevalent although the impacts from
the US on EMU were stronger than from the EMU to the US
47
International Finance and Macro

Professor Kari Heimonen, “Equity markets and the real eurodollar exchange rate”

Research project with Juuso Vataja (University of Vaasa)

Incorporates equity markets in modeling the dynamics of the
real euro-dollar exchange rate

Tests whether the equity markets could partly explain the
recent dynamics in the real euro-dollar exchange rate
48
Empirical Corporate Finance

Empirical work on capital market imperfections and availability of
capital to small businesses

Examples of recent work



Hyytinen, A. and Väänänen, L., Where do financial constraints come
from? An empirical analysis of adverse selection and moral hazard in
capital markets, Small Business Economics, forthcoming.
Hyytinen, A. and Toivanen, O., Do financial constraints hold back
innovation and growth? Evidence on the role of public policy, Research
Policy, forthcoming.
The effects of legal system on SME finance

Examples of recent/on-going work


Hyytinen, A. and Väänänen, L., Mandatory auditor choice and small firm
finance: Evidence from Finland
Hyytinen, A. and Takalo, T., Corporate law and small business finance:
Mandatory v. enabling rules, European Business Organization Law
Review, 2005, Vol. 6, Issue 3, pp. 449-466.
49