ESTIMATING CORE INFLATION IN NORWAY

Central banks are continually considering the problem of how to identify which price changes should be considered permanent and which entirely temporary. Indeed, due to the delayed effect that monetary policy uses to put its choices into action, a wrong valuation of the type of inflation can prove extremely costly for the economy and does not produce the desired results. Since price indexes (as CPI) deliver a distorted picture of underlying inflation, it is necessary to devise a more appropriate target for monetary policy. The need to find a good measure for the latter variable becomes more marked when the central bank adopts price stability as the overriding aim of monetary policy. In this paper we apply the Quah and Vahey (1995) methodology to Norway, oil producing OECD country, and derive measures of core inflation by imposing restrictions from economic theory within the context of a multivariate econometric analysis. To estimate long-term movements of inflation, we present two models that enable the distinction between core and non-core inflation and also between domestic and imported inflation. We conclude that in all the models presented core inflation is a �prime mover� of inflation.Core inflation, Monetary Policy, Norway

A longitudinal gauge degree of freedom and the Pais Uhlenbeck field

We show that a longitudinal gauge degree of freedom for a vector field is equivalent to a Pais-Uhlenbeck scalar field. With the help of this equivalence, we can determine natural interactions of this field with scalars and fermions. Since the theory has a global U(1) symmetry, we have the usual conserved current of the charged fields, thanks to which the dynamics of the scalar field is not modified by the interactions. We use this fact to consistently quantize the theory even in the presence of interactions. We argue that such a degree of freedom can only be excited by gravitational effects like the inflationary era of the early universe and may play the role of dark energy in the form of an effective cosmological constant whose value is linked to the inflation scale.Comment: 20 pages, no figures. Minor changes and comments added to match the accepted version in JHE

Growth and social capital: an evolutionary model

In this paper, we analyze the role of cooperation between firms through a model of growth and social capital. In a growth model à la Solow we incorporate the set of resources that a relational network has at its disposals, as a distinct production factor, and thus examine its dissemination through evolutionary type processes in firm interactions. Dynamic analysis of the model demonstrates that cooperation is able to increase the productivity of factors, fostering a higher rate of growth in the long term. The most significant result is that scarcity of social capital can produce a general collapse of the economic system in areas in which long term growth is usually sustained by the learning by doing and spillover of knowledge phenomena. This conclusion leads to reconsider the role of local development economic policies that should concentrate on activities that promote repeated interaction between firms proven to be cooperative or that encourage the formation of technological consortia.Economic growth; Social capital; Networks; Evolutionary games

The evolutionary dynamics of tolerance

This paper incorporates the phenomenon of tolerance, as the ability to accept diversity, into an economic analysis showing how different aptitudes to trust and cooperation can affect economic outcomes. In the economic system we propose, tolerance is associated with the different weight that agents attribute to their own nature and to the institutional parameters in their utility function. We thus construct a model of overlapping generations, showing that the incentives that influence descendants’ predisposition to tolerance depend on both institutional factors, where behaviour is imposed by rules, and on social (or cultural) factors, found in popular customs and established traditions. Our study highlights the absolute impossibility of affirming tolerance through formal rules. In fact, intolerance is a persistent attitude and its control is only possible through constant and continuous interventions on the educational processes of new generations (intolerance trap).Tolerance; Evolutionary dynamics; Imperfect empathy