Dynamics of inflation expectations in the euro area

The present study examines empirically the inflation dynamics of the euro area. The focus of the analysis is on the role of expectations in the inflation process. In six articles we relax rationality assumption and proxy expectations directly using OECD forecasts or Consensus Economics survey data. In the first four articles we estimate alternative Phillips curve specifications and find evidence that inflation cannot instantaneously adjust to changes in expectations. A possible departure of expectations from rationality seems not to be powerful enough to totally explain the persistence of euro area inflation in the New Keynesian framework. When expectations are measured directly, the purely forward-looking New Keynesian Phillips curve is outperformed by the hybrid Phillips curve with an additional lagged inflation term and the New Classical Phillips curve with a lagged expectations term. The results suggest that the euro area inflation process has become more forward-looking in the recent years of low and stable inflation. Moreover, in low inflation countries, the inflation dynamics have been more forward-looking already since the late 1970s. We find evidence of substantial heterogeneity of inflation dynamics across the euro area countries. Real time data analysis suggests that in the euro area real time information matters most in the expectations term in the Phillips curve and that the balance of expectations formation is more forward- than backward-looking. Vector autoregressive (VAR) models of actual inflation, inflation expectations and the output gap are estimated in the last two articles.The VAR analysis indicates that inflation expectations, which are relatively persistent, have a significant effect on output. However,expectations seem to react to changes in both output and actual inflation, especially in the medium term. Overall, this study suggests that expectations play a central role in inflation dynamics, which should be taken into account in conducting monetary policy.

Unrealized expectations of jumps in volatility: An explanation to the low and time-varying predictive power of implied volatility

The low predictive power of implied volatility in forecasting the subsequently realized volatility is a well-documented empirical puzzle. As suggested by e.g. Feinstein (1989), Jackwerth and Rubinstein (1996), and Bates (1997), we test whether unrealized expectations of jumps in volatility could explain this phenomenon. Our findings show that expectations of infrequently occurring jumps in volatility are indeed priced in implied volatility. This has two important consequences. First, implied volatility is actually expected to exceed realized volatility over long periods of time only to be greatly less than realized volatility during infrequently occurring periods of very high volatility. Second, the slope coefficient in the classic forecasting regression of realized volatility on implied volatility is very sensitive to the discrepancy between ex ante expected and ex post realized jump frequencies. If the in-sample frequency of positive volatility jumps is lower than ex ante assessed by the market, the classic regression test tends to reject the hypothesis of informational efficiency even if markets are informationally effective.

Owners' Way or the Highway: Short-term Expectations and Owner Impatience

Increased media exposure to layoffs and corporate quarterly financial reporting have created arguable a common perception – especially favored by the media itself – that the companies have been forced to improve their financial performance from quarter to quarter. Academically the relevant question is whether the companies themselves feel that they are exposed to short-term pressure to perform even if it means that they have to compromise company’s long-term future. This paper studies this issue using results from a survey conducted among the 500 largest companies in Finland. The results show that companies in general feel moderate short-term pressure, with reasonable dispersion across firms. There seems to be a link between the degree of pressure felt, and the firm’s ownership structure, i.e. we find support for the existence of short-term versus long-term owners. We also find significant ownership related differences, in line with expectations, in how such short-term pressure is reflected in actual decision variables such as the investment criteria used.

Do Households Have Rational Expectations on Future Consumption? Evidence from the Finnish Consumer Survey

