The Maastricht Convergence Criteria and Optimal Monetary Policy for the EMU Accession Countries.

The EMU accession countries are obliged to fulfill the Maastricht convergence criteria prior to entering the EMU. This paper uses a DSGE model of a two-sector small open economy, to address the following question: How do the Maastricht convergence criteria modify optimal monetary policy in an economy facing domestic and external shocks? First, we derive the micro founded loss function that represents the objective function of the optimal monetary policy not constrained to satisfy the criteria. We find that the optimal monetary policy should not only target inflation rates in the domestic sectors and aggregate output fluctuations but also domestic and international terms of trade. Second, we show how the loss function changes when the monetary policy is constrained to satisfy the Maastricht criteria. The loss function of such a constrained policy is characterized by additional elements penalizing fluctuations of the CPI inflation rate, the nominal interest rate and the nominal exchange rate around the new targets which are potentially different from the steady state of the unconstrained optimal monetary policy. Under the chosen parameterization, the unconstrained optimal monetary policy violates two criteria: concerning the CPI inflation rate and the nominal interest rate. The constrained optimal policy results in targeting the CPI inflation rate and the nominal interest rate that are 0.7% lower (in annual terms) than the CPI inflation rate and the nominal interest rate in the countries taken as a reference. The welfare costs associated with these constraints need to be offset against credibility gains and other benefits related to the compliance with the Maastricht criteria that are not modelled. JEL Classification: F41, E52, E58, E61EMU accession countries, Maastricht convergence criteria, optimal monetary policy

Assessing the benefits of international portfolio diversification in bonds and stocks.

This paper considers a stylized asset pricing model where the returns from exchange rates, stocks and bonds are linked by basic risk-arbitrage relationships. Employing GMM estimation and monthly data for 18 economies and the US (treated as the domestic country), we identify through a simple test the countries whose assets strongly comove with US assets and the countries whose assets might other larger diversification benefits. We also show that the strengthening of the comovement of returns across countries is neither a gradual process nor a global phenomenon, reinforcing the case for international diversification. However, our results suggest that fund managers are better other constructing portfolios selecting assets from a subset of countries than relying on either fully inter-nationally diversified or purely domestic portfolios. JEL Classification: F31, G10asset pricing, Exchange Rates, international parity conditions, market integration, stochastic discount factor

What do asset prices have to say about risk appetite and uncertainty?

Implied volatility indices should have information about risk parameters, once they are cleansed of the influence of normal volatility dynamics and macro-economic uncertainty. Building on intuition from the dynamic asset pricing literature, we uncover unobserved risk aversion and fundamental uncertainty from the observed time series of the VIX and the credit spreads while controlling for realized volatility, expectations about the macroeconomic outlook, and interest rates. We apply this methodology to monthly data from both Germany and the US. We find that implied volatilities contain a substantial amount of information regarding risk aversion whereas credit spreads have a lot to say about both risk aversion and uncertainty. Moreover, there is a significant comovement in the German and US risk aversion. JEL Classification:Credit Spread, Economic uncertainty, risk aversion, Time variation in risk and return, Volatility dynamics

Isospin dependence of pseudospin symmetry in nuclear resonant states

The relativistic mean field theory in combination with the analytic continuation in the coupling constant method is used to determine the energies and widths of single-particle resonant states in Sn isotopes. It is shown that there exists clear shell structure in the resonant levels as appearing in the bound levels. In particular, the isospin dependence of pseudospin symmetry is clearly shown in the resonant states, is consistent with that in the bound states, where the splittings of energies and widths between pseudospin doublets are found in correlation with the quantum numbers of single-particle states, as well as the nuclear mass number. The similar phenomenon also emerges in the spin partners.Comment: 7 pages, 6 figure

Optimal Education with Mobile Capital. An OLG Approach (new title: Optimal Public Education under Capital Mobility)

The paper considers a two-country model of overlapping generations economies with intergenerational transfers carried out in the form of bequest and investment in human capital. We examine in competitive equilibrium the optimal provision of education with and without capital markets integration. First, we explore how regimes of education provision - public, private or mixed - arise and how they affect the dynamics of autarkic economies. Second, we study the transitory and long-run effects of capital markets integration, in equilibrium, on the optimal provision of education and growth. Third, we examine a competition game where countries compete in the provision of public education.Altruism, education, growth, human capital, capital markets integration

A new probe of dark matter properties: gravitational waves from an intermediate mass black hole embedded in a dark matter mini-spike

An intermediate mass black hole (IMBH) may have a dark matter (DM) mini-halo around it and develop a spiky structure within less than a parsec from the IMBH. When a stellar mass object is captured by the mini-halo, it eventually infalls into such an IMBH due to gravitational wave back reaction which in turn could be observed directly by future space-borne gravitational wave experiments such as eLISA/NGO. In this paper, we show that the GW detectability strongly depends on the radial profile of the DM distribution. So if the GW is detected, the power index, that is, the DM density distribution would be determined very accurately. The DM density distribution obtained would make it clear how the IMBH has evolved from a seed BH and whether the IMBH has experienced major mergers in the past. Unlike the gamma ray observations of DM annihilation, GW is just sensitive to the radial profile of the DM distribution and even to non-interacting DM. Hence the effect we demonstrate here can be used as a new and powerful probe into DM properties.Comment: 6 pages,3 figure

Internal kinematics of spiral galaxies in distant clusters IV. Gas kinematics of spiral galaxies in intermediate redshift clusters and in the field

(Abridged) We trace the interaction processes of galaxies at intermediate redshift by measuring the irregularity of their ionized gas kinematics, and investigate these irregularities as a function of the environment (cluster versus field) and of morphological type (spiral versus irregular). Our sample consists of 92 distant galaxies. 16 cluster (z~0.3 and z~0.5) and 29 field galaxies (mean z=0.44) of these have velocity fields with sufficient signal to be analyzed. We find that the fraction of galaxies that have irregular gas kinematics is remarkably similar in galaxy clusters and in the field at intermediate redshifts. The distribution of the field and cluster galaxies in (ir)regularity parameters space is also similar. On the other hand galaxies with small central concentration of light, that we see in the field sample, are absent in the cluster sample. We find that field galaxies at intermediate redshifts have more irregular velocity fields as well as more clumpy and less centrally concentrated light distributions than their local counterparts. Comparison with a SINS sample of 11 z ~ 2 galaxies shows that these distant galaxies have more irregular gas kinematics than our intermediate redshift cluster and field sample. We do not find a dependence of the irregularities in gas kinematics on morphological type. We find that two different indicators of star formation correlate with irregularity in the gas kinematics. More irregular gas kinematics, also more clumpy and less centrally concentrated light distributions of spiral field galaxies at intermediate redshifts in comparison to their local counterparts indicate that these galaxies are probably still in the process of building their disks via mechanisms such as accretion and mergers. On the other hand, they have less irregular gas kinematics compared to galaxies at z ~ 2.Comment: Accepted for publication in A&A, high resolution version available at http://www.astro.rug.nl/~kutdemir/13262/13262_hr.p