On the Long-Run Behavior of Equation-Based Rate Control

We consider unicast equation based rate control, where a source estimates the loss event ratio p, and, primarily at loss events, adjusts its sending rate to f(p). Function f is assumed to represent the loss-throughput relation that TCP would experience. When no loss occurs, the rate may also be increased according to some additional mechanism. We assume that the loss event interval estimator is non-biased. If the loss process is deterministic, the control is TCP-friendly in the long run, i.e, the average throughput does not exceed that of TCP. If, in contrast, losses are random, it is not a priori clear whether this holds, due to the non-linearity of f, and a phenomenon similar to Feller`s paradox. Our goal is to identify the key factors that drive whether, and how far, the control is TCP friendly (in the long run). As TCP and our source may experience different loss event intervals, we distinguish between TCP-friendly and conservative (throughput does not exceed f(p)). We give a representation of the long term throughput, and derive that conservativeness is primarily influenced by various convexity properties of f, the variability of loss events, and the correlation structure of the loss process. In many cases, these factors lead to conservativeness, but we show reasonable lab experiments where the control is clearly non-conservative. However, our analysis also suggests that our source should experience a higher loss event ratio than TCP, which would make non-TCP friendliness less likely. Our findings provide guidelines that help understand when an equation base control is indeed TCP-friendly in the long run, and in some cases, excessively so. The effect of round trip time and its variation is not included in this study

Nominal exchange rate regimes and relative price dispersion: on the importance of nominal exchange rate volatility for the width of the border

Based on a broad set of regional aggregated and disaggregated consumer price index (CPI) data from major industrialized countries in Asia, North America and Europe we are examining the role that national borders play for goods market integration. In line with the existing literature we find that intra-national markets are better integrated than international market. Additionally, our results show that there is a large "ocean" effect, i.e., inter-continental markets are significantly more segmented than intra-continental markets. To examine the impact of the establishment of the European Monetary Union (EMU) on integration, we split our sample into a pre-EMU and EMU sample. We find that border effects across EMU countries have declined by about 80% to 90% after 1999 whereas border estimates across non-EMU countries have remained basically unchanged. Since global factors have affected all countries in our sample similarly and major integration efforts across EMU countries were made before 1999, we suggest that most of the reduction in EMU border estimates has been "nominal". Panel unit root evidence shows that the observed large differences in integration across intra- and inter-continental markets remain valid in the long-run. This finding implies that real factors are responsible for the documented segmentations across our sample countries

(WP 2010-10) Assessing the Predictive Power of Labor-Market Indicators of Inflation

This paper examines two different measures of wages as predicators of prices in a vector error-correction framework using quarterly data for the U.S. for the period from 1947.Q1 through 2008.Q1. Based on cointegration and a series of exogeneity tests, it is found that: 1) there is a stable, long-run relationship between the Consumer Price Index (CPI) and the Personal Consumption Expenditure Deflator (PCED) on the one hand and unit labor costs (ULC) and average earnings per unit of output (AHE) on the other; 2) ULC is weakly exogenous for both price indices while the two price indices are weakly exogenous for AHE; 3) ULC is strongly exogenous for CPI but not for AHE; 4) ULC is super exogenous for CPI. Taken together, these findings lead to the conclusion that ULC is a reliable indicator of price inflation but productivity-adjusted hourly earnings is not. Thus monetary policymakers are justified in using information about the behavior of ULC in formulating policy actions for achieving the goal of price stability

