Aino 2: An updated DSGE model of the Finnish economy

Petteri Juvonen and Aino Silvo

No 10/2026, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: We document the current specification of Aino 2, the dynamic stochastic general equilibrium (DSGE) model used at the Bank of Finland for forecasting and policy analysis, originally introduced under the name Aino 2.0 in Kilponen et al. (2016). It is a large-scale estimated New Keynesian small open economy model with an explicit banking sector, designed to capture key features of the Finnish macroeconomy. Since its introduction, the model has been updated to include various features with a view of improving its performance in practical policy work. The most important modifications include the adoption of general constant relative risk aversion preferences, a revised wage-indexation mechanism that generates more realistic wage dynamics in forecasting applications, and fixed production costs that improve the model's ability to match labour market and productivity fluctuations. A companion Technical Appendix provides the derivation of full equilibrium conditions, analytical steady state solution, and log-linearised dynamic equilibrium conditions.

Date: 2026
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/344111/1/198548403X.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:344111

Access Statistics for this paper

More papers in Bank of Finland Research Discussion Papers from Bank of Finland Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().