Targeting versus instrument rules for monetary policy

Svensson (2003) argues strongly that specific targeting rules-first-order optimality conditions for a specific objective function and model-are normatively superior to instrument rules for the conduct of monetary policy. That argument is based largely on four main objections to the latter, plus a claim concerning the relative interest-instrument variability entailed by the two approaches. The present paper considers the four objections in turn and advances arguments that contradict all of them. Then, in the paper's analytical sections, it is demonstrated that the variability claim is incorrect, for a neo-canonical model and also for a variant with one-period-ahead plans used by Svensson, providing that the same decisionmaking errors are relevant under the two alternative approaches. Arguments relating to general targeting rules and actual central bank practice are also included.Monetary policy ; Banks and banking, Central

Choice or Consequence? Explaining Differences in Female Participation in Mathematics, Science and Technology in the Netherlands and Sweden

Saharso, S. [Promotor]Svensson, J.S. [Copromotor]Vries, G.C. de [Copromotor

Learning, expectations formation and the pitfalls of optimal control monetary policy

This paper examines the robustness characteristics of optimal control policies derived under the assumption of rational expectations to alternative models of expectations. We assume that agents have imperfect knowledge about the precise structure of the economy and form expectations using a forecasting model that they continuously update based on incoming data. We find that the optimal control policy derived under the assumption of rational expectations can perform poorly when expectations deviate modestly from rational expectations. We then show that the optimal control policy can be made more robust by deemphasizing the stabilization of real economic activity and interest rates relative to inflation in the central bank loss function. That is, robustness to learning provides an incentive to employ a "conservative" central banker. We then examine two types of simple monetary policy rules from the literature that have been found to be robust to model misspecification in other contexts. We find that these policies are robust to empirically plausible parameterizations of the learning models and perform about as well or better than optimal control policies.Rational expectations (Economic theory) ; Econometric models

Learning, Expectations Formation, and the Pitfalls of Optimal Control Monetary Policy

This paper examines the robustness characteristics of optimal control policies derived under the assumption of rational expectations to alternative models of expectations. We assume that agents have imperfect knowledge about the precise structure of the economy and form expectations using a forecasting model that they continuously update based on incoming data. We find that the optimal control policy derived under the assumption of rational expectations can perform poorly when expectations deviate modestly from rational expectations. We then show that the optimal control policy can be made more robust by deemphasizing the stabilization of real economic activity and interest rates relative to inflation in the central bank loss function. That is, robustness to learning provides an incentive to employ a "conservative" central banker. We then examine two types of simple monetary policy rules from the literature that have been found to be robust to model misspecification in other contexts. We find that these policies are robust to empirically plausible parameterizations of the learning models and perform about as well or better than optimal control policies.Rational expectations, robust control, model uncertainty

Hardness of Vertex Deletion and Project Scheduling

Assuming the Unique Games Conjecture, we show strong inapproximability results for two natural vertex deletion problems on directed graphs: for any integer $k\geq 2$ and arbitrary small $\epsilon > 0$, the Feedback Vertex Set problem and the DAG Vertex Deletion problem are inapproximable within a factor $k-\epsilon$ even on graphs where the vertices can be almost partitioned into $k$ solutions. This gives a more structured and therefore stronger UGC-based hardness result for the Feedback Vertex Set problem that is also simpler (albeit using the "It Ain't Over Till It's Over" theorem) than the previous hardness result. In comparison to the classical Feedback Vertex Set problem, the DAG Vertex Deletion problem has received little attention and, although we think it is a natural and interesting problem, the main motivation for our inapproximability result stems from its relationship with the classical Discrete Time-Cost Tradeoff Problem. More specifically, our results imply that the deadline version is NP-hard to approximate within any constant assuming the Unique Games Conjecture. This explains the difficulty in obtaining good approximation algorithms for that problem and further motivates previous alternative approaches such as bicriteria approximations.Comment: 18 pages, 1 figur

