Money in monetary policy design: monetary cross-checking in the New-Keynesian model

In the New-Keynesian model, optimal interest rate policy under uncertainty is formulated without reference to monetary aggregates as long as certain standard assumptions on the distributions of unobservables are satisfied. The model has been criticized for failing to explain common trends in money growth and inflation, and that therefore money should be used as a cross-check in policy formulation (see Lucas (2007)). We show that the New-Keynesian model can explain such trends if one allows for the possibility of persistent central bank misperceptions. Such misperceptions motivate the search for policies that include additional robustness checks. In earlier work, we proposed an interest rate rule that is near-optimal in normal times but includes a cross-check with monetary information. In case of unusual monetary trends, interest rates are adjusted. In this paper, we show in detail how to derive the appropriate magnitude of the interest rate adjustment following a significant cross-check with monetary information, when the New-Keynesian model is the central bank’s preferred model. The cross-check is shown to be effective in offsetting persistent deviations of inflation due to central bank misperceptions. Keywords: Monetary Policy, New-Keynesian Model, Money, Quantity Theory, European Central Bank, Policy Under Uncertaint

A Theory of Natural Addiction

Economic theories of rational addiction aim to describe consumer behavior in the presence of habit-forming goods. We provide a biological foundation for this body of work by formally specifying conditions under which it is optimal to form a habit. We demonstrate the empirical validity of our thesis with an in-depth review and synthesis of the biomedical literature concerning the action of opiates in the mammalian brain and their eects on behavior. Our results lend credence to many of the unconventional behavioral assumptions employed by theories of rational addiction, including adjacent complementarity and the importance of cues, attention, and self-control in determining the behavior of addicts. We oer evidence for the special case of the opiates that "harmful" addiction is the manifestation of a mismatch between behavioral algorithms encoded in the human genome and the expanded menu of choices faced by consumers in the modern world

Single-molecule experiments in biological physics: methods and applications

I review single-molecule experiments (SME) in biological physics. Recent technological developments have provided the tools to design and build scientific instruments of high enough sensitivity and precision to manipulate and visualize individual molecules and measure microscopic forces. Using SME it is possible to: manipulate molecules one at a time and measure distributions describing molecular properties; characterize the kinetics of biomolecular reactions and; detect molecular intermediates. SME provide the additional information about thermodynamics and kinetics of biomolecular processes. This complements information obtained in traditional bulk assays. In SME it is also possible to measure small energies and detect large Brownian deviations in biomolecular reactions, thereby offering new methods and systems to scrutinize the basic foundations of statistical mechanics. This review is written at a very introductory level emphasizing the importance of SME to scientists interested in knowing the common playground of ideas and the interdisciplinary topics accessible by these techniques. The review discusses SME from an experimental perspective, first exposing the most common experimental methodologies and later presenting various molecular systems where such techniques have been applied. I briefly discuss experimental techniques such as atomic-force microscopy (AFM), laser optical tweezers (LOT), magnetic tweezers (MT), biomembrane force probe (BFP) and single-molecule fluorescence (SMF). I then present several applications of SME to the study of nucleic acids (DNA, RNA and DNA condensation), proteins (protein-protein interactions, protein folding and molecular motors). Finally, I discuss applications of SME to the study of the nonequilibrium thermodynamics of small systems and the experimental verification of fluctuation theorems. I conclude with a discussion of open questions and future perspectives.Comment: Latex, 60 pages, 12 figures, Topical Review for J. Phys. C (Cond. Matt

The Need to Decide If All Estrogens Are Intrinsically Similar

We used gene expression profiling to investigate whether the molecular effects induced by estrogens of different provenance are intrinsically similar. In this article we show that the physiologic estrogen 17β-estradiol, the phytoestrogen genistein, and the synthetic estrogen diethylstilbestrol alter the expression of the same 179 genes in the intact immature mouse uterus under conditions where each chemical has produced an equivalent gravimetric and histologic uterotrophic effect, using the standard 3-day assay protocol. Data are also presented indicating the limitations associated with comparison of gene expression profiles for different chemicals at times before the uterotrophic effects are fully realized. We conclude that the case has yet to be made for regarding synthetic estrogens as presenting a unique human hazard compared with phytoestrogens and physiologic estrogens

Central Bank Transparency under Model Uncertainty

This paper explores the effects of central bank transparency on the performance of optimal inflation targeting rules. I assume that both the central bank and the private sector face uncertainty about the correct model of the economy and have to learn. A transparent central bank can reduce one source of uncertainty for private agents by communicating its policy rule to the public. The paper shows that central bank transparency plays a crucial role in stabilizing the agents' learning process and expectations. By contrast, lack of transparency can lead to expectations-driven fluctuations that have destabilizing effects on the economy, even when the central bank has adopted optimal policie

Anchoring of Consumers’ Inflation Expectations: Evidence from Microdata

In this paper we explore the degree of anchoring of consumers' long-run inflation expectations. If expectations are firmly anchored, short- and long-run expectations should show no comovement in response to transitory shocks. Utilizing the University of Michigan Survey of Consumer's rotating panel microstructure, we can identify changes in inflation expectations of individual consumers over time. Our results indicate that long-run inflation expectations became more anchored over the last decades. While the degree of comovement fell significantly after 1996, the probability of a joint adjustment stayed constant. Regarding the possible determinants, we find that consumers' rising interest rate expectations and perceived news on the monetary policy stance have a detrimental effect on the anchoring of long-run expectations. This effect is no longer present in the post-1996 period. Notably, a positive effect of perceived news on government debt on the degree of comovement emerges after 1996, alluding to a potentially problematic link between fiscal and monetary policy

Relationship between gene co-expression and probe localization on microarray slides

BACKGROUND: Microarray technology allows simultaneous measurement of thousands of genes in a single experiment. This is a potentially useful tool for evaluating co-expression of genes and extraction of useful functional and chromosomal structural information about genes. RESULTS: In this work we studied the association between the co-expression of genes, their location on the chromosome and their location on the microarray slides by analyzing a number of eukaryotic expression datasets, derived from the S. cerevisiae, C. elegans, and D. melanogaster. We find that in several different yeast microarray experiments the distribution of the number of gene pairs with correlated expression profiles as a function of chromosomal spacing is peaked at short separations and has two superimposed periodicities. The longer periodicity has a spacing of 22 genes (~42 Kb), and the shorter periodicity is 2 genes (~4 Kb). CONCLUSION: The relative positioning of DNA probes on microarray slides and source plates introduces subtle but significant correlations between pairs of genes. Careful consideration of this spatial artifact is important for analysis of microarray expression data. It is particularly relevant to recent microarray analyses that suggest that co-expressed genes cluster along chromosomes or are spaced by multiples of a fixed number of genes along the chromosome