Does global liquidity matter for monetary policy in the Euro area?

Global excess liquidity roaming the world’s financial markets (or its sudden absence) is sometimes believed to limit sovereign monetary policy even in large economies such as the euro area. However, there is still discussion about what constitutes global excess liquidity and how exactly it shapes the policy environment. Our approach adjusts liquidity for longerterm interest rate and output effects and focuses on U.S. and Japanese liquidity as relevant proxies for global developments from a euro area perspective. We find that both excess liquidity in Japan and, in particular, the U.S. tend to lead developments in euro area liquidity. U.S. excess liquidity also enters consistently positive as a determinant of euro area inflation and is shown to be Granger-causal for euro area inflation in an out-of-sample forecasting exercise. In part, this result seems to be related to a weakening of the euro area interest rate channel during times of excessive U.S. liquidity. In contrast, the influence of Japanese and euro area excess liquidity on euro area inflation is more limited. --Global excess liquidity,euro area,inflation,monetary policy,interest rate channel,forecasting accuracy.

From Bioeconomic Farm Models to Multi-Agent Systems: Challenges for Parameterization and Validation

Bioeconomic farm models have been very instrumental in capturing the technical aspects of human-nature interactions and in highlighting the economic consequences of resource use changes. They may elucidate the tradeoffs that farm households face in crop choice and farming practices, assess the profitability of various land-use options and capture the internal costs of adjusting to changes in environmental and market conditions. But they face also limitations when it comes to analyzing situations, in which heterogeneity of households and landscapes is large and increasing. Multi-agent models building on the bioeconomic farm approach hold the promise of capturing more fully the heterogeneity and interactions of farm households. The fulfillment of this promise, however, depends on the empirical parameterization and validation of multi-agent models. Although multi-agent models have been widely applied in experimental and hypothetical settings, only few studies have tried to build empirical multi-agent models and the literature on methods of parameterization and validation is therefore limited. This paper suggests novel methods for the empirical parameterization and validation of multiagent models that may comply with the high standards established in bioeconomic farm modeling. The biophysical measurements (here: soil properties) are extrapolated over the landscape using multiple regressions and a Digital Elevation Model. The socioeconomic surveys are used to estimate probability functions for key characteristics of human actors, which are then assigned to the model agents with Monte-Carlo techniques. This approach generates a landscape and agent populations that are robust and statistically consistent with empirical observations.Farm Management,

Complementarity between Irrigation and Fertilizer Technologies - A Justification for Increased Irrigation Investment in the Less-Favored Areas of SSA

There is a downward spiral of declining soil fertility, low crop yield and increasing poverty in the less-favored areas of SSA. The semi-arid tropics of northern Ghana share this episode. The soils in this part of the country are naturally less endowed, have little organic matter content and farmers use very little inorganic fertilizer. Existing studies indicate that the erratic nature of rainfall in the area increases risk and constrains farmers' investment on inorganic fertilizer. However, agronomic studies suggest that promotion of sustainable use of inorganic fertilizer is indispensable at least in the short to medium term to break the downward spiral. Therefore, promoting sustainable use of inorganic fertilizer use remains to be a policy challenge. This paper argues that in spite of observed disinvestment on irrigation both by governments and donors there is significant complementarity between irrigation and inorganic fertilizer use in the less-favored areas of northern Ghana. This implies that increased irrigation investment in the semi-arid tropics of SSA can be justified given its importance in reducing rainfall risk and boosting inorganic fertilizer use.Resource /Energy Economics and Policy, Q15, Q16, Q18,

Simulating Farm Household Poverty: From Passive Victims to Adaptive Agents

Existing microeconomic models for simulating poverty heavily rely on static projection from statistical inference. When used for simulation these models tend to conceive farm households as passive victims and thereby underestimate their resilience and adaptive capacity. Farming systems research has much to contribute to the research on poverty by bringing in a detailed understanding of farm household decision-making, which directly relates to their adaptive capacity. This paper presents a novel methodology to simulate poverty dynamics using a farming systems approach. The methodology is based on mathematical programming of farm households but adds three innovations: First, poverty levels are quantified by including a three-step budgeting system, including a savings model, a Working-Leser model, and an Almost Ideal Demand System. Second, the model is extended with a disinvestment model to simulate farm household coping strategies to food insecurity. Third, multi-agent systems are used to tailor each mathematical program to a real-world household and so to capture the heterogeneity of opportunities and constraints at the farm level as well as to quantify the distributional effects of change. An empirical application to Uganda illustrates the methodology. The method opens exciting new prospects for applying farming systems research and multi-agent systems to poverty analysis and the ex ante assessment of alternative policy interventions.Food Security and Poverty,

Funnel control for a moving water tank

We study tracking control for a moving water tank system, which is modelled using the Saint-Venant equations. The output is given by the position of the tank and the control input is the force acting on it. For a given reference signal, the objective is to achieve that the tracking error evolves within a prespecified performance funnel. Exploiting recent results in funnel control we show that it suffices to show that the operator associated with the internal dynamics of the system is causal, locally Lipschitz continuous and maps bounded functions to bounded functions. To show these properties we consider the linearized Saint-Venant equations in an abstract framework and show that it corresponds to a regular well-posed linear system, where the inverse Laplace transform of the transfer function defines a measure with bounded total variation.Comment: 11 page

The ECB's monetary analysis revisited

Monetary aggregates continue to play an important role in the ECB's policy strategy. This paper revisits the case for money, surveying the ongoing theoretical and empirical debate. The key conclusion is that an exclusive focus on non-monetary factors alone may leave the ECB with an incomplete picture of the economy. However, treating monetary factors as a separate matter is a second-best solution. Instead, a general-equilibrium inspired analytical framework that merges the economic and monetary pillars of the ECB's policy strategy appears the most promising way forward. The role played by monetary aggregates in such unified framework may be rather limited. However, an integrated framework would facilitate the presentation of policy decisions by providing a clearer narrative of the relative role of money in the interaction with other economic and financial sector variables, including asset prices, and their impact on consumer prices. --ECB,monetary analysis,monetary pillar,New Keynesian model,DSGE model,P* model,Twopillar Phillips curve,VAR model,generalized dynamic factor model