Ever since its initial introduction some fifty years ago, the rational expectations paradigm has dominated the way economic theory handles uncertainty. The main assertion made by John F. Muth (1961), seen by many as the father of the paradigm, is that expectations of rational economic agents should essentially be equal to the predictions of relevant economic theory, since rational agents should use information available to them in an optimal way. This assumption often has important consequences on the results and interpretations of the models where it is applied. Although the rational expectations assumption can be applied to virtually any economic theory, the focus in this thesis is on macroeconomic theories of consumption, especially the Rational Expectations–Permanent Income Hypothesis proposed by Robert E. Hall in 1978. The much-debated theory suggests that, assuming that agents have rational expectations on their future income, consumption decisions should follow a random walk, and the best forecast of future consumption level is the current consumption level. Then, changes in consumption are unforecastable. This thesis constructs an empirical test for the Rational Expectations–Permanent Income Hypothesis using Finnish Consumer Survey data as well as various Finnish macroeconomic data. The data sample covers the years 1995–2010. Consumer survey data may be interpreted to directly represent household expectations, which makes it an interesting tool for this particular test. The variable to be predicted is the growth of total household consumption expenditure. The main empirical result is that the Consumer Confidence Index (CCI), a balance figure computed from the most important consumer survey responses, does have statistically significant predictive power over the change in total consumption expenditure. The history of consumption expenditure growth itself, however, fails to predict its own future values. This indicates that the CCI contains some information that the history of consumption decisions does not, and that the consumption decisions are not optimal in the theoretical context. However, when conditioned on various macroeconomic variables, the CCI loses its predictive ability. This finding suggests that the index is merely a (partial) summary of macroeconomic information, and does not contain any significant private information on consumption intentions of households not directly deductible from the objective economic variables. In conclusion, the Rational Expectations–Permanent Income Hypothesis is strongly rejected by the empirical results in this thesis. This result is in accordance with most earlier studies conducted on the topic.

Filosofins renässans eller modern mystik : Bergsondebatten i Finland

The study examines the debate in Finland at the beginning of the 20th century surrounding the philosophy of Henri Bergson. Both within as well as outside of academic philosophy Bergsonism was adapted to the philosophical and cultural landscape in Finland by a process of selective appropriation. The ambiguous relationship between the sender and the receiver is accentuated in reference to philosophical celebrities such as Bergson, whose reputations spread more quickly than the content of their philosophy and whose names are drawn into the political and social discourse. As a philosophical movement the aim of Bergsonism was to create a scientific philosophy of life as an alternative to both idealism and modern empirical and antimetaphysical currents, during a period when European philosophy was searching for new guidelines after the collapse of the idealistic system philosophies of the 19th century. This reorientation is examined from a Finnish viewpoint and in the light of the process of intellectual importation. The study examines how elements from an international discourse were appropriated within the philosophical field in Finland against a background of changes in the role of the university and the educated elites as well as the position of philosophy within the disciplinary hierarchy. Philosophical reception was guided by expectations that had arisen in a national context, for example when Bergsonism in Finland was adjusted to a moral and educational ideal of self-cultivation, and often served as a means for philosophers to internationalize their own views in order to strengthen their position on the national stage. The study begins with some introductory remarks on the international circulation of ideas from the point of view of the periphery. The second section presents an overview of the shaping of the philosophical field at the turn of the 20th century, the naturalism and positivism of the late 19th century that were the objects of Bergson s critique, and an introduction to the attempts of a philosophy of life to make its way between idealism and naturalism. The third and main section of the study begins with a brief presentation of the main features of the philosophy of Bergson, followed by a closer examination of the different comments and analyses that it gave rise to in Finland. The final section addresses the ideological implications of Bergsonism within the framework of a political annexation of the philosophy of life at the beginning of the 20th century.

Herätys kylässä ja tuvissa : Rääkkylän Oravisalon kylä ja renqvistiläinen herätys 1820-luvulla

A Revival in a Village and its Households. The Village of Oravisalo in Rääkkylä Parish and the Renqvistist Revivalism in the 1820s. My purpose is to apply the science of religion and the study of past communities to the study of religious revivalism. Revivalism will be considered a religious phenomenon as well as a cultural and social phenomenon. What makes this study unique is the possibility to reconstruct a list of participating revivalists based on entries in the communion book of the time. The conflict between the revivalists and the chaplain of Rääkkylä also generated other documentary material. The community in Oravisalo was relatively stratified. People lived in complex and varying forms of households. They also had plentiful contacts both with unrelated inhabitants of Oravisalo and with the neighbouring villages. Through these contacts the inhabitants of Oravisalo were introduced to revivalism. In Oravisalo, the revival for the most part fell into a certain social stratum and did not severely damage existing relationships within families or among acquaintances. The revivalists formed a new community within the village but the community was neither very tightly-knit nor was it closed. The revival was an individual phenomenon affected by general factors. First, there were factors that brought about a quest for an applicable system of meanings. These factors included at least three important issues: the Great Partition of land, the crisis of slash-and-burn cultivation, and a population growth that increased the proportion of the landless in the village. As a result, many of the revivalists had low status and poor expectations for the future. Second, there were factors that appealed to the people in the message and character of the preacher, Henrik Renqvist. Third, the proximity of the village to Liperi, where the revival got its start, was crucial to revivalism s spread to Oravisalo. Culturally, the revival meant a change in the system of symbols or meanings, so it was not solely a matter of intensified religious fervour. For instance, Communion, prayer, reading, and perhaps baptism symbolised different things to the revivalists than to other villagers. However, the revivalists do not seem to have started any moral revolution in their village. The religious aspect defined the limits of the protest and the resistance towards authorities. The revivalists wanted only to have the right to follow their conscience. The freedom granted the female members was limited to the religious sphere. No social or economic claims were made. The revival altered the situation of its members only on a symbolic level, yet it also offered them status within their own group.

