| Abstract: | In this paper a model for the Finnish economy with disequilibrium in the goods and financial markets is specified and estimated by single equation methods. The transmission mechanisms of the model are studied in the framework of various devaluation simulations. The model is very sensitive, especially with respect to the prevailing credit market regime and possible regime changes. Policy effects are not so much affected by conditions in the goods market, assuming moderate policy shocks. These considerations suggest the importance in policy planning of identifying the regimes prevailing in the markets. |
