Optimal monetary policy and the transmission of oil-supply shocks to the euro area under rational expectations

This paper presents first the estimation of a two-country DSGE model for the euro area and the rest-of-the-world including relevant oil-price channels. We then investigate the optimal resolution of the policy tradeoffs emanating from oil-price disturbances. Our simulations show that the inflationary forces related to the use of oil as an intermediate good seem to require specific policy actions in the optimal allocation. However, the direct effects of oil prices should be allowed to exert their mechanical influence on CPI inflation and wage dynamics through the indexation schemes. We also illustrate that any fine-tuning strategy which tries to counteract the direct effects of oil-price changes in headline inflation would prove counterproductive both in terms to stabilization of underlying inflation and by causing unnecessary volatility in the macroeconomic landscape. Finally, it appears that perfect foresight on future oil price developments allows a more rapid absorption of the steady state decline in purchasing power and real national income in the optimal allocation. Through the various expectation channels, economic agents facilitate the necessary adjustments and optimal monetary policy can still tolerate the direct effects of oil price changes on CPI inflation as well as some degree of underlying inflationary pressures in the view of easing partly the burden of downward real wage shifts. Our monetary policy prescriptions have been derived in a modeling framework where oil-price fluctuations are essentially exogenous to policy actions and where expectations are formed under the rational expectations paradigm. Notably, the extension of such conclusions to imperfect knowledge and weak central bank credibility configurations remain challenging fields for further research. JEL Classification: E4, E5, F4Bayesian estimation, new open economy macroeconomics, Oil prices, optimal monetary policy

Regional Convergence and Aggregate Growth

A striking feature of US states convergence is the link between the spatial speed of convergence and the aggregate growth rate: fast aggregate growth induces a reduction in regional inequalities. This paper uses a neoclassical growth framework with integrated economies in order to capture this phenomena. As it has been stressed by Ventura (1997), the interdependence between regional economies through the access to common markets generates a link between aggregate evolution and spatial convergence dynamics. The paper has two mains results. First, we show how deep parameters of the economy determines quantitatively the magnitude of this link. Second, we propose two directions for testing the model and we provide some empirical evidence using US states data on personal income. These results are mixed, only a part of the convergence pattern is well captured by the model.

Towards a monetary policy evaluation framework

Advances in the development of Dynamic Stochastic General Equilibrium (DSGE) models towards medium-scale structural frameworks with satisfying data coherence have considerably enhanced the range of analytical tools well-suited for monetary policy evaluation. The present paper intends to make a step forward in this direction: using US data over the Volker-Greenspan sample, we perform a DGSE-VAR estimation of a medium-scale DSGE model very close to Smets and Wouters [2007] specification, where monetary policy is set according to a Ramsey-planner decision problem. Those results are then contrasted with the DSGE-VAR estimation of the same model featuring a Taylortype interest rate rule. Our results show in particular that the restrictions imposed by the welfare-maximizing Ramsey policy deteriorates the empirical performance with respect to a Taylor rule specification. However, it turns out that, along selected conditional dimensions, and notably for productivity shocks, the Ramsey policy and the estimated Taylor rule deliver similar economic propagation. JEL Classification: E4, E5, F4Bayesian estimation, DSGE Models, optimal monetary policy

Winner of the Hédi Bouraoui Mediterranean Scholarship with Emphasis on the Maghreb, 2014

Jonathan Adjemian, "On Mohammed Dib: Second contextualization - poetics: signs, and imagination."Jonathan Adjemian's essay is an excerpt from his doctoral dissertation in progress in Social and Political Thought, York University, "The World's Opacity: Writing and History in Mohammed Dib." It was the 2014 winner of the Hédi Bouraoui Scholarship in Mediterranean Studies with Emphasis on the Maghreb.

Optimal monetary policy in an estimated DSGE for the euro area

The objective of this paper is to examine the main features of optimal monetary policy within a micro-founded macroeconometric framework. First, using Bayesian techniques, we estimate a medium scale closed economy DSGE for the euro area. Then, we study the properties of the Ramsey allocation through impulse response, variance decomposition and counterfactual analysis. In particular, we show that, controlling for the zero lower bound constraint, does not seem to limit the stabilization properties of optimal monetary policy. the Ramsey allocation reasonably well. Such optimal simple operational rules seem to react specifically to nominal wage inflation. Overall, the Ramsey policy together with its simple rule approximations seem to deliver consistent policy messages and may constitute some useful normative benchmarks within medium to large scale estimated DSGE framework. prove the economic micro-foundation and the econometric identification of the structural disturbances. We also present simple monetary policy rules which can “approximate” and implement However, this normative analysis based on estimated models reinforces the need to improve the economic micro-foundation and the econometric identification of the structural disburbances. JEL Classification: E4, E5Bayesian estimation, DSGE Models, monetary policy, Welfare calculations

