Globalization and monetary policy: an introduction

Greater openness has become an almost universal feature of modern, developed economies. This paper develops a workhorse international model, and explores the role of standard monetary policy rules applied to an open economy. For this purpose, I build a two-country DSGE model with monopolistic competition, sticky prices, and pricing-to-market. I also derive the steady state and a log-linear approximation of the equilibrium conditions. The paper provides a lengthy explanation of the steps required to derive this benchmark model, and a discussion of: (a) how to account for certain well-known anomalies in the international literature, and (b) how to start "thinking" about monetary policy in this environment.Monetary policy ; Equilibrium (Economics) ; Globalization ; Macroeconomics ; International finance ; Mathematical models

Dimensional cross-over of hard parallel cylinders confined on cylindrical surfaces

We derive, from the dimensional cross-over criterion, a fundamental-measure density functional for parallel hard curved rectangles moving on a cylindrical surface. We derive it from the density functional of circular arcs of length $\sigma$ with centers of mass located on an external circumference of radius $R_0$. The latter functional in turns is obtained from the corresponding 2D functional for a fluid of hard discs of radius $R$ on a flat surface with centers of mass confined onto a circumference of radius $R_0$. Thus the curved length of closest approach between two centers of mass of hard discs on this circumference is $\sigma=2R_0\sin^{-1}(R/R_0)$, the length of the circular arcs. From the density functional of circular arcs, and by applying a dimensional expansion procedure to the spatial dimension orthogonal to the plane of the circumference, we finally obtain the density functional of curved rectangles of edge-lengths $\sigma$ and $L$. The DF for curved rectangles can also be obtained by fixing the centers of mass of parallel hard cylinders of radius $R$ and length $L$ on a cylindrical surface of radius $R_0$. The phase behavior of a fluid of aligned curved rectangles is obtained by calculating the free-energy branches of smectic, columnar and crystalline phases for different values of the ratio $R_0/R$ in the range $1<R_0/R\leq 4$; the smectic phase turns out to be the most stable except for $R_0/R=4$ where the crystalline phase becomes reentrant in a small range of packing fractions. When $R_0/R<1$ the transition is absent, since the density functional of curved rectangles reduces to the 1D Percus functional.Comment: 27 pages, 6 figure

Phytogenic mounds (nebkhas): effect of Tricomaria usillo on sand entrapment in central-west of Argentina

Nebkhas, developed by the trapping of sand within the body of a plant, were studied in the Médanos Grandes system, arid central Argentina, during the springs of 2009-2010.In this system, formed by megadunes and overlapping dunes, nebkhas dynamism was analyzed considering their location on windward and lee slopes. In each nebkha, sand movement was studied through erosion pins and considering E, W, N and S orientation. Predominant winds blow from the south-southeast; however, no significant statistical differences were found in the erosion-deposition process, between windward and lee slopes. Nebkhas on the lee show slow growth and those on windward slope moderate deterioration. Tricomaria usillo is the dominant plant species in the nebkha formation process. There are positive relationship between nebkha volume and shrub canopy volume.Fil: Pastrán, Graciela. Universidad Nacional de San Juan. Facultad de Cs.exactas Físicas y Naturales. Departamento de Biología. Area Ecología; ArgentinaFil: Martinez Carretero, Eduardo Enrique. Universidad Nacional de San Juan. Facultad de Cs.exactas Físicas y Naturales. Departamento de Biología. Area Ecología; Argentina. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - Mendoza. Instituto Argentino de Investigaciones de las Zonas Áridas. Provincia de Mendoza. Instituto Argentino de Investigaciones de las Zonas Áridas. Universidad Nacional de Cuyo. Instituto Argentino de Investigaciones de las Zonas Áridas; Argentin

The real exchange rate in sticky price models: does investment matter?

This paper re-examines the ability of sticky-price models to generate volatile and persistent real exchange rates. We use a DSGE framework with pricing-to-market akin to those in Chari, et al. (2002) and Steinsson (2008) to illustrate the link between real exchange rate dynamics and what the model assumes about physical capital. We show that adding capital accumulation to the model facilitates consumption smoothing and significantly impedes the model's ability to generate volatile real exchange rates. Our analysis, therefore, caveats the results in Steinsson (2008) who shows how real shocks in a sticky-price model without capital can replicate the observed real exchange rate dynamics. Finally, we find that the CKM (2002) persistence anomaly remains robust to several alternative capital specifications including set-ups with variable capital utilization and investment adjustment costs (see, e.g., Christiano, et al., 2005). In summary, the PPP puzzle is still very much alive and well.Globalization ; Foreign exchange ; International finance ; Forecasting ; Mathematical models

The euro and the dollar in the crisis and beyond

The euro has survived its first decade, overcoming questions about its viability and political and economic raison d'être. “The Euro and the Dollar in the Crisis and Beyond,” a conference sponsored by Bruegel, the Peterson Institute for International Economics and the Federal Reserve Bank of Dallas, marked the milestone on March 17, 2010, with discussions of Europe's monetary integration, the euro's global role relative to the dollar and the currency's prospects in the aftermath of the 2008–09 global recession.>Euro-dollar market ; Global financial crisis ; Economic stabilization ; Monetary policy

Technical note on "The real exchange rate in sticky price models: does investment matter?"

This technical note is developed as a mathematical companion to the paper "The Real Exchange Rate in Sticky Price Models: Does Investment Matter?" (Institute working paper no. 17). It contains three basic calculations. First, we derive the equilibrium conditions of the model. Second, we compute the zero-inflation, zero-trade balance (deterministic) steady state. Third, we describe the log-linearization of the equilibrium conditions around the deterministic steady state. Simultaneously, we explain the system of equations that constitutes the basis for the paper to broaden its scope. Commentary is provided whenever necessary to complement the model description and to place into context the assumptions embedded in our DSGE framework.Globalization ; Foreign exchange ; International finance ; Forecasting ; Mathematical models

Investment and trade patterns in a sticky-price, open-economy model

This paper develops a tractable two-country DSGE model with sticky prices à la Calvo (1983) and local-currency pricing. We analyze the capital investment decision in the presence of adjustment costs of two types, the capital adjustment cost (CAC) specification and the investment adjustment cost (IAC) specification. We compare the investment and trade patterns with adjustment costs against those of a model without adjustment costs and with (quasi-) flexible prices. We show that having adjustment costs results into more volatile consumption and net exports, and less volatile investment. We document three important facts on U.S. trade: a) the S-shaped cross-correlation function between real GDP and the real net exports share, b) the J-curve between terms of trade and net exports, and c) the weak and S-shaped cross-correlation between real GDP and terms of trade. We find that adding adjustment costs tends to reduce the model's ability to match these stylized facts. Nominal rigidities cannot account for these features either.Macroeconomics - Econometric models ; Capital investments ; International trade ; Foreign exchange