Turun linna kerrottuna ja kertovana tilana

The Turku castle, founded c. 1300, has changed over the centuries from a medieval defensive structure into a Renaissance palace and from a derelict jailhouse in the late 19th century into a prime example of the Medieval built heritage in Finland. Today, it is first and foremost a monument to the Medieval and Renaissance heyday of the castle. This is apparent in the architectural forms that have been carefully restored and reconstructed. It also becomes clear in all kinds of narratives, both visual (like the set of miniatures about the different stages of the construction of the castle) and textual (as during the guided tours). For the first time in the architectural history of the Turku castle, the Medieval, the Renaissance, the Modern, and the Present as architecturally constructed or reconstructed spaces can all be visited within the same hour. As a result, the monumental Turku castle may even be deemed anachronistic or inauthentic. In this study I look at the ways in which the Turku castle is, indeed, anachronistic and inauthentic. My main objective, however, is to find ways in which the anachronisms and inauthenticities are overcome in a positive way. I base my analysis of the Turku castle on three theoretical standpoints. First, I am studying the castle as space, described by Michel de Certeau as a practiced place (de Certeau 2002). Second, I am approaching the numerous narrative aspects of the castle following Paul Ricoeur s analysis of narrative as a threefold mimetic process (Ricoeur 1990). From these two theoretical settings I have summoned the concept of narrative space. The life and work at the castle are based on expectations and understandings of the historical surroundings. My third theoretical choice is to study this applied knowledge of the place as the management of blocks of knowledge in communication (Robert de Beaugrande 1980). Combining the theoretical starting points of space and narrative , I am approaching the castle as if it were an evolving set of narratives, narrated in space but also through space. Seeing e.g. the restoration teams of the mid-20th century and the present day tour guides as creative narrators, I am looking beyond the dilemma of the anachronistic spaces. What transpires is an inter-connected web of texts and spaces, tangible and intangible narratives. My analytical key to these narrative relationships is the threefold mimetic process of pre-figuration, con-figuration, and re-figuration, inspired by the writings of Paul Ricoeur (1990). This way, the past can be seen as a pool of endless possibilities to emplot place, time, and action into a narrative space. The narratives convey images of the past that may be contested by other images, and the power to narrate in the first place can be challenged and re-distributed.

Melun sieto kaupunkielämän välttämättömyytenä : Melu ympäristöongelmana ja sen synnyttämien reaktioiden kulttuurinen käsittely Helsingissä

