Do Asymmetric Central Bank Preferences Help Explain Observed Inflation Outcomes?

When the central banker’s loss function is asymmetric, changes in the volatility of inflation and/or unemployment affect equilibrium inflation. This suggests that changing macroeconomic volatilities may be an important driving force behind trends in observed inflation. Previous evidence, which has offered support for this idea, suffers from a spurious regression problem. Once this problem is controlled for, the evidence suggests that the volatility of unemployment does not help explain inflation outcomes. There is some evidence of a relationship between inflation and its volatility, but overall the data does not support the view that changing economic volatility, as filtered through asymmetric central bank preferences, is an important driver of inflation trends.Inflation, Monetary Policy, Asymmetric Loss Function.

Virtual Worlds as Petri Dishes for the Social and Behavioral Sciences

The next tool for social science experimentation should allow for macro level, generalizable, scientific research. In the past devices such as rat mazes, Petri dishes and supercolliders have been developed when scientists needed new tools to do research. We believe that Virtual Worlds are the modern equivalent to supercolliders for social scientists, and feel they should be the next area to receive significant attention and funding. The advantages provided by virtual worlds research outweigh the costs. Virtual worlds allow for societal level research with no harm to humans, la rge numbers of experiments and participants, and make long term and panel studies possible. Virtual worlds do have some drawbacks, in that they are expensive and time consuming to build. These obstacles can be overcome, however, by adopting the models of revenue and maintenance practiced by the current game industry. The returns from virtual worlds being used as scientific tools could reach levels that would self fund future search for decades to come. However, at the beginning an investment of funding agencies seems to be necessary.Virtual Worlds, Macro Level Experiments, Research Infrastructure

Do Asymmetric Central Bank Preferences Help Explain Observed Inflation Outcomes?

Recent theoretical work shows that changes in the volatility of inflation and/or unemployment affect equilibrium inflation outcomes when the central banker's loss function is asymmetric. We show that previous evidence offered in support of the proposition that the volatility of unemployment helps explain inflation outcomes suffers from a spurious regression problem. Once this problem is controlled for, the evidence suggests that the volatility of unemployment does not help explain inflation outcomes. There is some evidence of a relationship between inflation and its volatility, but the data is not strongly supportive of the view that asymmetric central bank preferences are an important driver of inflation.inflation; monetary policy; asymmetric loss

Testing Commitment Models of Monetary Policy: Evidence from OECD Economies

Inflation rates in a number of OECD follow a common trend over the past four decades: inflation starts out low in the 1960s, rises for a time before peaking in the 1970s or early 1980s, and then falls back to initial levels. This similarity in the behavior of trend inflation suggests that any explanation of long run inflation trends ought to apply across OECD countries. Ireland (1999) shows that a simple time inconsistency model of monetary policy, modified to allow for a time-varying NAIRU, can explain long run trends in U.S. inflation. In this paper we show that this result cannot serve as an explanation of the common trend in OECD inflation, as it fits the data only in the U.S.. We investigate two important variants of the hypothesis: i) that time inconsistency was an important component of central bank behavior in earlier decades, but has become less significant in recent years, and ii) that time inconsistency problems drive U.S. inflation, which affects inflation rates in other countries as a result of central bankers' attempts to manage nominal exchange rate movements vis a vis the U.S. dollar. We find that the first hypothesis fits the data no better than the baseline model. We find some support for the international spillovers version of the model, but the behavior of non-U.S. central bankers with respect to domestic unemployment rates is not well described by the time inconsistency mechanism.monetary policy; inflation; time incosistency

Virtual Worlds as Petri Dishes for the Social and Behavioral Sciences

"The next tool for social science experimentation should allow for macro level, generalizable, scientific research. In the past devices such as rat mazes, Petri dishes and supercolliders have been developed when scientists needed new tools to do research. We believe that Virtual Worlds are the modern equivalent to supercolliders for social scientists, and feel they should be the next area to receive significant attention and funding. The advantages provided by virtual worlds research outweigh the costs. Virtual worlds allow for societal level research with no harm to humans, large numbers of experiments and participants, and make long term and panel studies possible. Virtual worlds do have some drawbacks, in that they are expensive and time consuming to build. These obstacles can be overcome, however, by adopting the models of revenue and maintenance practiced by the current game industry. The returns from virtual worlds being used as scientific tools could reach levels that would self fund future research for decades to come. However, at the beginning an investment of funding agencies seems to be necessary." (author's abstract

Reference Points and Effort Provision

A key open question for theories of reference-dependent preferences is what determines the reference point. One candidate is expectations: what people expect could affect how they feel about what actually occurs. In a real-effort experiment, we manipulate the rational expectations of subjects and check whether this manipulation influences their effort provision. We find that effort provision is significantly different between treatments in the way predicted by models of expectation-based reference-dependent preferences: if expectations are high, subjects work longer and earn more money than if expectations are low

Big data in the new media environment

Bentley et al. argue for the social scientific contextualization of “big data” by proposing a four-quadrant model. We suggest extensions of the east–west (i.e., socially motivated versus independently motivated) decision-making dimension in light of findings from social psychology and neuroscience. We outline a method that leverages linguistic tools to connect insights across fields that address the individuals underlying big-data media streams