ECONOMICS

1
ECONOMICS

• School of Business and Economics
• University of Jyväskylä
• Finland

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I An introduction to research in economics in
Jyväskylä
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Index

• Introduction
• Applied research on regional labour markets
• Applied research on financial markets

• 1. Staff and orientation in research
• 2. Publishing
• 3. Doctoral training
• 4. Research collaboration
• 5. Societal influence

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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

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Staff and .Orientation in research

• Applied research
• Two main fields
• Labour and regional economics
• Regional labour markets
• Financial economics

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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.

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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
  self-employment, 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.

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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)

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Doctoral training Ph.D. students

• Doctoral degrees in 2000-04
• 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
• Doctoral degrees in 2005
• 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 Job-seekers and Vacancies
• Hannu Koskinen, financing from the University
  Studies on Demand for Money, Inflation and
  Labour Market Dynamics in Some EU Countries

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DOCTORAL TRAINING

• Finnish Doctoral Program in Economics
• (FDPE)
• Courses
• Seminars
• Workshops
• National and international collaboration

• 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

• Finnish Doctoral Program in Business Studies
• (KATAJA)
• Courses
• Seminars
• Tutorials
• Workshops
• National and international collaboration

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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

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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
• 81 presentations and 165 participants in 2005
• In 2001, the SBE in co-operation with the EALE
  Secretariat organized the 13th annual conference
  of European Association of Labour Economists
• 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)

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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

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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)

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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)

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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

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5. Societal influence Policy-making

• 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)
• Governments Employment Committee, 2003
• Prime Minister Offices 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

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Societal influence Participation in Public
Discussion

• Active participation in public (policy)
  discussion
• Writings in periodicals, magazines and newspapers
• c. 60 columns in newspapers
• List (selected)
• 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

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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)

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II Applied research on regional labour markets
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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

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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

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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

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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
• 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
• Organized international congresses EALE 2001,
  ERSA 2003
• Dissertations
• Prizes
• 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

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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)

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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

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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
  Sanna-Mari 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
• Lahtonens PhD under review
• 2 refereed articles, 3 under review, 3 conference
  papers (ERSA, EALE)

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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

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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

30
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

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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 project has employed several post graduate
  students Kirsi Mukkala, Signe Jauhiainen, Timo
  Tohmo, Jukka Haukka, Anu Tokila and Satu
  Nivalainen
• The main objectives
• 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

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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 self-employment as well as dynamics and
  duration of self-employment periods
• Special interest will be directed at
  self-employment of students and young workers,
  knowledge-based and high-potential
  entrepreneurship and regional differences in
  self-employment
• The project has produced 4 papers so far (2 in
  refereed journals)

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III Applied research on financial markets
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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

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Researchers

• Research leaders
• Professor Markku Lanne
• 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, range-based volatility
  measures, etc.
• Dr., docent Ari Hyytinen deputizes Sept. 2005 ?
• 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
• 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

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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)

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Research projects

• Examples of past and on-going work
• Modeling Financial Data
• 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
• International Finance and Macro
• 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

38
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

39
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

40
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

41
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

42
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

43
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

44
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

45
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

46
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

47
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

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International Finance and Macro

• Professor Kari Heimonen, Equity markets and the
  real euro-dollar 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

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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.