Tolerance of Noise as a Necessity of Urban Life. Noise pollution as an environmental problem and its cultural perceptions in the city of Helsinki This study looks at the noise pollution problem and the change in the urban soundscape in the city of Helsinki during the period from the 1950s to the present day. The study investigates the formation of noise problems, the politicization of the noise pollution problem, noise-related civic activism, the development of environmental policies on noise, and the expectations that urban dwellers have had concerning their everyday soundscape. Both so-called street noise and the noise caused by, e.g., neighbors are taken into account. The study investigates whether our society contains or has for some time contained cultural and other elements that place noise pollution as an essential or normal state of affairs as part of urban life. It is also discussed whether we are moving towards an artificial soundscape, meaning that the auditory reality, the soundscape, is more and more under human control. The concept of an artificial soundscape was used to crystallize the significance of human actions and the role of modern technology in shaping soundscapes and also to link the changes in the modern soundscape to the economic, political, and social changes connected to the modernization process. It was argued that the critical period defining noise pollution as an environmental problem were the years from the end of the 1960s to the early 1970s. It seems that the massive increase of noise pollution caused by road traffic and the introduction of the utopian traffic plans was the key point that launched the moral protest against the increase of noise pollution, and in general, against the basic structures and mindsets of society, including attitudes towards nature. The study argues that after noise pollution was politicized and institutionalized, the urban soundscape gradually became the target of systematic interventions. However, for various reasons, such as the inconsistency in decision making, our increased capacity to shape the soundscape has not resulted in a healthy or pleasant urban soundscape. In fact the number of people exposed to noise pollution is increasing. It is argued that our society contains cultural and other elements that urge us to see noise as a normal part of urban life. It is also argued that the possibility of experiencing natural, silent soundscapes seems to be the yardstick against which citizens of Helsinki have measured how successful we are in designing the (artificial) soundscape and if the actions of noise control have been effective. This work discusses whose interests it serves when we are asked to accept noise pollution as a normal state of affairs. It is also suggested that the quality of the artificial soundscape ought to be radically politicized, which might give all citizens a better and more equal chance to express their needs and wishes concerning the urban soudscape, and also to decide how it ought to be designed.

Studies of working memory in interrupted human-computer interaction

Distraction in the workplace is increasingly more common in the information age. Several tasks and sources of information compete for a worker's limited cognitive capacities in human-computer interaction (HCI). In some situations even very brief interruptions can have detrimental effects on memory. Nevertheless, in other situations where persons are continuously interrupted, virtually no interruption costs emerge. This dissertation attempts to reveal the mental conditions and causalities differentiating the two outcomes. The explanation, building on the theory of long-term working memory (LTWM; Ericsson and Kintsch, 1995), focuses on the active, skillful aspects of human cognition that enable the storage of task information beyond the temporary and unstable storage provided by short-term working memory (STWM). Its key postulate is called a retrieval structure an abstract, hierarchical knowledge representation built into long-term memory that can be utilized to encode, update, and retrieve products of cognitive processes carried out during skilled task performance. If certain criteria of practice and task processing are met, LTWM allows for the storage of large representations for long time periods, yet these representations can be accessed with the accuracy, reliability, and speed typical of STWM. The main thesis of the dissertation is that the ability to endure interruptions depends on the efficiency in which LTWM can be recruited for maintaing information. An observational study and a field experiment provide ecological evidence for this thesis. Mobile users were found to be able to carry out heavy interleaving and sequencing of tasks while interacting, and they exhibited several intricate time-sharing strategies to orchestrate interruptions in a way sensitive to both external and internal demands. Interruptions are inevitable, because they arise as natural consequences of the top-down and bottom-up control of multitasking. In this process the function of LTWM is to keep some representations ready for reactivation and others in a more passive state to prevent interference. The psychological reality of the main thesis received confirmatory evidence in a series of laboratory experiments. They indicate that after encoding into LTWM, task representations are safeguarded from interruptions, regardless of their intensity, complexity, or pacing. However, when LTWM cannot be deployed, the problems posed by interference in long-term memory and the limited capacity of the STWM surface. A major contribution of the dissertation is the analysis of when users must resort to poorer maintenance strategies, like temporal cues and STWM-based rehearsal. First, one experiment showed that task orientations can be associated with radically different patterns of retrieval cue encodings. Thus the nature of the processing of the interface determines which features will be available as retrieval cues and which must be maintained by other means. In another study it was demonstrated that if the speed of encoding into LTWM, a skill-dependent parameter, is slower than the processing speed allowed for by the task, interruption costs emerge. Contrary to the predictions of competing theories, these costs turned out to involve intrusions in addition to omissions. Finally, it was learned that in rapid visually oriented interaction, perceptual-procedural expectations guide task resumption, and neither STWM nor LTWM are utilized due to the fact that access is too slow. These findings imply a change in thinking about the design of interfaces. Several novel principles of design are presented, basing on the idea of supporting the deployment of LTWM in the main task.