How do Labor Market Institutions affect the Link between Growth and Unemployment: the case of the European countries

This paper analyzes how the frictions in the labor market simultaneously affect the economic growth and the long run unemployment. To this goal, we develop a schumpeterian model of endogenous growth: agents have the choice between employment and R and D activities. Unemployment is caused by the wage-setting behavior of unions. We show that: (i) Increases in the labor costs or in the power of trade unions lead to higher unemployment and lower economic growth. (ii) Efficient bargain allows to increase employment, at the price of a lower growth rate. These theoretical predictions are consistent with the insights from our empirical analysis based on 183 European Regions, between 1980-2003endogenous growth, unemployment, labor market institutions

The Inconvenience Cost: A Portfolio Approach to Non-Convergence Between Cash and Futures Prices

Cash and futures prices should reach equality, or converge, upon contract maturity. Traders can impose convergence during the delivery month through arbitrage behavior: either making or taking delivery on futures contracts. If convergence is not predictable, a futures market fails to provide a clear storage signal to potential inventory holders and reduces the attractiveness of hedging. Recent convergence problems in domestic commodity markets demonstrate the existence of persistent, significant arbitrage opportunities over the second half of the last decade. Yet, terminal elevator operators—perhaps the only participants with the capacity to do so—have not arbitraged away these riskless returns by making enough deliveries. This model demonstrates conditions under which a profit maximizing warehouseman foregoes available arbitrage. We find that making delivery involves substantial opportunity costs, which stem from the loss of managerial control over warehouse space. We refer to the inconvenience of losing such control as the inconvenience cost.Convergence, Arbitrage, Portfolio Theory, Storage, Agricultural Finance, Financial Economics, Risk and Uncertainty, G11, D21, Q14,

De l’expérience migratoire au Grand Récit de la migration

La postérité de la fanfare arménienne des quarante orphelins, accueillie par le prince héritier d’Éthiopie en 1924, nourrit une réflexion sur la manière dont l’historien de l’immigration ou le chercheur en sciences sociales doivent interpréter le lissage qu’opère la narration des acteurs sur la fragmentation de leur propre expérience migratoire. Le mythe de l’adoption des enfants musiciens s’est imposé dans la mémoire collective, à Addis Abeba, parce qu’il corroborait l’image des immigrants arméniens comme fidèles serviteurs des rois d’Éthiopie. L’euphémisation de l’événement participe ainsi à l’élaboration d’un Grand Récit unifié de l’immigration, qui offre aux immigrants et à leurs descendants la possibilité de surmonter l’hétérogénéité de leurs parcours et de leurs origines, de construire du consensus et de la continuité dans la dispersion.The Migration, from Experience to the Grand NarrativeIn 1924, the Crown Prince of Ethiopia welcomed forty Armenians orphans who were to form his personal fanfare and the Ethiopian government’s brass band. In the collective memory, the recruitment of these young musicians appeared as a kind of adoption, as if the close relationship of Armenian immigrants with the Ethiopian imperial court from the end of the 19th century was recognized and rewarded. Emphasized in the memory, the so-called adoption of the forty orphans contributed to the making of a unified Grand Narrative of Armenian immigration to Ethiopia, even though the small community was all but homogeneous in the middle of the 20th century, where its growth was made of successive migration waves and distinct geographical and cultural origins. This article analyses the way historians and social scientists could interpret the trend of migrants’narratives to erase the heterogeneity of their experiences

Canada's moral mandate for Armenia : sparking humanitarian and political interest, 1880-1923

This thesis explores the efforts undertaken by Canadians in support of the Armenian people from 1880 to the 1920s. Canadian Protestant missionaries stationed in the Ottoman Empire wrote home about atrocities they witnessed, and some of their reports and their pleas for assistance were published in the Canadian media. Money for Armenian relief was collected and sent abroad on several occasions. Imperialist-minded Canadian intellectuals and politicians influenced by their Christian heritage and their work for social reform were especially involved in the Armenian relief efforts. In early 1920, some Canadian Protestant groups lobbied the government to oppose the return of the Armenian provinces to Turkish rule. The Canadian government echoed these pleas, and subsequently demanded that the British government share with it timely and appropriate information about the negotiations of the Turkish peace treaty. Several prominent British and Canadian individuals suggested that Canada take on a daunting League of Nations mandate for Armenia should the United States fail to do so. However, the vigorous reaction was short lived, as interested parties became increasingly more preoccupied with domestic concerns. The failure to prepare the Canadian public for more sustained protest activities on behalf of the Armenians and initiate a discussion of a more meaningful Canadian role offers a practical perspective to consider the reaction to more recent humanitarian crises. It illustrates how preparing the public to support profound sacrifices in personal and public funds is vital if international humanitarian interventions are to prove truly effective. Most of the primary manuscript material cited in this thesis was consulted at the Library and Archives of Canada in Ottawa, Ontari