Foreign Capital and Finland : Central government's first period of reliance on international financial markets, 1862-1938

The main objective of the study is to evaluate the Finnish central government s foreign borrowing between the years 1862 and 1938. Most of this period was characterised by deep capital market integration that bears resemblance to the liberal world financial order at the turn of the millennium. The main aim is to analyse the credit risk associated with the state and its determination by evaluating the world financial market centres perception of Finland. By doing this, the study is also expected to provide an additional dimension to Finland s political and economic history by incorporating into the research the assessments of international capital markets regarding Finland during a period that witnessed profound political and economic changes in Finnish society. The evaluation of the credit risk mainly relies on exchange-rate risk free time series of the state s foreign bonds. They have been collected from quotations in the stock exchanges in Helsinki, Hamburg, Paris and London. In addition, it investigates Finland s exposure to short-term debt and Moody s credit ratings assigned to Finland. The study emphasises the importance of the political risk. It suggests that the hey-day of the state s reliance on foreign capital markets took place during last few decades of the 19th century when Finland enjoyed a wide autonomy in the Russian Empire and prudently managed its economy, highlighted in Finland s adherence to the international gold standard. Political confrontations in Finland and, in particular, in Russia and the turbulence of the world financial system prevented the return of this beneficial position again. Through its issuance of foreign bonds the state was able to import substantial amounts of foreign capital, which was sorely needed to foster economic development in Finland. Moreover, the study argues that the state s presence in the western capital markets not only had economic benefits, but it also increased the international awareness of Finland s distinct and separate status in the Russian Empire and later underlined its position as an independent republic.

Studies on the international effects of real shocks

This doctoral thesis addresses the macroeconomic effects of real shocks in open economies in flexible exchange rate regimes. The first study of this thesis analyses the welfare effects of fiscal policy in a small open economy, where private and government consumption are substitutes in terms of private utility. The main findings are as follows: fiscal policy raises output, bringing it closer to its efficient level, but is not welfare-improving even though government spending directly affects private utility. The main reason for this is that the introduction of useful government spending implies a larger crowding-out effect on private consumption, when compared with the `pure waste' case. Utility decreases since one unit of government consumption yields less utility than one unit of private consumption. The second study of this thesis analyses the question of how the macroeconomic effects of fiscal policy in a small open economy depend on optimal intertemporal behaviour. The key result is that the effects of fiscal policy depend on the size of the elasticity of substitution between traded and nontraded goods. In particular, the sign of the current account response to fiscal policy depends on the interplay between the intertemporal elasticity of aggregate consumption and the elasticity of substitution between traded and nontraded goods. The third study analyses the consequences of productive government spending on the international transmission of fiscal policy. A standard result in the New Open Economy Macroeconomics literature is that a fiscal shock depreciates the exchange rate. I demonstrate that the response of the exchange rate depends on the productivity of government spending. If productivity is sufficiently high, a fiscal shock appreciates the exchange rate. It is also shown that the introduction of productive government spending increases both domestic and foreign welfare, when compared with the case where government spending is wasted. The fourth study analyses the question of how the international transmission of technology shocks depends on the specification of nominal rigidities. A growing body of empirical evidence suggests that a positive technology shock leads to a temporary decline in employment. In this study, I demonstrate that the open economy dimension can enhance the ability of sticky price models to account for the evidence. The reasoning is as follows. An improvement in technology appreciates the nominal exchange rate. Under producer-currency pricing, the exchange rate appreciation shifts global demand toward foreign goods away from domestic goods. This causes a temporary decline in domestic employment.

Medicalising Prohibition : Harm reduction in Finnish and International Drug Policy

The increase in drug use and related harms in the late 1990s in Finland has come to be referred to as the second drug wave. In addition to using criminal justice as a basis of drug policy, new kinds of drug regulation were introduced. Some of the new regulation strategies were referred to as "harm reduction". The most widely known practices of harm reduction include needle and syringe exchange programmes for intravenous drug users and medicinal substitution and maintenance treatment programmes for opiate users. The purpose of the study is to examine the change of drug policy in Finland and particularly the political struggle surrounding harm reduction in the context of this change. The aim is, first, to analyse the content of harm reduction policy and the dynamics of its emergence and, second, to assess to what extent harm reduction undermines or threatens traditional drug policy. The concept of harm reduction is typically associated with a drug policy strategy that employs the public health approach and where the principal focus of regulation is on drug-related health harms and risks. On the other hand, harm reduction policy has also been given other interpretations, relating, in particular, to human rights and social equality. In Finland, harm reduction can also be seen to have its roots in criminal policy. The general conclusion of the study is that rather than posing a threat to a prohibitionist drug policy, harm reduction has come to form part of it. The implementation of harm reduction by setting up health counselling centres for drug users with the main focus on needle exchange and by extending substitution treatment has implied the creation of specialised services based on medical expertise and an increasing involvement of the medical profession in addressing drug problems. At the same time the criminal justice control of drug use has been intensified. Accordingly, harm reduction has not entailed a shift to a more liberal drug policy nor has it undermined the traditional policy with its emphasis on total drug prohibition. Instead, harm reduction in combination with a prohibitionist penal policy constitutes a new dual-track drug policy paradigm. The study draws on the constructionist tradition of research on social problems and movements, where the analysis centres on claims made about social problems, claim-makers, ways of making claims and related social mobilisation. The research material mainly consists of administrative documents and interviews with key stakeholders. The doctoral study consists of five original articles and a summary article. The first article gives an overview of the strained process of change of drug policy and policy trends around the turn of the millennium. The second article focuses on the concept of harm reduction and the international organisations and groupings involved in defining it. The third article describes the process that in 1996 97 led to the creation of the first Finnish national drug policy strategy by reconciling mutually contradictory views of addressing the drug problem, at the same as the way was paved for harm reduction measures. The fourth article seeks to explain the relatively rapid diffusion of needle exchange programmes after 1996. The fifth article assesses substitution treatment as a harm reduction measure from the viewpoint of the associations of opioid users and their family members.

Intraday Linkages across International Equity Markets

Utilizing concurrent 5-minute returns, the intraday dynamics and inter-market dependencies in international equity markets were investigated. A strong intraday cyclical autocorrelation structure in the volatility process was observed to be caused by the diurnal pattern. A major rise in contemporaneous cross correlation among European stock markets was also noticed to follow the opening of the New York Stock Exchange. Furthermore, the results indicated that the returns for UK and Germany responded to each other’s innovations, both in terms of the first and second moment dependencies. In contrast to earlier research, the US stock market did not cause significant volatility spillover to the European markets.