Money, output and the payment system: Optimal monetary policy in a model with hidden effort

We propose a new explanation for the observed difference in the cost of intraday and overnight liquidity. We argue that the low cost of intraday liquidity is an application of the Friedman rule in an environment where a deviation of the Friedman rule is optimal with respect to overnight liquidity. In our environment the cost of overnight liquidity affects output while the cost of intraday liquidity only redistributes resources between money holders and non-money holders. We show that it is optimal to set a high overnight rate to reduce the incentives to overuse money. In contrast, intraday liquidity should have a low cost to provide risk-sharing.Friedman rule; monetary policy; random-relocation models

Sub-Optimality of the Friedman Rule in Townsends Turnpike and Limited Communication Models of money: Do finite lives and initial dates matter?

We construct an economy populated with infinitely-lived agents and show that the Friedman rule is suboptimal. We do that by showing that our economy and an overlapping generations model in which the Friedman rule is known to be suboptimal are homomorphic. We also discuss the importance of whether or not the economy has an initial date for this result.Friedman rule; monetary policy; overlapping generations; turnpike.

Is turbulent mixing a self convolution process ?

Experimental results for the evolution of the probability distribution function (PDF) of a scalar mixed by a turbulence flow in a channel are presented. The sequence of PDF from an initial skewed distribution to a sharp Gaussian is found to be non universal. The route toward homogeneization depends on the ratio between the cross sections of the dye injector and the channel. In link with this observation, advantages, shortcomings and applicability of models for the PDF evolution based on a self-convolution mechanisms are discussed.Comment: 4 page

Who is Afraid of the Friedman Rule?

In this paper, we explore the connection between optimal monetary policy and heterogeneity among agents. We study a standard monetary economy with two types of agents in which the stationary distribution of money holdings is non-degenerate. Sans type-specific fiscal policy, we show that the zero-nominal-interest rate policy (the Friedman rule) does not maximize type-specific welfare; it may not maximize aggregate social welfare either. Indeed, one or, more surprisingly, both types may benefit if the central bank deviates from the Friedman rule. Our results suggest a positive explanation for why central banks around the world do not implement the Friedman rule.Friedman rule, monetary policy, money-in-the-utility-function

Periodic Modulation of Extraordinary Optical Transmission through Subwavelength Hole Arrays using Surrounding Bragg Mirrors

The enhanced light transmission through an array of subwavelength holes surrounded by Bragg mirrors is studied, showing that the mirrors act to confine the surface plasmons associated with the Extraordinary Optical Transmission effect, forming a surface resonant cavity. The overall effect is increased light transmission intensity by more than a factor of three beyond the already enhanced transmission, independent of whether the Bragg mirrors are on the input or the output side of the incident light. The geometry of the Bragg mirror structures controls the enhancement, and can even reduce the transmission in half. By varying these geometric parameters, we were able to periodically modulate the transmission of light for specific wavelengths, consistent with the propagation and interference of surface plasmon waves in a resonant cavity. FDTD simulations and a wave propagation model verify this effect.Comment: 9 pages, 5 figure

Origins of chemical diversity of back-arc basin basalts: a segment-scale study of the Eastern Lau Spreading Center

We report major, trace, and volatile element data on basaltic glasses from the northernmost segment of the Eastern Lau Spreading Center (ELSC1) in the Lau back-arc basin to further test and constrain models of back-arc volcanism. The zero-age samples come from 47 precisely collected stations from an 85 km length spreading center. The chemical data covary similarly to other back-arc systems but with tighter correlations and well-developed spatial systematics. We confirm a correlation between volatile content and apparent extent of melting of the mantle source but also show that the data cannot be reproduced by the model of isobaric addition of water that has been broadly applied to back-arc basins. The new data also confirm that there is no relationship between mantle temperature and the wet melting productivity. Two distinct magmatic provinces can be identified along the ELSC1 axis, a southern province influenced by a “wet component” with strong affinities to arc volcanism and a northern province influenced by a “damp component” intermediate between enriched mid-ocean ridge basalts (E-MORB) and arc basalts. High–field strength elements and rare earth elements are all mobilized to some extent by the wet component, and the detailed composition of this component is determined. It differs in significant ways from the Mariana component reported by E. Stolper and S. Newman (1994), particularly by having lower abundances of most elements relative to H_(2)O. The differences can be explained if the slab temperature is higher for the Mariana and the source from which the fluid is derived is more enriched. The ELSC1 damp component is best explained by mixing between the wet component and an E-MORB-like component. We propose that mixing between water-rich fluids and low-degree silicate melts occurs at depth in the subduction zone to generate the chemical diversity of the ELSC1 subduction components. These modified sources then rise independently to the surface and melt, and these melts mix with melts of the background mantle from the ridge melting regime to generate the linear data arrays characteristic of back-arc basalts. The major and trace element framework for ELSC1, combined with different slab temperatures and compositions for difference convergent margins, may be able to be applied to other back-arc basins around the globe

Amorphous silica modeled with truncated and screened Coulomb interactions: A molecular dynamics simulation study

We show that finite-range alternatives to the standard long-range BKS pair potential for silica might be used in molecular dynamics simulations. We study two such models that can be efficiently simulated since no Ewald summation is required. We first consider the Wolf method, where the Coulomb interactions are truncated at a cutoff distance r_c such that the requirement of charge neutrality holds. Various static and dynamic quantities are computed and compared to results from simulations using Ewald summations. We find very good agreement for r_c ~ 10 Angstroms. For lower values of r_c, the long--range structure is affected which is accompanied by a slight acceleration of dynamic properties. In a second approach, the Coulomb interaction is replaced by an effective Yukawa interaction with two new parameters determined by a force fitting procedure. The same trend as for the Wolf method is seen. However, slightly larger cutoffs have to be used in order to obtain the same accuracy with respect to static and dynamic quantities as for the Wolf method.Comment: 10 pages; 11 fig

Optimality of the Friedman rule in overlapping generations model with spatial separation

Recent papers suggest that when intermediation is analyzed seriously, the Friedman rule does not maximize social welfare in overlapping generations model in which money is valued because of spatial separation and limited communication. These papers emphasize a trade-off between productive efficiency and risk sharing. We show financial intermediation or a trade-off between productive efficiency and risk sharing are neither necessary nor sufficient for that result. We give conditions under which the Friedman rule maximizes social welfare and show any feasible allocation such that money grows faster than the Friedman rule is Pareto dominated by a feasible allocation with the Friedman rule. The key to the results is the ability to make intergenerational transfers