Macroeconomics. Econometrics. Data. Stuff.
Welcome to my homepage. Here you will find current research and passion projects I am working on. Topics of interest include monetary policy, business cycles and quantitative methods. Views presented here are strictly my own and do not represent employers, persons or organizations I am associated with.
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Testing identification assumptions of heteroskedastic SVARs: why the Bayesian treatment is more intuitive than the Frequentist one
In this post I will make the case that Bayesian models are much more intuitive than Frequentist models when it comes to parametrisation. Since Bayesian statistics consider data fixed and parameters as random, the resulting marginal posteriors can be interpreted and compared as such. In contrast, since Frequentist statistics consider parameters fixed and data random,…
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Identifying geopolitical shocks in VARs: maybe let go off the recursive schemes already
This post is based on my (at the time of writing) ongoing research project about the transmission channels of geopolitical tensions. Stay tuned for the full manuscript 🙂 Incredible identification assumptions: 35th anniversary? Due to international developments during the last couple of years, the macroeconomic effects of geopolitical developments have become a hot-topic in economics.…
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Protectionism as a market failure
In this short post I argue for a viewpoint of seeing protectionism as a market failure. Although not a definite nor a perfect viewpoint in general, I think it makes clear certain implications which could be important when considering protectionism, trade wars and geoeconomic fragmentation. What a market failure is not? Just to make the…
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The case for steady state priors in BVARs – application to the euro area inflation surge
Note: Due to a small coding error in the original modelling, this post has been edited since its initial release. Results and discussion remain qualitatively the same, while some differences in the impulse responses emerged. Historical decompositions remain practically the same. Although practical algorithms for Gibbs sampling have been available for some time (see Villani,…
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Bergholt, Canova, Furlanetto, Maffei-Faccioli and Ulvedal are wrong about historical shock decompositions
In their working paper, Bergholt et. al (2024) (hence “Authors”) illustrate that due to the estimation uncertainty of the constant (or in general all exogenous) term the historical decompositions built around such constant terms are prone to large quantitative and qualitative variation making them unreliable for inferential purposes. In this post I will briefly note…
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Russian sabre rattling and the Finnish economy – Some evidence of inflationary effects
As a result of the full-scale invasion of Ukraine by Russia, the prevalence of rogue states at the international stage has once again become undeniable. Besides the obvious humanitarian suffering, power politics also has macroeconomic consequences. As seen in Ukraine, fighting a war takes a huge toll on employment and human capital as working force…
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National Activity Index for Finland
Following the methodology used by the Chicago Fed, I construct the National Activity Index (NAI) for Finland. The NAI is a monthly indicator designed to measure the state of the economy. It is constructed as the lead principal component of 28 monthly economic activity series. The Federal Reserve Bank of Chicago describes their National Activity…
Juho Pitkäranta, Economist 