KInNeSS: A Modular Framework for Computational Neuroscience

Making use of very detailed neurophysiological, anatomical, and behavioral data to build biological-realistic computational models of animal behavior is often a difficult task. Until recently, many software packages have tried to resolve this mismatched granularity with different approaches. This paper presents KInNeSS, the KDE Integrated NeuroSimulation Software environment, as an alternative solution to bridge the gap between data and model behavior. This open source neural simulation software package provides an expandable framework incorporating features such as ease of use, scalabiltiy, an XML based schema, and multiple levels of granularity within a modern object oriented programming design. KInNeSS is best suited to simulate networks of hundreds to thousands of branched multu-compartmental neurons with biophysical properties such as membrane potential, voltage-gated and ligand-gated channels, the presence of gap junctions of ionic diffusion, neuromodulation channel gating, the mechanism for habituative or depressive synapses, axonal delays, and synaptic plasticity. KInNeSS outputs include compartment membrane voltage, spikes, local-field potentials, and current source densities, as well as visualization of the behavior of a simulated agent. An explanation of the modeling philosophy and plug-in development is also presented. Further developement of KInNeSS is ongoing with the ultimate goal of creating a modular framework that will help researchers across different disciplines to effecitively collaborate using a modern neural simulation platform.Center for Excellence for Learning Education, Science, and Technology (SBE-0354378); Air Force Office of Scientific Research (F49620-01-1-0397); Office of Naval Research (N00014-01-1-0624

Permanent and transitory policy shocks in an empirical macro model with asymmetric information

Despite a large literature documenting that the efficacy of monetary policy depends on how inflation expectations are anchored, many monetary policy models assume: (1) the inflation target of monetary policy is constant; and, (2) the inflation target is known by all economic agents. This paper proposes an empirical specification with two policy shocks: permanent changes to the inflation target and transitory perturbations of the short-term real rate. The public sector cannot correctly distinguish between these two shocks and, under incomplete learning, private perceptions of the inflation target will not equal the true target. The paper shows how imperfect policy credibility can affect economic responses to structural shocks, including transition to a new inflation target - a question that cannot be addressed by many commonly used empirical and theoretical models. In contrast to models where all monetary policy actions are transient, the proposed specification implies that sizable movements in historical bond yields and inflation are attributable to perceptions of permanent shocks in target inflation

Asymmetric and non linear adjustment in the revenue expenditure models

The purpose of this paper is to empirically analyse the revenue-expenditure models of public finance by considering the possibility of non-linear and asymmetric adjustment. A long-run relationship between general government expenditure and revenues is identified for Italy. Following system-wide shocks, the estimated relationship adjusts slowly to equilibrium, mainly due to complex administrative procedures that add to the sluggishness of tax collection and undermine the effective monitoring of public spending. Exogeneity of public expenditure implies that taxes rather than spending, carry the burden of short-run adjustment to correct budgetary disequilibria. Allowing for non-linear adjustment and the possibility of multiple equilibria, our findings show evidence of asymmetric adjustment around a unique equilibrium. In particular, we find that when government expenditure is too high, adjustment of taxes takes places at a faster rate than when it is too low. Further, there is evidence of a faster adjustment when deviations from the equilibrium level get larger, pointing to a Leviathan-style, revenue-maximiser government

The dynamic relationship between the Euro overnight rate, the ECB´s policy rate and the term spread

