Out of reach? Convergence to an inflation target in the Central Bank of Iceland's macroeconomic model

Inflation scenarios in forecasts of the Central Bank of Iceland (CBI) appear to converge to the inflation target (2.5%) in 8-9 quarters. We ask whether this is a coincidence or an inherent property of the CBI’s model, QMM. We formulate a sub-model, containing equations for inflation, inflation expectations, wages, exchange rate and the policy interest rate. We find that rapid convergence toward the inflation target is a property of the QMM when a Taylor-rule is included in the model. Underlying is an inflation expectations equation which assumes a high degree of credibility of the CBI. This equation, however, lacks empirical underpinnings. When we replace the QMM expectations equation with an estimated equation, a more realistic picture emerges where the Central Bank has to raise the policy rate considerably higher than in QMM scenarios and it takes much longer to reach the inflation target.Inflation targeting, inflation forecasts, inflation expectations, macroeconomic models, credibility

Why do Europeans Work Less than Americans? Public Consumption and Welfare Benefits as a Cause of the North-Atlantic Divide

We propose an explanation of why Europeans choose to work fewer hours than Americans and also suffer higher rates of unemployment. Labor market regulations, unemployment benefits, and high levels of public consumption in many European countries reduce, ceteris paribus, the gains from being employed, which makes employed workers ask for higher wages relative to productivity. The higher wages make firms offer fewer vacancies, as well as raising the opportunity cost of working by enabling employed workers to enjoy time-consuming consumption activities. We find empirical support for our thesis

Incipient Continent-Continent Collision between the Eratosthenes Seamount and Cyprus / Eastern Mediterranean

Earth processes related to incipient continent-continent collision have been studied via the example of Cyprus and the Eratosthenes Seamount in the eastern Mediterranean. Subduction of the African plate beneath the Cyprus-Anatolian plate continued until the seamount, and perhaps a predecessor, the Hecataeus Rise, approached the Cyprus arc trench. The following transition from subduction to collision triggered a series of synchronous deformations across the collision zone between Africa-Sinai-Arabia and Eurasia-Anatolia, including the entire eastern Mediterranean region. This fundamental Earth process has been studied during research cruise MSM14/3 with RV Maria S. Merian in spring 2010. 39 MCS-profiles of more than 2300 km entire length, more than 3000 km magnetic and sediment echosounder data, and about 4000 km of gravity data have been recorded. Four wide-angle reflection/refraction profiles across the seamount were measured with up to 34 OBS deployments along each profile. 10 ocean-bottommagnetotelluric stations were deployed along one of these profiles that connects the seamount with the Hecataeus Rise. One 650 km long amphibian refraction profile strikes across the seamount, Cyprus and southern Turkey. Of the 250 land stations, 200 were deployed in southern Turkey and 50 in Cyprus. A first analysis of the collected data led to the following hypothesis about the interrelation of observed processes: Continent-continent collision caused a compressional regime in the crustal lithosphere, which resulted in the flexure (of the Eratosthenes Seamount), uplift (of Cyprus and Turkey) and accordingly an increased tilt of the facing slopes. The collision reactivated Mesozoic fault lineaments in the Levantine Basin like the Baltim-Hecataeus-Line and created the Hecataeus Rise. Shortening in the non-consolidated Messinian to Holocene sediment succession between the seamount and Cyprus resulted in faulting, folding and compressional salt diapirism. The increase in pore pressure causes fluid migration and mud volcanism. Slope tilt and faulting triggered mass wasting. All of these processes are still shaping the seafloor morphology and interact with the bottom current circulation, which is reflected by sediment drift deposition, sediment remobilisation and erosion, which facilitates again mass wasting

EMU and the Icelandic labour market

In this paper we look at the costs and benefits for Iceland from joining the EMU from a labour-market perspective. We conclude that none of Mundell's three criteria for an optimal currency area are at present fulfilled for Iceland and the initial Euro zone. Shocks to the Icelandic economy are found to be asymmetric with those experienced in other countries, nominal wages rigid, and migration limited. The painful adjustment of the Faeroese economy to macroeconomic shocks in the early 1990s suggests that the disadvantages of not having a separate currency can be substantial if nominal wages are rigid. Substantial variation in labour market participation and frequent adjustments of the exchange rate seem to have held unemployment in check in Iceland, at least until around 1988.

