The Bank of Finland published a near record number of research contributions in 2021. The research themes were influenced by both the ECB’s strategy review and the continuation of the COVID-19 pandemic. The 30th anniversary conference of BOFIT brought together central bank governors and leading researchers in the field of emerging economies.

In 2021, the Bank of Finland published a near record number of research contributions in academic journals. Publications in high-quality journals, in particular, increased significantly.

The Bank also organised several online events and hybrid meetings for the academic community.

The 30th Anniversary Conference of the Bank of Finland Institute for Emerging Economies (BOFIT) was attended by, for example, the Governors of the central banks of Russia and China.

In the background work underlying the ECB’s strategy review, the focus in 2021 was on analysing research in the various subsegments of monetary policy.

Bank of Finland researchers and international cooperation

In 2021, the Bank of Finland’s researchers participated, among other things, in the activities of the workstreams set up to analyse monetary-fiscal policy interactions and financial stability.

The Bank’s researchers analysed the symmetry of the ECB’s inflation target in a peer-reviewed study. This became a key theme in the ECB’s strategy review.

The Bank of Finland also conducted a survey among international researchers on the optimal inflation target for a central bank.

The analyses conducted at BOFIT in 2021 highlighted, for example, the problems and risks in the Chinese real estate sector. Work continued on analysing the impacts of the COVID-19 pandemic and trade wars on the global economy and large emerging economies.

Selected Bank of Finland discussion papers in 2021

The Bank of Finland Research Discussion Papers published in 2021 dealth with topics such as inflation dynamics and forecast (Manuel Martins and Fabio Verona), yield curve momentum (Markus Sihvonen), the Federal Reserve’s new inflation target (Seppo Honkapohja and Nigel McClung), human frictions in the transmission of economic policy (Francesco D’Acunto, Daniel Hoang, Maritta Paloviita and Michael Weber), and optimal pharmaceutical patent policy, which affects e.g. vaccine development (Olena Izhak, Tanja Saxell and Tuomas Takalo).

Below are some examples of research contributions published under the BOFIT Discussion Paper series:

Denis Davydov, Jukka Sihvonen and Laura Solanko found in their research entitled ‘Who cares about sanctions? Observations from annual reports of European firms’ that there are significant differences in European countries in how firms perceive sanctions such as, for example, those imposed after the illegal annexation of Crimea. This is partially, but not entirely, explained by the countries’ economic and financial integration with Russia.

Mikko Mäkinen’s research ‘Does a financial crisis change a bank’s exposure to risk? A difference-in-differences approach’ found that the Russian banks that had been hardest hit by the crisis of 2008 later changed their risk-taking behaviour in such a way that their capital adequacy risks were reduced.

In their research entitled ‘What 31 provinces reveal about growth in China?’, Eeva Kerola and Benoît Mojon use provincial data to build an alternative indicator for GDP growth in China. The alternative GDP indicator is calculated on a quarterly basis and is published in BOFIT China statistics.

Publications in the BoF Economics Review series in 2021

Several analyses were published in the BoF Economics Review series in 2021.

The analyses covered topics such as long-run forecasting of Finland’s economic growth on the basis of human capital; competition and regulation in the ATM industry; and the economic effects of a debt-to-income constraint utilising the Aino model for the Finnish economy.

Bank of Finland research articles in international journals

One of the key objectives of the Bank of Finland’s research activities is to publish the Bank’s research articles in recognised international peer-reviewed journals. In 2021, a record number of such articles were published in various journals.

Below is a sample of the articles published in 2021.

Michaela Elfsbacka-Schmöller and Martin Spitzer analysed in their paper entitled ‘Deep recessions, slowing productivity and missing (dis-)inflation in the euro area’ the factors underlying recent years’ inflation developments in the euro area. In their research article ‘How much do non-performing loans hinder loan growth in Europe?’, Eero Tölö and Matti Virén examined the impact of non-performing loans on bank lending in the euro area.

Sami Alpanda, Eleonora Granziera and Sarah Zubairy studied monetary policy transmission in the different phases of the economic and business cycle in their paper entitled ‘State dependence of monetary policy across business, credit and interest rate cycles.

All three articles were published in the European Economic Review.

Adam Gulan, Markus Haavio and Juha Kilponen examined the exogeneous and endogeneous factors leading to the Finnish Great Depression of the 1990s in their article ‘Can large trade shocks cause crises? The case of the Finnish-Soviet trade collapse’.

Gene Ambrocio and Iftekhar Hasan broadened the view on the pricing of sovereign bonds on the global market in their paper entitled ‘Quid pro quo? Political ties and sovereign borrowing.

Both research articles were published in the Journal of International Economics.

Mikael Juselius and Előd Takáts examined the relationship between demographics and inflation in different countries and times in their article ‘Inflation and demography through time’. The article was published in the Journal of Economic Dynamics and Control.

Zuzana Fungáčová, Rima Turk and Laurent Weill analysed in their paper ‘High liquidity creation and bank failures’ the link between Russian banks’ liquidity creation and the withdrawal of their authorisation. The article was published in the Journal of Financial Stability.

Presentation of Bank of Finland research to stakeholders

In 2021, the Bank of Finland’s research findings were presented in the Eurosystem working groups on modelling and forecasting, in research networks and in a number of research conferences in Finland and abroad.

Researchers from the Bank of Finland published five columns in VoxEU, one of the key fora for economic policy discussion.

The Bank of Finland organised domestic and international meetings in 2021

In 2021, the Bank organised or co-organised several academic events on topical policy issues.

In September–October, the Bank of Finland co-organised a joint conference entitled ‘New Avenues for Monetary Policy’ with the Centre for Economic Policy Research (CERP), a ‘Workshop on Banking and Finance in Emerging Markets’ with the University of Strasbourg and Fordham University, and a joint conference entitled ‘Monetary Policy Approaches: A Comparative Appraisal’ with the European Money and Finance Forum (SUERF).

The 18th ESCB Emerging Markets Workshop was co-organised in December with the central banks of Austria and Spain.

The Bank of Finland also organised a special session on the theme ‘Implications of Large Global Shocks on Macro Modelling’ in connection with the Annual Meeting of the Central Bank Research Association (CEBRA).

In 2021, the Bank of Finland organised a number of shorter online seminars at which the Bank’s own and visiting researchers presented their research.

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The Bank of Finland and international cooperation in 2021