Liquidity, term spreads and monetary policy

We propose a model that delivers endogenous variations in term spreads driven primarily by banks' portfolio decision and their appetite to bear the risk of maturity transformation. We first show that fluctuations of the future profitability of banks' portfolios affect their ability to cover for any liquidity shortage and hence influence the premium they require to carry maturity risk. During a boom, profitability is increasing and thus spreads are low, while during a recession profitability is decreasing and spreads are high, in accordance with the cyclical properties of term spreads in the data. Second, we use the model to look at monetary policy and show that allowing banks to sell long-term assets to the central bank after a liquidity shock leads to a sharp decrease in long-term rates and term spreads. Such interventions have significant impact on long-term investment, decreasing the amplitude of output responses after a liquidity shock. The short-term rate does not need to be decreased as much and inflation turns out to be much higher than if no QE interventions were implemented. Finally, we provide macro and micro-econometric evidence for the U.S. confirming the importance of expected financial business profitability in the determination of term spread fluctuations

Liquidity effects and cost channels in monetary transmission

We study liquidity effects and cost channels within a model of nominal rigidities and imperfect competition that gives explicit role for money-credit markets and investment decisions. We find that cost channels matter for monetary transmission, amplifying the impact of supply shocks and dampening the effects of demand shocks. Liquidity effects only obtain when the policy is specified by an interest rate policy rule and money-credit conditions are determined endogenously. We also find that determinacy issues are particularly relevant when models include the cost channel and explicit money-credit markets

Lending relationships and monetary policy

Financial intermediation and bank spreads are important elements in the analysis of business cycle transmission and monetary policy. We present a simple framework that introduces lending relationships, a relevant feature of financial intermediation that has been so far neglected in the monetary economics literature, into a dynamic stochastic general equilibrium model with staggered prices and cost channels. Our main findings are: (i) banking spreads move countercyclically generating amplified output responses, (ii) spread movements are important for monetary policy making even when a standard Taylor rule is employed (iii) modifying the policy rule to include a banking spread adjustment improves stabilization of shocks and increases welfare when compared to rules that only respond to output gap and inflation, and finally (iv) the presence of strong lending relationships in the banking sector can lead to indeterminacy of equilibrium forcing the central bank to react to spread movements

Investment cost channel and monetary transmission

We show that a standard DSGE model with investment cost channels has important model stability and policy implications. Our analysis suggests that in economies characterized by supply side well as demand side channels of monetary transmission, policymakers may have to resort to a much more aggressive stand against inflation to obtain locally unique equilibrium. In such an environment targeting output gap may cause model instability. We also show that it is difficult to distinguish between the New Keynesian model and labor cost channel only case, while with investment cost channel differences are more significant. This result is important as it suggests that if one does not take into account the investment cost channel, one is underestimating the importance of supply side effects

A study of localization metrics: Evaluation of position errors in wireless sensor networks

Cataloged from PDF version of article.For wireless sensor network applications that require location information for sensor nodes, locations of nodes can be estimated by a number of localization algorithms, which inevitably may introduce various types of errors in their estimations. How an application is affected from errors and a location error metric’s response to errors may depend on the error characteristics. Therefore it is important to use the right error metric to evaluate the error performance of alternative localization techniques that is possible to use for an application. To date, unfortunately, only simplistic error metrics that depend on the Euclidean distance between an actual node position and its estimate in isolation to the rest of the network has been considered for evaluation of localization algorithms. In this paper, we first clarify the problem with this traditional approach and then propose some alternative and new metrics that consider an overall network topology and its estimate in computing a metric value. We compared the existing and new metrics via simulation experiments done using some typical application and error scenarios, and observed that some new metrics are more sensitive to some type of errors and therefore can distinguish better among alternative localization algorithms for applications that are more sensitive to those types of errors. We also go through a case study with some localization algorithms from literature to give an idea about the practical use of our approach. Finally, we provide a step-by-step guideline for selecting the best metric to use for a given sensor network application.(C)2011 Elsevier B.V. All rights reserved

Automatic mapping of linear woody vegetation features in agricultural landscapes using very high resolution imagery

