Nominal rigidities and the dynamic effects of a shock to monetary policy

We present a model embodying moderate amounts of nominal rigidities which accounts for the observed inertia in inflation and persistence in output. The key features of our model are those that prevent a sharp rise in marginal costs after an expansionary shock to monetary policy. Of these features, the most important are staggered wage contracts of average duration three quarters, and variable capital utilization.Monetary policy

The Impact of Cloud-To-Ground Lightning Type on the Differences in Return Stroke Peak Current Over Land and Ocean

Natural cloud-to-ground (CG) lightning behaves differently over land and ocean. These differences likely reflect local variations in the speed at which storms develop over ocean, and are possibly contributed to by differences in the local aerosol composition. Earlier studies have reported statistically larger peak currents for negative CG first strokes over ocean than over land. This work focuses on differences in this relationship for first strokes, for subsequent strokes in existing channels to ground, and for subsequent strokes creating new ground contacts. This distinction will shed light on the mechanism responsible for the observed land:ocean differences, and can either support or refute the hypothesis that this difference is associated with the propagation of downward negative leaders in free space, driven by the vertical profile of electric field within and below the cloud. Results show that when compensated for detection threshold increases with increasing distance from land-based sensors, the distribution of estimated peak currents for subsequent strokes in existing (pre-ionized) channels to ground was indistinguishable from distributions for lightning that occurred inland, near shore, offshore, and in the distant ocean (similar to 200 km offshore), with median values ranging between 14.4 and 15.1 kA. Conversely, the population of first strokes over distant ocean had much higher peak currents than those that occurred inland (median values of 23.1 kA vs. 17.3 kA, respectively), when corrected for detection threshold. These findings are consistent with the field-profile hypothesis noted above since peak currents for return strokes due to downward leaders that establish new channels (first strokes) would be impacted the most by the vertical profile of electric field near the cloud base, whereas the peak current for strokes in previously-established channels should be far less dependent on the field profile.Open access journalThis item from the UA Faculty Publications collection is made available by the University of Arizona with support from the University of Arizona Libraries. If you have questions, please contact us at [email protected]

Gradual Translocation of Spatial Correlates of Neuronal Firing in the Hippocampus toward Prospective Reward Locations

SummaryIn a continuous T-maze alternation task, CA1 complex-spike neurons in the hippocampus differentially fire as the rat traverses overlapping segments of the maze (i.e., the stem) repeatedly via alternate routes. The temporal dynamics of this phenomenon were further investigated in the current study. Rats learned the alternation task from the first day of acquisition and the differential firing pattern in the stem was observed accordingly. More importantly, we report a phenomenon in which spatial correlates of CA1 neuronal ensembles gradually changed from their original firing locations, shifting toward prospective goal locations in the continuous T-maze alternation task. The relative locations of simultaneously recorded firing fields, however, were preserved within the ensemble spatial representation during this shifting. The within-session shifts in preferred firing locations in the absence of any changes in the environment suggest that certain cognitive factors can significantly alter the location-bound coding scheme of hippocampal neurons

Some Empirical Evidence on the Effects of Monetary Policy Shocks on Exchange Rates

This paper presents new empirical evidence on the effects of monetary policy shocks on U.S. exchange rates, both nominal and real. Three measures of monetary policy shocks are considered: orthogonalized shocks to the Federal Funds rate, the ratio of Non Borrowed to Total Reserves and the Romer and Romer (1989) index. Using data from the flexible exchange rate era, we find that expansionary shocks to U.S. monetary policy lead to sharp. persistent depreciations in U.S. nominal and real exchange rates as well as to sharp. persistent increases in the spread between various foreign and U.S. interest rates. The temporal pattern of the depreciation in U.S. nominal exchange rates following a positive monetary policy shock is inconsistent with simple overshooting models of the type considered by Dornbusch (1976). We also find that U.S. monetary policy was less volatile under fixed exchange rates than under floating exchange rates. Finally, we find less evidence that monetary policy shocks had a significant impact on U.S. real exchange rates under the Bretton Woods agreement.

Modeling Money

We develop and implement a limited information diagnostic strategy for assessing the plausibility of monetary business cycle models. Our strategy focuses on a model's ability to reproduce empirical estimates of an actual economy's response to monetary policy shocks. A key input to this diagnostic is a univariate time series representation of the response of money to a shock in monetary policy. We find that a monetary policy shock has only a small contemporaneous effect on the monetary base and M1. Its primary effect is to signal future movements in the money supply. We implement our diagnostic strategy on a limited participation model of money which stresses the importance of credit market frictions in the monetary transmission mechanism.

Sticky Price and Limited Participation Models of Money: A Comparison

This paper provides new evidence that models of the monetary transmission mechanism should be consistent with at least the following facts. In response to a contractionary monetary policy shock, the aggregate price level responds very little, aggregate output falls, interest rates initially rise, real wages decline, though by a modest amount, and profits fall. The paper argues that neither sticky price nor limited participation models can convincingly account for these facts. The key failing of the sticky price model is that it implies profits rise after a contractionary monetary policy shock. This finding is robust to a variety of perturbations of the benchmark sticky price model that we consider. In contrast, the limited participation model can account for all of the facts mentioned above. But it can do so only if one is willing to assume a high labor supply elasticity (2) and a high average markup (40%). The shortcomings of both models reflect the absence of other frictions, such as wage contracts, which dampen movements in the marginal cost of production after a monetary policy shock.

Sticky price and limited participation models of money: a comparison

We provide new evidence that models of the monetary transmission mechanism should be consistent with at least the following facts. After a contractionary monetary policy shock, the aggregate price level responds very little, aggregate output falls, interest rates initially rise, real wages decline by a modest amount, and profits fall. We compare the ability of sticky price and limited participation models with frictionless labor markets to account for these facts. The key failing of the sticky price model lies in its counterfactual implications for profits. The limited participation model can account for all the above facts, but only if one is willing to assume a high labor supply elasticity (2 percent) and a high markup (40 percent). The shortcomings of both models reflect the absence of labor market frictions, such as wage contracts or factor hoarding, which dampen movements in the marginal cost of production after a monetary policy shock.Money theory

A Self-Reference False Memory Effect in the DRM Paradigm: Evidence from Eastern and Western Samples

It is well established that processing information in relation to oneself (i.e., selfreferencing) leads to better memory for that information than processing that same information in relation to others (i.e., other-referencing). However, it is unknown whether self-referencing also leads to more false memories than other-referencing. In the current two experiments with European and East Asian samples, we presented participants the Deese-Roediger/McDermott (DRM) lists together with their own name or other people’s name (i.e., “Trump” in Experiment 1 and “Li Ming” in Experiment 2). We found consistent results across the two experiments; that is, in the self-reference condition, participants had higher true and false memory rates compared to those in the other-reference condition. Moreover, we found that selfreferencing did not exhibit superior mnemonic advantage in terms of net accuracy compared to other-referencing and neutral conditions. These findings are discussed in terms of theoretical frameworks such as spreading activation theories and the fuzzytrace theory. We propose that our results reflect the adaptive nature of memory in the sense that cognitive processes that increase mnemonic efficiency may also increase susceptibility to associative false memories