This paper investigates how the dynamic adjustment of the European overnight rate Eonia to the term spread and the ECB’s policy rate has been affected by rate expectations and the operational framework of the ECB. In line with recent evidence found for the US and Japan, the reaction of the Eonia to the term spread is non-symmetric. Moreover, the response of the Eonia to the policy rate depends on both, the repo auction format and the position of the Eonia in the ECB’s interest rate corridor. JEL - Klassifikation: E43 , E52Für viele Zentralbanken wie z.B. die Europäische Zentralbank (EZB) und die US-amerikanische Notenbank, ist der Interbankenmarkt für Tagesgeld der Haupttransmissionkanal ihrer geldpolitischen Maßnahmen. Der Zinssatz für Tagesgeld ist das operationelle Ziel der Geldpolitik, das die Zinsstrukturkurve verankert. Das Verständnis von Bestimmungsfaktoren und Dynamik des Tagesgeldsatzes ist daher von entscheidender Bedeutung für die effiziente Implementierung der Geldpolitik. Dieses Papier untersucht, wie die dynamische Anpassung des europäischen Zinssatzes für Tagesgeld, Eonia, an die Zinsstrukturkurve sowie an den Politikzins der EZB durch Zinsänderungserwartungen und den operationellen Rahmen der EZB beeinflußt wird. In unserem empirischen Ansatz zur Analyse der Dynamik des Eonia-Tagesgeldsatzes wird die Bedeutung von zwei separaten Beziehungen, die das Langfristverhalten des Eonia bestimmen, betont. Zum einen ist der Politikzins der Zentralbank eine wichtige Determinante des Niveaus des Tagesgeldsatzes. Dieser Politikzins ist definiert als der Reposatz aus den Hauptrefinanzierungsgeschäften der EZB. Zum anderen impliziert die Erwartungshypothese der Zinsstrukturkurve die Anpassung des Tagesgeldsatzes an einen längerfristigen Zinssatz. Unser empirischesModell beinhaltet beide Einflüsse und berücksichtigt dabei persistente Abweichungen zwischen Eonia und Politikzins am Ende der monatlichen Reservehaltungsperiode. Diese Abweichungen beruhen auf der kontraintuitiven Reaktion des Eonia auf Zinsänderungserwartungen, die jedoch durch den verzerrenden Einfluß erklärt werden kann, den das Unter- und Überbieten von Banken bei Offenmarktgeschäften vor der Reform der EZB im März 2004 auf den Interbankenmarkt ausgeübt hatte. Ähnlich wie das Zinsziel für die US-amerikanische Federal funds rate ist der Reposatz der EZB ein symmetrischer Politikzins. Im Gegensatz dazu ist zu erwarten, daß ein Mindestbietungssatz, wie er von der EZB seit Juni 2000 angewendet wird, vorrangig als untere Grenze für den Tagesgeldsatz wirkt. Darüberhinaus legt das Auftreten von Unter- und Überbietungsverhalten in den Hauptrefinanzierungsgeschäften der EZB nahe, daß auch die Richtung von Zinsänderungserwartungen die Entwicklung des Eonia bestimmt hat. Wir erweitern daher unseren Ansatz und modellieren eine nicht-symmetrische Anpassung des Eonia an beide Langfristbeziehungen. Dabei wird der potentielle Einfluß der Implementierung der Geldpolitik durch die EZB berücksichtigt. Insbesondere untersuchen wir, wie sich die Änderung im Auktionsverfahren der EZB im Juni 2000 auf die dynamische Anpassung des Eonia an seine langfristigen Bestimmungsfaktoren ausgewirkt hat. Unsere Ergebnisse zeigen, daß die Entwicklung des Eonia-Tagesgeldsatz innerhalb der monatlichen Reservehaltungsperiode vom Auktionsformat abhängt. Allerdings hat die Einführung des Zinstenders mit Mindestbietungssatz nicht zu einer geringeren Kontrolle uber den Eonia durch die EZB geführt. Eine asymmetrische Reaktion auf Zinsänderungserwartungen kann für die Eurozone unterstützt werden, obwohl diese zum Teil die Probleme des Unter- und Überbietens in den untersuchten Zeiträumen widerspiegeln dürfte

The Inefficiency of Short-Run Monetary Targets for Monetary Policy

macroeconomics, monetary policy

Perhaps the 1970s FOMC did what it said it did

Briefing forecasts prepared for the Federal Open Market Committee (FOMC) are used to estimate changes in the design of US monetary policy and in the implied policy target for inflation from 1970 through 1997. Both estimated policy rate responses and FOMC transcripts are consistent with intermediate targeting of monetary aggregates throughout the Great Inflation of the 1970s. The unpublished FOMC targets for M1 growth are tabulated. Empirical results support an effective inflation target of roughly 7% in the 1970s and 3% thereafter. A notable difference in the 1970s monetary policies of the US and Germany is the absence of explicit public objectives for US long-run inflation