Nuorisokodista maailmalle : Kokemuksia nuorisokodissa elämisestä ja aikuisiässä selviytymisestä

This thesis studies the experiences of women who have lived in a youth home as girls. There are two main themes: 1) experiences of living in a youth home, and 2) experiences of coping as an adult. Data on the first theme is purely subjective; it derives from personal, recalled experiences. Data on the second theme is partly based on experiences and partly on facts about the current life situation of the research participants. A third theme of the thesis is concerned with the question of how the research participants’ placement in a youth home influenced their later life. The thesis contributes valuable knowledge concerning the experiences of young people who have been raised in substitute care, a topic that is rare in the literature. The empirical data of the study consists of responses to an initial inquiry and subsequent interviews. The inquiry was sent to 116 former inhabitants of a youth home. 62 altogether returned the inquiry, and 34 participated in the interview. The purpose of the inquiry was to produce an overview of the life situations of the research participants and to invite them to participate in the interview. In addition, the inquiry sought to produce an overview of how the participants enjoyed living in a youth home and how they saw its significance in terms of their later lives. The interviews concentrated on the research participants’ experiences concerning the processes of getting into a youth home, living there, and coping independently in life afterwards. The most central result relating to the first main theme was that the experiences were both shared and non-shared. Living in a youth home was characterized by six general sentiments: “wonderful, real home”, “new world!”, “safe haven”, “place to live”, “penal institution”, and “nightmare”. These sentiments seemed to be related first and foremost to whether one’s own, individual needs and expectations had been met in the youth home. The strongest and most common needs, as experienced, were the needs for safety, belongingness and respect. On the basis of the experiences, meeting these needs can be considered as the most important task of a youth home. The results relating to the second main theme of the study were examined in two different ways. Comparisons with the general female population (education, situation in working life and financial circumstances) showed that research participants had coped less well. Differences were also found to exist in family structures: nuclear families and single mother families were more unusual among research participants, and stepfamilies more common, than in the general population. More of the participants’ children than of the general population’s lived with somebody other than their parent. However, the experience of coping well was common among research participants, although the beginning of independent living had been generally experienced as difficult: feelings of loneliness, insecurity and restlessness were dominant. Later, a sense of life control developed and strengthened through joining with others (family, work, friends), through accepting one’s own life history and through creating one’s own model of living. As the most significant explanation of their coping, the research participants identified their own (innate) strength and will to cope. The majority of the research participants felt that the youth home had a positive influence on their later lives. Positive influences can be grouped in three “levels”: I) getting out of the home, II) having good experiences and learning useful things, and III) the essential effect on one’s own way of thinking and living. The second level’s influence includes strengthened self-esteem, increased social understanding and new knowledge and skills. Some research participants did not think the youth home had any significance in terms of their later lives, and some thought it had negative significance.

Arvot intialaissyntyisten maahanmuuttajien akkulturaatioprosessissa

The study examined immigrants´ attitudes towards acculturation, in other words the social and cultural changes that take place in the adaptation process. The perspective of acculturation studies was also expanded by examining immigrants´ cultural values and their experiences of majority´s expectations. In addition, special interest was directed to the relations between acculturation attitudes and values and both factors´ relevance on psychological well-being. Indian born immigrants were selected as subjects as they are one of the fastest growing ethnic minorities in Finland. This minority has not been included in immigration studies previously. The seventy-five immigrants that participated as subjects represent a highly educated subgroup of Indian born immigrants. The study was carried out with posted questionnaires. Most of the subjects received an inquiry of their motivation to participate by e-mail or phone before the postal questionnaire. The results were in line with previous studies in Finland as the attitudes emphasising cultural integration were dominant. However, attitudes towards marriage, reflecting deeper and less flexible parts of culture, were dominated by separation motives. Immigrants´ perceptions of majority´s expectations reflected partly the real assimilation wishes demonstrated in previous studies. Against hypotheses, discrepancies between acculturation attitudes and experiences of majority´s expectations did not predict immigrants´ psychological well-being in a clear way. The highly educated Indian born immigrants emphasised self-direction and universalism in their values. This separates them from the traditional cultural values of India. The hypotheses made of the predictive relations between values and acculturation attitudes were partly confirmed. Also, the assumptions concerning both the stress buffering role of collectivistic values and the positive effect of achievement values on feelings of mastery were confirmed. Despite the limitations in the data, this study strengthens the view that cultural and personal values play a significant role in immigrants´ adaptation process. Information about values can benefit individuals making hard decisions and coping with cultural change as well as officials modifying Finnish immigration policy and planning the support system for immigrants.

