A Characteristic Scale on the Cosmic Microwave Sky

The current suite of results from Cosmic Microwave Background anisotropy experiments is fulfilling the promise of providing extraordinary levels of discrimination between cosmological models. We calculate a binned anisotropy power spectrum, which we tabulate, along with error bars and bin-to-bin correlations, so that it can be easily used for constraining models. The resulting power spectrum is flat at large angles, with a gradual rise to a prominent peak at around 0.5 degrees and a decrease thereafter. This is precisely the shape predicted by inflationary-inspired adiabatic models. Within that class of cosmologies, this characteristic scale imprinted on the CMB sky can be used to infer that the geometry of the Universe is very close to flat. The next wave of CMB results should add fuel to the debate about whether or not the Universe once inflated, as well as beginning in earnest the task of measuring cosmological parameters.Comment: 6 pages, 1 figure. A less technical article based on the same work has appeared in Science Perspectives under the title "How Flat is the Universe?" (Science, Mar 24, 2000, 2171-2172

Interbank Market Liquidity and Central Bank Intervention

We develop a simple model of the interbank market where banks trade a long term, safe asset. We show that when there is a lack of opportunities for banks to hedge aggregate and idiosyncratic liquidity shocks, the interbank market is characterized by excessive price volatility. In such a situation, a central bank can implement the constrained efficient allocation by using open market operations to fix the short term interest rate. The model shows also that market freezes, where banks stop trading with each other, can be a feature of the constrained efficient allocation if there is sufficient uncertainty about aggregate liquidity demand compared to idiosyncratic liquidity demand.interbank market, liquidity, central bank intervention, open market operations

Money, Financial Stability and Efficiency

Most analyses of banking crises assume that banks use real contracts. However, in practice contracts are nominal and this is what is assumed here. We consider a standard banking model with aggregate return risk, aggregate liquidity risk and idiosyncratic liquidity shocks. We show that, with non-contingent nominal deposit contracts, the first-best efficient allocation can be achieved in a decentralized banking system. What is required is that the central bank accommodates the demands of the private sector for fiat money. Variations in the price level allow full sharing of aggregate risks. An interbank market allows the sharing of idiosyncratic liquidity risk. In contrast, idiosyncratic (bank-specific) return risks cannot be shared using monetary policy alone; real transfers are needed.

Estimating Returns to Schooling When Schooling is Misreported

We propose a general method of moments technique to identify measurement error in self-reported and transcript-reported schooling using differences in wages, test scores, and other covariates to discern the relative verity of each measure. We also explore the implications of such reporting errors for both OLS and IV estimates of the returns to schooling. The results cast a new light on two common findings in the extensive literature on the returns to schooling: sheepskin effects' and the recent IV estimates, relying on natural experiments' to identify the payoff to schooling. First, respondents tend to self-report degree attainment much more accurately than they report educational attainment not corresponding with degree attainment. For instance, we estimate that more than 90 percent of those with associate's or bachelor's degrees accurately report degree attainment, while only slightly over half of those with 1 or 2 years of college credits accurately report their educational attainment. As a result, OLS estimates tend to understate returns per year of schooling and overstate degree effects. Second, because the measurement error in educational attainment is non-classical, IV estimates also tend to be biased, although the magnitude of the bias depends upon the nature of the measurement error in the region of educational attainment affected by the instrument.

The informal diplomacy of the Australian American leadership dialogue

After 20 years, the Australian American Leadership Dialogue has acquired enviable access to political leaders in the foreign policy establishments of both countries. The influence of the Dialogue is at earlier consensus-building stages of decision making. Its importance has been in ‘relationship maintenance’ of the bilateral alliance which it has pursued through processes of informal diplomacy. The Dialogue now faces its own challenges of organisational renewal and relevance in the wider ‘interpretative community’ of Australian think tanks, university policy institutes and opinion-formers

Still flat after all these years

The Universe could be spatially flat, positively curved or negatively curved. Each option has been popular at various times, partly affected by an understanding that models tend to evolve away from flatness. The curvature of the Universe is amenable to measurement, through tests such as the determination of the angles of sufficiently large triangles. The angle subtended by the characteristic scale on the Cosmic Microwave sky provides a direct test, which has now been realised through a combination of exquisite results from a number of CMB experiments. After a long and detailed investigation, with many false clues, it seems that the mystery of the curvature of the Universe is now solved. It's an open and shut case: the Universe is flat.Comment: 7 pages, 2 figures, submitted to the Gravity Research Foundation Essay Competition for 200

A New Bispectral Test for Nonlinear Serial Dependence

Bispectrum, nonlinearity, time series analysis

Money, Financial Stability and Efficiency

Most analyses of banking crises assume that banks use real contracts. However, in practice contracts are nominal and this is what is assumed here. We consider a standard banking model with aggregate return risk, aggregate liquidity risk and idiosyncratic liquidity shocks. We show that, with non-contingent nominal deposit contracts, the first-best efficient allocation can be achieved in a decentralized banking system. What is required is that the central bank accommodates the demands of the private sector for fiat money. Variations in the price level allow full sharing of aggregate risks. An interbank market allows the sharing of idiosyncratic liquidity risk. In contrast, idiosyncratic (bank-specific) return risks cannot be shared using monetary policy alone; real transfers are needed