Price Stability and The ECB's Monetary Policy Strategy

This paper focuses on the price stability objective within the framework of the single monetary policy strategy. It starts by reviewing what this objective, which is common to all central banks, means. Secondly, this paper will focus exclusively on the anchoring of short- to medium-term inflation expectations (Part 2). Several measures show that this anchoring is effective. Modern New Keynesian theory is an appropriate framework for analysing the impact that this anchoring of expectations has on the determination of the short- to medium-term inflation rate. From this point of view, observed inflation in the euro area seems to be in line with the theory and the ECB's action seems to be very effective. Thirdly, we will focus on the other aspect of monetary stability: the degree of price-level uncertainty and the anchoring of inflation expectations in the medium to long term. Even though this assessment is more difficult than it is in the short to medium term, since we only have a track record covering five years, various indicators from the theoretical analysis paint a fairly reassuring picture of the effectiveness of the device used by the ECB.Monetary policy ; European Central Bank ; Inflation

The Rotating Mass Matrix, the Strong CP Problem and Higgs Decay

We investigate a recent solution to the strong CP problem, obtaining a theta-angle of order unity, and show that a smooth trajectory of the massive eigenvector of a rank-one rotating mass matrix is consistent with the experimental data for both fermion masses and mixing angles (except for the masses of the lightest quarks). Using this trajectory we study Higgs decay and find suppression of $\Gamma(H\to c\bar{c})$ compared to the standard model predictions for a range of Higgs masses. We also give limits for flavour violating decays, including a relatively large branching ratio for the $\tau^-\mu^+$ mode.Comment: 15 pages, 6 figures; improvements to introduction and preliminarie

The art of central banking of the ECB and the separation principle.

This paper examines the art of central banking as practised by the European Central Bank (ECB) through the prism of Goodfriend's (2009) determination of the three policies that fall within the remit of a central bank: monetary policy, which consists in varying the size of the balance sheet, credit policy, which consists in modifying the credit structure, and interest rate policy, which consists in adjusting the interest rates of the marginal lending and deposit facilities. The theoretical literature emphasises the existence of a separation principle between the first policy, which seeks to ensure monetary stability and the other two policies, which are intended to ensure financial stability through the smooth functioning of the interbank money market. This paper shows in particular that a central bank not only has the capacity but indeed must strive to separate the conduct of its monetary policy, which must seek to ensure medium and long-term price stability, from that of its credit policy, which is driven by short-term imperatives and consists in supplying the banking system with liquidity in the event of temporary money demand shocks. During the first part of the crisis, the ECB acted in accordance with the separation principle. However, it became increasingly difficult to apply as interest rates approached the zero-lower-bound. In effect, the unconventional measures adopted by the ECB created interference between its monetary policy, its credit policy and its interest rate policy.Monetary Policy ; operational framework ; Eurosystem ; separation principle.

Charm-quark mass from weighted finite energy QCD sum rules

The running charm-quark mass in the $\bar{MS}$ scheme is determined from weighted finite energy QCD sum rules (FESR) involving the vector current correlator. Only the short distance expansion of this correlator is used, together with integration kernels (weights) involving positive powers of $s$, the squared energy. The optimal kernels are found to be a simple {\it pinched} kernel, and polynomials of the Legendre type. The former kernel reduces potential duality violations near the real axis in the complex s-plane, and the latter allows to extend the analysis to energy regions beyond the end point of the data. These kernels, together with the high energy expansion of the correlator, weigh the experimental and theoretical information differently from e.g. inverse moments FESR. Current, state of the art results for the vector correlator up to four-loop order in perturbative QCD are used in the FESR, together with the latest experimental data. The integration in the complex s-plane is performed using three different methods, fixed order perturbation theory (FOPT), contour improved perturbation theory (CIPT), and a fixed renormalization scale $\mu$ (FMUPT). The final result is $\bar{m}_c (3\, {GeV}) = 1008\,\pm\, 26\, {MeV}$, in a wide region of stability against changes in the integration radius $s_0$ in the complex s-plane.Comment: A short discussion on convergence issues has been added at the end of the pape

Quark masses in QCD: a progress report

Recent progress on QCD sum rule determinations of the light and heavy quark masses is reported. In the light quark sector a major breakthrough has been made recently in connection with the historical systematic uncertainties due to a lack of experimental information on the pseudoscalar resonance spectral functions. It is now possible to suppress this contribution to the 1% level by using suitable integration kernels in Finite Energy QCD sum rules. This allows to determine the up-, down-, and strange-quark masses with an unprecedented precision of some 8-10%. Further reduction of this uncertainty will be possible with improved accuracy in the strong coupling, now the main source of error. In the heavy quark sector, the availability of experimental data in the vector channel, and the use of suitable multipurpose integration kernels allows to increase the accuracy of the charm- and bottom-quarks masses to the 1% level.Comment: Invited review paper to be published in Modern Physics Letters

Is there a structural break in equilibrium velocity in the euro area?

We investigate the stability of M3 income velocity in the euro area. We apply a set of breakpoint procedures to examine this issue and conclude that at least one structural change occurred around 2000-2001. We also find evidence of another structural break around 1992-1993. These two breaks seem to affect both the level and the slope of the income velocity of M3. We then estimate a model of equilibrium velocity that factors in the opportunity cost of M3, along the lines suggested by Orphanides and Porter (2000). Here again, we find some evidence of instability in equilibrium velocity. Given the importance of the assumption of stable velocity trends for both the derivation of the reference value and the two-pillar strategy of the Eurosystem, these findings question the relevance of some excess liquidity indicators directly computed from the reference value and may call for some adjustments in the conduct of the ECB's monetary policy.M3 velocity ; Breakpoint tests; ECB.

Theoretical Study of the Phosphoryl Transfer Reaction from ATP to Dha Catalyzed by DhaK from Escherichia coli

Protein kinases, representing one of the largest protein families involved in almost all aspects of cell life, have become one of the most important targets for the development of new drugs to be used in, for instance, cancer treatments. In this article an exhaustive theoretical study of the phosphoryl transfer reaction from adenosine triphosphate (ATP) to dihydroxyacetone (Dha) catalyzed by DhaK from Escherichia coli (E. coli) is reported. Two different mechanisms, previously proposed for the phosphoryl transfer from ATP to the hydroxyl side chain of specific serine, threonine, or tyrosine residues, have been explored based on the generation of free energy surfaces (FES) computed with hybrid QM/MM potentials. The results suggest that the substrate-assisted phosphoryl and proton-transfer mechanism is kinetically more favorable than the mechanism where an aspartate would be activating the Dha. Although the details of the mechanisms appear to be dramatically dependent on the level of theory employed in the calculations (PM3/MM, B3LYP:PM3/MM, or B3LYP/MM), the transition states (TSs) for the phosphoryl transfer step appear to be described as a concerted step with different degrees of synchronicity in the breaking and forming bonds process in both explored mechanisms. Residues of the active site belonging to different subunits of the protein, such as Gly78B, Thr79A, Ser80A, Arg178B, and one Mg2+ cation, would be stabilizing the transferred phosphate in the TS. Asp109A would have a structural role by posing the Dha and other residues of the active site in the proper orientation. The information derived from our calculations not only reveals the role of the enzyme and the particular residues of its active site, but it can assist in the rational design of new more specific inhibitors