Optimal Monetary Policy in an Interdependent World

In the literature on international monetary policy, the paradigm is that gains from coordination are fairly small. Monetary policy is conducted to stabilize macroeconomic fluctuations and gains from policy coordination arise from preventing national monetary authorities from strategically manipulating the terms of trade by means of these stabilization policy instruments. However, as it has been emphasized by \cite{lucas:2003a}, welfare gains from stabilizing fluctuations are generically small since they are of second order. In this paper, I develop a dynamic stochastic two-country model with sticky wages and a cash-in-advance restriction which is in the spirit of the New Open Economy Macroeconomics framework. In this environment, monetary authorities can manipulate the terms of trade by conducting a general short-run monetary policy using both the nominal interest rate and the money supply. The money supply affects the terms of trade by altering the nominal exchange rate ex post and it is used in the traditional way so as to stabilize macroeconomic fluctuations. The nominal interest rate affects the terms of trade by changing expected inflation ex ante. Self-oriented national policymakers use the nominal interest rates to raise the terms of trade ex ante. This leads to an inefficient inflation tax whose welfare effects are of first order. Consequently, gains from monetary policy coordination are of first order.International Policy Coordination, General Short-Run Monetary Policy, New Open Economy Macroeconomics

Ab initio spin-flip conductance of hydrogenated graphene nanoribbons: Spin-orbit interaction and scattering with local impurity spins

We calculate the spin-dependent zero-bias conductance $G_{\sigma\sigma'}$ in armchair graphene nanoribbons with hydrogen adsorbates employing a DFT-based ab initio transport formalism including spin-orbit interaction. We find that the spin-flip conductance $G_{\sigma\bar{\sigma}}$ can reach the same order of magnitude as the spin-conserving one, $G_{\sigma\sigma}$, due to exchange-mediated spin scattering. In contrast, the genuine spin-orbit interaction appears to play a secondary role, only

Ab initio quantum transport through armchair graphene nanoribbons: Streamlines in the current density

We calculate the local current density in pristine armchair graphene nanoribbons (AGNRs) with varying width, $N_\mathrm{C}$, employing a density-functional-theory-based ab initio transport formalism. We observe very pronounced current patterns (streamlines) with threefold periodicity in $N_\mathrm{C}$. They arise as a consequence of quantum confinement in the transverse flow direction. Neighboring streamlines are separated by stripes of almost vanishing flow. As a consequence, the response of the current to functionalizing adsorbates is very sensitive to their placement: adsorbates located within the current filaments lead to strong backscattering, while adsorbates placed in other regions have almost no impact at all.Comment: 7 pages, 11 figure

Inflation, Investment Composition and Total Factor Productivity

This paper employs a dynamic stochastic general equilibrium model with a financial market friction to rationalize the empirically observed negative relationship between inflation and total factor productivity (TFP). Specifically, an empirical analysis of US macroeconomic time series establishes that there is a negative causal effect of inflation on aggregate productivity. Rather than taking the productivity process as exogenous, the model is therefore set up to feature an endogenous component of TFP. This is achieved by allowing physical investment to be channelled into two distinct technologies: a safe, but return-dominated technology and a superior technology which is subject to idiosyncratic liquidity risk. An agency problem prevents complete insurance against liquidity risk, and the scope for insurance is endogenously determined via the relevant liquidity premium. Since the liquidity premium is positively related to the rate of inflation, the model demonstrates how nominal fluctuations have an influence not only on the overall amount, but also on the qualitative composition of aggregate investment and hence on TFP. The quantitative relevance of the underlying transmission mechanism which links nominal fluctuations to TFP via corporate liquidity holdings and the composition of aggregate investment is corroborated by means of the quantitative analysis of the calibrated model economy as well as a detailed analysis of industry-level and firm-level panel data. Notably, the empirical findings are consistent with both the properties of the agency problem postulated in the theoretical model and its implications for corporate liquidity holdings and physical investment portfolios.

Inflation, Liquidity Risk and Long-run TFP - Growth

This paper demonstrates a negative relation between inflation and long-run productivity growth. Inflation generates long-run real effects due to a link from the short-run nominal and financial frictions to a firm's qualitative investment portfolio. We develop an endogenous growth model whose key ingredients are (i) a nominal short-run portfolio choice for households, (ii) an agency problem which gives rise to financial market incompleteness, (iii) a firm-level technology choice between a return-dominated but secure and a more productive but risky project. In this framework, inflation increases the costs of corporate insurance against productive but risky projects and hence a firm's choice of technology. It follows that each level of inflation is associated with a different long-run balanced growth path for the economy as long as financial markets are incomplete. Finally, we apply U.S. industry and firm level data to examine the relevance of our specific microeconomic mechanism. We find that (i) firms insure systematically against risky R&D investments by means of corporate liquidity holdings, (ii) periods of higher inflation restrain firm-level R&D investments by reducing corporate liquidity holdings.