Cataloged from PDF version of article.Automatic mapping and monitoring of agricultural landscapes using remotely sensed imagery has been an important research problem. This paper describes our work on developing automatic methods for the detection of target landscape features in very high spatial resolution images. The target objects of interest consist of linear strips of woody vegetation that include hedgerows and riparian vegetation that are important elements of the landscape ecology and biodiversity. The proposed framework exploits the spectral, textural, and shape properties of objects using hierarchical feature extraction and decision-making steps. First, a multifeature and multiscale strategy is used to be able to cover different characteristics of these objects in a wide range of landscapes. Discriminant functions trained on combinations of spectral and textural features are used to select the pixels that may belong to candidate objects. Then, a shape analysis step employs morphological top-hat transforms to locate the woody vegetation areas that fall within the width limits of an acceptable object, and a skeletonization and iterative least-squares fitting procedure quantifies the linearity of the objects using the uniformity of the estimated radii along the skeleton points. Extensive experiments using QuickBird imagery from three European Union member states show that the proposed algorithms provide good localization of the target objects in a wide range of landscapes with very different characteristics

Inequality and Procedural Justice in Social Dilemmas

This study investigates the influence of resource inequality and the fairness of the allocation procedure of unequal resources on cooperative behavior in social dilemmas. We propose a simple formal behavioral model that incorporates conflicting selfish and social motivations. This model allows us to predict how inequality influences cooperative behavior. Allocation of resources is manipulated by three treatments that vary in terms of procedural justice: allocating resources randomly, based on merit, and based on ascription. As predicted, procedural justice influences cooperation significantly. Moreover, gender is found to be an important factor interacting with the association between procedural justice and cooperative behavior.

Medium-run implications of changing demographic structures for the macro-economy

While there may be an important, but transitory, cyclical component in the poor performance of the past decade, we will emphasise the secular forces: the impact of demographic structure and innovation. We draw on the empirical and theoretical work reported in Aksoy, Basso, Smith and Grasl (2015), ABSG, about the impact of changes in demographic structure on macroeconomic outcomes. This suggests that changes in age profile not only have significant implications for savings, investment, real interest rates and growth but also for innovation. The size of the effects seems plausible. For instance, if in 2015 the UK had the 1970 age structure, it would have added 0.68 percentage points to the long-run annual growth rate. The model suggests that the population ageing predicted for the next decades will tend to reduce output growth and real interest rates across OECD countries

Paleoseismology of the North Anatolian Fault at Güzelköy (Ganos segment, Turkey): Size and recurrence time of earthquake ruptures west of the Sea of Marmara

International audienceThe Ganos fault is the westernmost segment of the North Anatolian Fault that experienced the Mw = 7.4 earthquake of 9 August 1912. The earthquake revealed 45-km-long of surface ruptures inland, trending N70 E, and 5.5 m of maximum right lateral offset near Güzelköy. The long-term deformation of the fault is clearly expressed by several pull-apart basins and sag ponds, pressure and shutter ridges and offset streams. In parallel with detailed geomorphologic investigations, we measured co-seismic and cumulative displacements along the fault, and selected the Güzelköy site for paleoseismology. A microtopographic survey at the site yields 10.5 AE 0.5 m and 35.4 AE 1.5 m cumulative lateral offsets of stream channels and geomorphologic features. Seven paleoseismic parallel and cross-fault trenches document successive faulting events and provide the timing of past earthquakes on the Ganos fault segment. Radiocarbon dating of successive colluvial wedges in trench T1, and the fresh scarplet above (probably 1912 surface rupture) indicate the occurrence of three faulting events since the 14th century. Parallel trenches (3, 5, 6 and 7) expose paleo-channels and show a cumulative right-lateral offset of 16.5 AE 1.5 m next to the fault, and 21.3 AE 1.5 m total channel deflection. Radiocarbon dating of past channel units and fault scarp-related colluvial deposits imply an average 17 +/À 5 mm/year slip rate and 323 AE 142 years recurrence interval of large earthquakes during the last 1000 years on the Ganos fault. The succession of past faulting events and inferred slip rate west of the Marmara Sea provide more constraint on the long-term faulting behavior in the seismic gap of the North Anatolian Fault and may contribute to a better seismic hazard assessment in the Istanbul region