Monetary Policy in the presence of Informal Labour Markets

In this paper we analyse the effects of informal labour markets on the dynamics of inflation and on the transmission of aggregate demand and supply shocks. In doing so, we incorporate the informal sector in a modified New Keynesian model with labour market frictions as in the Diamond-Mortensen-Pissarides model. Our main results show that the informal economy generates a "buffer" effect that diminishes the pressure of demand shocks on aggregate wages and inflation. Finding that is consistent with the empirical literature on the e¤ects of informal labour markets in business cycle fluctuations. This result implies that in economies with large informal labour markets the interest rate channel of monetary policy is relatively weaker. Furthermore, the model produces cyclical flows from informal to formal employment consistent with the data.Monetary Policy, New Keynesian Model, Informal Economy, Labour Market Frictions.

Inflation Premium and Oil Price Volatility

In this paper we establish a link between the volatility of oil price shocks and a positive expected value of inflation in equilibrium (inflation premium). In doing so, we implement the perturbation method to solve up to second order a benchmark New Keynesian model with oil price shocks. In contrast with log linear approximations, the second order solution relaxes certainty equivalence providing a link between the volatility of shocks and inflation premium. First, we obtain analytical results for the determinants of the level of inflation premium. Thus, we find that the degree of convexity of both the marginal cost and the phillips curve is a key element in accounting for the existence of a positive inflation premium. We further show that the level of inflation premium might be potentially large even when a central bank implements an active monetary policy. Second, we evaluate numerically the second order solution of the model to explain the episode of high and persistent inflation observed in the US during the 70's. We find, in contrast with Clarida, Gali and Gertler (QJE, 2000), that even when there is no difference in the monetary policy rules between the pre-Volcker and post-Volcker periods, oil price shocks can generate high inflation levels during the 70's through a positive high level of inflation premium. As by product, our analysis shows that oil price shocks along with a distorted steady state can generate a time-varying endogenous trade-off between inflation and deviations of output from its efficient level. The previous trade-off, once uncertainty is taking into account, implies that a positive level of inflation premium is an optimal response to oil price shocksPhillips Curve, Second Order Solution, Oil Price Shocks, Endogenous Trade-off

Money, Infation and Interest Rate: Does the Link Change when the Policy Instrument Changes?

The goal of this paper is to explain a recent regularity observed in economies in which central banks have moved from using a money aggregate as the instrument for the conduction of monetary policy towards a short-term interest rate (for example Peru in 2002). In particular, in those economies we observe that, after the change in the policy instrument, there is a decrease in the macroeconomic volatility accompanied by a reduction in the average level of both inflation and interest rates vis-à-vis an increase in the average level of money aggregates (an increase in the money demand). In order to explain the previous stylized fact, a second order solution of a general equilibrium model for a small open economy is evaluated. By analyzing the second order solution we relax the assumption of certainty equivalence which permits consider the role of uncertainty (risk) in the equilibrium solution of the economy. The previous solution takes into account the reduction of macroeconomic uncertainty (risk) as a consequence of changing the instrument (from money aggregates to interest rate rules), helping to explain the stylized fact. Our findings show that the use of the interest rate as the instrument for the conduction of monetary policy induces a reduction of macroeconomic risks. In turn, the previous reduction has driven a decrease in the average level of interest rates and inflation which is consistent with the increase in the demand for money observed in Peru in the 2000s. Hence, the recent increase in the growth rate of money aggregates should not be linked, whatsoever, to higher inflation rates.Small Open Economy Model, Incomplete Markets, Second Order Solution

Inflation Premium and Oil Price Volatility

In this paper we establish a link between the volatility of oil price shocks and a positive expected value of inflation in equilibrium (inflation premium). In doing so, we implement the perturbation method to solve up to second order a benchmark New Keynesian model with oil price shocks. In contrast with log linear approximations, the second order solution relaxes certainty equivalence providing a link between the volatility of shocks and inflation premium. First, we obtain analytical results for the determinants of the level of inflation premium. Thus, we find that the degree of convexity of both the marginal cost and the phillips curve is a key element in accounting for the existence of a positive inflation premium. We further show that the level of inflation premium might be potentially large even when a central bank implements an active monetary policy. Second, we evaluate numerically the second order solution of the model to explain the episode of high and persistent inflation observed in the US during the 70's. We find, in contrast with Clarida, Gali and Gertler (QJE, 2000), that even when there is no difference in the monetary policy rules between the pre-Volcker and post-Volcker periods, oil price shocks can generate high inflation levels during the 70's through a positive high level of inflation premium. As by product, our analysis shows that oil price shocks along with a distorted steady state can generate a time- varying endogenous trade-off between inflation and deviations of output from its efficient level. The previous trade-off, once uncertainty is taking into account, implies that a positive level of inflation premium is an optimal response to oil price shocks.Phillips Curve, Second Order Solution, Oil Price shocks, Endogenous Trade off

Costo de la reforma del Sistema Nacional de Pensiones: Una adaptación del modelo de generaciones traslapadas

Clasificación JEL:

The Language Learning Activity of Individual Learners Using Online Tasks

This study combines an initial interest in private speech (Flavell 1966; Vygostky 1987; Ohta 2001; Ellis 2003), that is, self-addressed speech, used by individual language learners as they interact with online tasks, with a practice-based concern with the introduction of technology in a new self-access centre at the University of Guanajuato, Mexico. This had been done with little concern for the state of preparedness of learners and practitioners, as is often the case elsewhere (Benson 2001; Donaldson and Haggstrom 2006; Levy 2007; Winke and Goertler 2008). Literature on CALL, autonomy and task-based pedagogy revealed the need for an integrated, broad approach beyond technology itself with a special emphasis on the learning context, sociocultural issues and learner background. Often unexplored, the gap between what teachers plan and what learners do with tasks (Nunan 1989; Coughlan and Duff 1994; Roebuck 2000) began to focus the research efforts on investigating the nature of the language learning activity (Beetham 2007) of individual learners. Following suggestions from various authors from different traditions (e.g., Arnold and Ducate 2011; Lantolf and Poehner 2004; Chapelle 2001; Scanlon and Issroff 2005; Kaptelinin and Nardi 2006), activity theory (Vygotsky 1987; Leontiev 1978; Engeström 1987) was chosen as the most suitable theoretical framework and some of its key concepts, such as disturbances (Engeström and Sannino 2011; see also Montoro and Hampel 2011) and contradictions (Engeström 1987), were used to conduct a two-tiered analysis of empirical data gathered electronically during an online experiment followed by stimulated recall (SR) sessions. Findings include the widespread dependence of learners on private speech, memory and oral instruction and their underuse of learning tools (especially text-based ones such as dictionaries and notes), signalling links to literacy issues to be further explored and the prevalence of orality locally. Future research should explore these literacy issues and practical ways to improve the provision of language learning opportunities