The initial stages of cave formation: Beyond the one-dimensional paradigm

The solutional origin of limestone caves was recognized over a century ago, but the short penetration length of an undersaturated solution made it seem impossible for long conduits to develop. This is contradicted by field observations, where extended conduits, sometimes several kilometers long, are found in karst environments. However, a sharp drop in the dissolution rate of CaCO_3 near saturation provides a mechanism for much deeper penetration of reactant. The notion of a "kinetic trigger" - a sudden change in rate constant over a narrow concentration range - has become a widely accepted paradigm in speleogenesis modeling. However, it is based on one-dimensional models for the fluid and solute transport inside the fracture, assuming that the dissolution front is planar in the direction perpendicular to the flow. Here we show that this assumption is incorrect; a planar dissolution front in an entirely uniform fracture is unstable to infinitesimal perturbations and inevitably breaks up into highly localized regions of dissolution. This provides an alternative mechanism for cave formation, even in the absence of a kinetic trigger. Our results suggest that there is an inherent wavelength to the erosion pattern in dissolving fractures, which depends on the reaction rate and flow rate, but is independent of the initial roughness. In contrast to one-dimensional models, two-dimensional simulations indicate that there is only a weak dependence of the breakthrough time on kinetic order; localization of the flow tends to keep the undersaturation in the dissolution front above the threshold for non-linear kinetics.Comment: to be published in Earth and Planetary Science Letter

A self-consistent test of Comptonization models using a long BeppoSAX observation of NGC 5548

We test accurate models of Comptonization spectra over the high quality data of the BeppoSAX long look at NGC 5548. The data are well represented by a plane parallel corona with an inclination angle of 30$^{\circ}$, a soft photon temperature of 5 eV and a hot plasma temperature and optical depth of $kT_{\rm e}\simeq$ 360 keV and $\tau\simeq$ 0.1, respectively. If energy balance applies, such values suggest that a more ``photon-starved'' geometry (e.g. a hemispheric region) is necessary. The spectral softening detected during a flare, appears to be associated to a decrease of the heating-to-cooling ratio, indicating a geometric and/or energetic modification of the disk plus corona system. The hot plasma temperature derived with the models above is significantly higher than that obtained fitting the same data with a power law plus high energy cut off model for the continuum. This is due to the fact that in anisotropic geometries Comptonization spectra show "intrinsic" curvature which moves the fitted high energy cut-off to higher energies.Comment: 4 pages, 2 figures, to appear in the proceedings of the conference "X-ray Astronomy '99", Bologna, Italy, September 199

A Study of Dairy Heifer Rearing Practices from Birth to Weaning and Their Associated Costs on UK Dairy Farms

There are many inputs into the dairy replacement herd which impact not only on the cost of rearing heifers from birth to first calving, but also on their future longevity and production potential. This study determined the current cost of rearing dairy heifers in the UK through the calculation and analysis of individual costs on a subset of 102 UK dairy farms. Each farm was visited and an extensive heifer rearing questionnaire was completed. Current heifer rearing practices were recorded to provide insight into critical management decisions. A cost analysis workbook was developed to calculate the costs of inputs in the pre-weaning period for labour, calving, feed, housing, health treatments and vaccinations, waste storage, machinery and equipment, and utilities. The average age at weaning was 62 d. The mean cost of rearing from birth to weaning was £195.19 per heifer with a mean daily cost of £3.14 (excluding the opportunity cost of the calf). This ranged from £1.68 to £6.11 among farms, reflecting major differences in management strategies and efficiency. The highest contribution to total costs came from feed (colostrum, milk, starter and forage) at 48.5% with milk feeding making up the greatest proportion of this at 37.3%. The next major expenses were bedding and labour, contributing 12.3% and 11.2% respectively. Unsurprisingly, delaying age at weaning increased total cost by £3.53 per day. Total costs were on average 45% higher on organic farms than conventional due to higher feed costs and later weaning. Calving pattern also had a strong association with the total cost being lowest with spring calving, intermediate with autumn calving and highest in multi block and all year round calving herds.fals

Polomé, Edgar C. (ed.), Indo-European Religion after Dumézil.

Sin resume

Corruption and China’s Economic Reform in the Early 21st Century

Past economic reform of the state sector in China consisted mainly of privatization, of agriculture and of small and medium-size state enterprises, leaving large state enterprises in the control of the state. Current reform consists of making state-owned enterprises and banks more efficient and functioning like private enterprises, and gradual privatization of some large state enterprises. Bureaucrats managing state assets and the selling of assets take advantage of such power to benefit themselves, including embezzlement of public funds and taking bribes from citizens needing their help, as can be found in state enterprises, state-owned commercial banks and in government projects. Reducing the size of the government sector is a basic solution to the corruption problem in China while attention should be paid in the privatization process which can involve corruption.