Reserve Requirements, Currency Substitution, and Seigniorage in the Transition to European Monetary Union

This article considers a transition toward European monetary union that combines increased substitution of currencies and greater monetary, financial, and fiscal policy coordination. It explores how such a transition would affect national inflation and interest rates and required reserve ratios when governments depend in part on seigniorage funding for public expenditures. We find that greater coordination of policies would lead to lower inflation and interest rates but higher reserve-requirement ratios. Because higher reserve-requirement ratios could place European banks at a competititve disadvantage, we conclude that the interaction between reserve requirements and seigniorage concerns makes it less likely that the gradualist approach of the Maastricht treaty is a sustainable means of transition to European union

(WP 2007-01) Openness, Income-Tax Progressivity, and Inflation

This paper considers a model of an open economy in which the degree of income-tax progressivity influences the interaction among openness, central bank independence, and the inflation rate. Our model suggests that an increase in the progressivity of the tax system induces a smaller response in real output to a change in the price level. This implies that increased income-tax progressivity reduces the equilibrium inflation rate and that the effect of increased income-tax progressivity on inflation is smaller when the central bank places a higher weight on inflation or when there is greater openness. Examination of cross-country inflation data provides empirical support for these key predictions

Currency Substitution, Seigniorage, and Currency Crises in Interdependent Economies

This paper applies a two-country framework that allows for currency substitution in an environment in which policymakers optimally vary interest rates in light of utility-based objectives, one country pegs the value of its currency to the other nation’s currency, and government revenue is generated via explicit taxes and seigniorage. The analysis illustrates the roles that currency substitution, currency preferences, and efficiency of tax systems play in contributing to the likelihood of a “run” on one nation’s currency. We explore how these factors interact to influence the probability of a currency crisis in the country that fixes its exchange rate

(WP 2009-02) Exchange-Rate Pass Through, Openness, and the Sacrifice Ratio

Considerable recent work has reached mixed conclusions about whether and how globalization affects the inflation‐output trade‐off and suggests that the ultimate effect of openness on the output‐inflation relationship is influenced by a variety of factors. In this paper, we consider the impact of exchange‐rate pass through and how pass through conditions the effect of openness on the sacrifice ratio. We develop a simple theoretical model showing how both the extent of pass through and openness can interact to influence the output‐inflation relationship. Next we empirically explore the nature of these two variables and their interaction. Results indicate that greater pass through increases the sacrifice ratio, that there is significant interaction among pass through and openness, and—once the extent of pass through is taken into account alongside other factors that affect the sacrifice ratio, such as central bank independence—openness exerts an empirically ambiguous effect on the sacrifice ratio

Trade Openness, Capital Mobility, and the Sacrifice Ratio

This paper develops and evaluates empirically the implications of a theoretical model of an open economy in which variations in both trade openness and capital mobility can influence the sacrifice ratio. Key predictions forthcoming from the model are that both forms of globalization can independently affect the sacrifice ratio, once the influences of the level of central bank independence and the degree of wage stickiness in nations’ economies are taken into account. Examination of cross-country data encompassing 58 disinflations for 16 countries yields evidence consistent with these essential predictions of the theoretical framework

A Multiple Migration and Stacking Algorithm Designed for Land Mine Detection

This paper describes a modification to a standard migration algorithm for land mine detection with a ground-penetrating radar (GPR) system. High directivity from the antenna requires a significantly large aperture in relation to the operating wavelength, but at the frequencies of operation of GPR, this would result in a large and impractical antenna. For operator convenience, most GPR antennas are small and exhibit low directivity and a wide beamwidth. This causes the GPR image to bear little resemblance to the actual target scattering centers. Migration algorithms attempt to reduce this effect by focusing the scattered energy from the source reflector and consequentially improve the target detection rate. However, problems occur due to the varying operational conditions, which result in the migration algorithm requiring vastly different calibration parameters. In order to combat this effect, this migration scheme stacks multiple versions of the same migrated data with different velocity values, whereas some other migration schemes only use a single velocity value