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This paper first describes financial variables that have been constructed to correspond to various channels in the transmission mechanism. Next, a Bayesian VAR model for the macroeconomy, with priors on the steady states, is augmented with these financial variables and estimated using Swedish data for 1989-2015. The results support three conclusions. First, the financial system is important and the strength of the results is dependent on identification, with the financial variables accounting for 10-25 % of the forecast error variance of Swedish GDP growth. Second, the suggested model produces an earlier signal regarding the probability of recession, compared to a model without financial variables. Third, the model's forecasts for the deep downturn in 2008 and 2009, conditional on the development of the financial variables, outperform a macro-model that lacks financial variables. Furthermore, this improvement in modelling Swedish GDP growth during the financial crisis does not come at the expense of unconditional predictive power. Taken together, the results suggest that the proposed model presents an accessible possibility to analyse the macro-financial linkages and the GDP developments, especially during a financial crisis.

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The firm-based simulation model presented in this paper aims to help practical policy making, by providing a tool for analyzing the behavioural effects induced by changes in the tax code and for forecasting corporate tax revenues. To achieve this end, one of the key innovations adopted in the paper is the use of robust estimation techniques designed to ameliorate the undue impact of influential observations. The simulation results indicate that a statutory corporate tax rate reduction does not reduce the effective corporate tax rate to an equal extent because firms adjust their behaviour to new tax rules. The simulation also reveals that even though the macroeconomic environment is important for the taxes paid by the firm, it is not obvious that the effective tax rate for these firms may change because of the changed macro conditions.