A homeotic gene expression map in the central nervous system of larval Drosophila melanogaster: a quest for the holy engrailed

Due to the character of the original source materials and the nature of batch digitization, quality control issues may be present in this document. Please report any quality issues you encounter to [email protected], referencing the URI of the item.Includes bibliographical references (leaves 36-37).The expression of homeotic genes during early animal development determines the identity of specific populations of cells and thus the regions of the developing body. Furthermore, their expression is regulated so that it occurs at specific developmental time points. Previous studies demonstrated that the expression of homeotic genes could be used as molecular markers for identifying individual sets of neuroblasts within the embryonic central nervous system of Drosophila melanogaster. In this study cellular maps of the expression of the homeotic gene engrailed within the thoracic ventral ganglion of Drosophila larvae were created. Additionally, a staining technique used to label both engrailed expressing cells and dividing neuroblasts within the thoracic region was optimized. This double staining technique will allow for the identification of individual populations of dividing neuroblasts with the engrailed expressing cells acting as landmarks within the brain

Essays on International Policy Coordination in Interdependent Economies

Throughout the last couple of decades the world has experienced a strong and steady increase in the economic interdependence among national economies. Accordingly, national monetary and fiscal policies are also subject to a steady increase in mutual interdependence. As a consequence, the international coordination of monetary and fiscal policies among economies has become a central postulation within both the public as well as the academic debate. The first essay of this thesis addresses a central proposition in the academic literature on international monetary policy coordination: the gains from international policy coordination are fairly small. The role of monetary policy is restricted to the stabilization of macroeconomic fluctuations and gains from policy coordination arise from preventing national monetary authorities from strategically manipulating the terms of trade by means of these stabilization policy instruments. The first essay challenges this proposition. It is argued that welfare gains from stabilizing fluctuations are generically quite limited since they are of second order. It is demonstrated that national monetary authorities follow a more general objective to monetary policy than the mere stabilization of macroeconomic fluctuations and that there indeed exist strategic motives to nationally deviate from a globally optimal monetary policy. Importantly, as these incentives are independent of macroeconomic fluctuations, the welfare consequences of the competitive policy conduct are of first order. Hence, the essential result is that - as opposed to the common view in the literature - gains from monetary policy coordination can be substantial as they are of first order. The second essay of this thesis explores the interaction of monetary and fiscal policy conduct when countries coordinate on only one part of national macroeconomic policies. In particular, it is shown that international policy coordination requires to include both monetary as well as fiscal policy. The coordination of only a part of national macroeconomic policies through an international agreement leads to a strategically motivated shift in the conduct of the remaining independent policy instruments in order to still unilaterally manipulate the terms of trade. The potential gains from international policy coordination are therefore squandered if policymakers only cooperate, for instance, on monetary policy alone but leave the fiscal stances independent. Moreover, by letting the fiscal policy instruments be chosen non-cooperatively, monetary policy coordination might even create welfare losses as compared to no macroeconomic policy coordination at all. The third essay deals with a particular form of monetary and fiscal policy coordination: a monetary union and a federal fiscal transfer arrangement. It is asked whether a built-in fiscal transfer system that collects taxes from some member countries and pays transfers to other member countries can alleviate the economic consequences of adverse shocks. The properties of federal fiscal transfer schemes are explored with regard to their capability to stabilize national consumption, production and employment. The key result of this analysis is that federal fiscal arrangements can provide perfect insurance against adverse shocks

Preface

This is the preface for Volume 56: Proceedings of the Combined workshop on Self-organizing, Adaptive, and Context-Sensitive Distributed Systems  andSelf-organized Communication in Disaster Scenarios (SACS/SoCoDiS 2013

Inflation, liquidity and innovation

This paper presents a simple model with financial frictions where inflation increases the cost faced by firms holding liquid assets to hedge risky production against expenditure shocks. Inflation tilts firms' technology choice away from innovative activities and toward safer but return-dominated ones, and therefore reduces long-run growth. The theory makes specific predictions about how the severity of this adverse effect depends on industry characteristics. These predictions are tested with novel harmonized firm-level data from 139 developing countries, overcoming small sample problems constraining previous work. The analysis finds that inflation affects the composition but not the overall quantity of investment. A one percentage point increase in inflation reduces the establishment-level probability of innovation by 4.3 percent but does not affect total investment. Moreover, innovating firms display a stronger dependence on liquid assets, which, in turn, are negatively related to inflation. Generalized difference-in-differences estimations corroborate the sector-specific predictions of the theoretical model