Opettajan ja vanhemman vuorovaikutus ja keskustelun kehykset koululaisen kehityskeskusteluissa

The aim of the study is to describe the consultation discussions between the teacher, parents and the student. The structure and the interaction of the conversation is in the focus of the study. The study explicates the organization of the interaction and orientation of the participants in the conversation. The study approaches conversation as a dynamic activity and studies it from the point of view of the participants. Assessment is one of the themes involved in the teacher-parent-student consultation discussions. Assessment as a duty of the school brings an institutional aspect in the conversation, but the ways it is implemented and expressed varies in the conversational situations. Participants communication and interaction in the situation influences the ways the consultation discussions are carried out. The framework of the study is based on the ethno methodological approach where a social situation and its meaning is seen negotiated by the participants. The interest of the study is to find out how the participants implement mutual understanding and how it can be observed in their interaction. Quantitatively, the interaction of the participants is described in the framework of the interaction analysis and linked to the socio-emotional and rational aspects of the interaction. The empirical part of the study consists of data collected with questionnaires and videotaped conversations. The main research problems of the study are, how the teachers and parents described the consultation discussions and how the interaction of the teacher, the parent and the student is organized during the conversation. The background of the study is linked to the previous studies concerning co-operation between the teacher and the parent and home-school relationship. This part of the study aims to enlighten how the consultation discussions are part of the co-operation in the school context. The questionnaires link the consultation discussions to the every day co-operation between the teacher and the family. Expectations and results described by the parents and teachers are analysed. Videotaped data is both analysed quantitatively based on interaction analysis and approached with the ethno methodological interpretation. The interest of my study is, how people participate in the situation of consultation discussion, how they orientate in it and influence the conversation. The analyses of the consultation discussions are based on the both quantitative interaction analysis and ethno methodological frame analysis. With the theoretical approach of my study I want to describe and enlighten the organization of the interaction and ways of orientation of the participants in consultation discussions. Keywords: consultation discussion, interaction, evaluation, orientation in the conversation, home-school cooperation, quantitative interaction analysis, frame analysis

Yksi historia monimutkaistuvasssa maailmassa : Historian olemus ja historian suuret kertomukset luokanopettajaopiskelijoiden historiatietoisuudessa

One history in a multicomplex world The quintessence of history and grand historical narratives in the historical consciousness of class teacher students The study analyses the conception of history amongst class teacher students at the University of Helsinki. It also explores the expectations about the future that the students have on the basis of their views on history. The conceptions of the students are analysed against the background of the notion of one history which has been part of Western thought in the modern era and which is at the centre of the theoretical framework of this study. The Enlightenment project and the erosion of the role of the Church paved the way for the notion that history is an linear narrative of the progress of humankind and in which, implicitly, the Western countries are endowed with a special role as the vanguards of progress. In recent times these assumptions have been criticised by postmodernists and proponents of New History. The material of the study consists of interviews of twenty-two 19 26 years old class teacher students at the University of Helsinki. The topics in the interviews were the developments of the past and the future trajectories. The students conceived history as a field of knowledge that provides a unifying view on the world and helps to make today s world intelligible. Finnish history and global history were invested with features of a grand narrative of progress. In global history, progress and development were seen as characteristic of the Western world primarily. The students regarded the post-war Finnish history as a qualified success story in that they deplored the erosion of collectivist values and the rise of selfishness in recent decades. History was not conceived as a process of progress that would self-evidently continue in the future, but rather more as a field of contingency and cyclical change.The students regarded the increasing predominance of the market forces over democratically elected agencies, the antagonism between the West and the other parts of the world, and environmental risks as the major threats. Notwithstanding this general.pessimism about the future, the students had a very positive view of their own personal prospects. Keywords: historical consciouness, one history, future expectations