The Effect of a Financial Crisis on Household Finances: A Case Study of Iceland’s Financial Crisis

Iceland experienced a financial crisis in 2008–2009 when its banking system collapsed, the currency lost half its value, most businesses became technically insolvent, house prices fell, and household debt increased due to indexation to foreign currencies or the price level. This paper tells the story of the crisis and maps the losses to households using a dataset from tax returns that includes all taxpayers in the country and contains the value of housing, mortgage debt, disposable income, and net worth. For relative losses in net worth, the results show that families with children, especially those with parents aged between 24 and 45 years, suffered the largest proportional losses in net worth. The losses were also greater in urban areas. The fall in net worth, measured in local currency, correlated with income and education level as well as the number of children and the urban area. Real disposable income fell by one third or more for a large fraction of the population, causing a further increase in the burden of debt, which increased most for the high-income groups before falling due to rising income and mortgage relief. Urban areas, where banks are located, experienced a boom-bust cycle, while the rural areas experienced this cycle to a much lesser extent. We find that net worth took many years to recover but that by 2019, net worth had recovered for all age groups

Examining the Contribution of Critical Visualisation to Information Security

This paper examines the use of visualisations in the field of information security and in particular focuses on the practice of information security risk assessment. We examine the current roles of information security visualisations and place these roles in the wider information visualisation discourse.\ud We present an analytic lens which divides visualisations into three categories: journalistic, scientic and critical visualisations. We then present a case study that uses these three categories of visualisations to further support information security practice.\ud Two signicant results emerge from this case study: (1) visualisations that promote critical thinking and reflection (a form of critical visualisation) support the multi-stakeholder nature of risk assessment and (2) a preparatory stage in risk assessment is sometimes needed by service designers in order to establish the service design before conducting a formal risk assessment.\ud The reader is invited to explore the images in the digital version of this paper where they can zoom in to particular aspects of the images and view the images in colour

Extreme Value Analysis of Empirical Frame Coefficients and Implications for Denoising by Soft-Thresholding

Denoising by frame thresholding is one of the most basic and efficient methods for recovering a discrete signal or image from data that are corrupted by additive Gaussian white noise. The basic idea is to select a frame of analyzing elements that separates the data in few large coefficients due to the signal and many small coefficients mainly due to the noise \epsilon_n. Removing all data coefficients being in magnitude below a certain threshold yields a reconstruction of the original signal. In order to properly balance the amount of noise to be removed and the relevant signal features to be kept, a precise understanding of the statistical properties of thresholding is important. For that purpose we derive the asymptotic distribution of max_{\omega \in \Omega_n} || for a wide class of redundant frames (\phi_\omega^n: \omega \in \Omega_n}. Based on our theoretical results we give a rationale for universal extreme value thresholding techniques yielding asymptotically sharp confidence regions and smoothness estimates corresponding to prescribed significance levels. The results cover many frames used in imaging and signal recovery applications, such as redundant wavelet systems, curvelet frames, or unions of bases. We show that `generically' a standard Gumbel law results as it is known from the case of orthonormal wavelet bases. However, for specific highly redundant frames other limiting laws may occur. We indeed verify that the translation invariant wavelet transform shows a different asymptotic behaviour.Comment: [Content: 39 pages, 4 figures] Note that in this version 4 we have slightely changed the title of the paper and we have rewritten parts of the introduction. Except for corrected typos the other parts of the paper are the same as the original versions

Out of reach? Convergence to an inflation target in the Central Bank of Iceland's macroeconomic model

Inflation scenarios in forecasts of the Central Bank of Iceland (CBI) appear to converge to the inflation target (2.5%) in 8-9 quarters. We ask whether this is a coincidence or an inherent property of the CBI’s model, QMM. We formulate a sub-model, containing equations for inflation, inflation expectations, wages, exchange rate and the policy interest rate. We find that rapid convergence toward the inflation target is a property of the QMM when a Taylor-rule is included in the model. Underlying is an inflation expectations equation which assumes a high degree of credibility of the CBI. This equation, however, lacks empirical underpinnings. When we replace the QMM expectations equation with an estimated equation, a more realistic picture emerges where the Central Bank has to raise the policy rate considerably higher than in QMM scenarios and it takes much longer to reach the inflation target

Low back related leg pain: An investigation of construct validity of a new classification system

BACKGROUND: Leg pain is associated with back pain in 25–65% of all cases and classified as somatic referred pain or radicular pain. However, distinction between the two may be difficult as different pathomechanisms may cause similar patterns of pain. Therefore a pathomechanism based classification system was proposed, with four distinct hierarchical and mutually exclusive categories: Neuropathic Sensitization (NS) comprising major features of neuropathic pain with sensory sensitization; Denervation (D) arising from significant axonal compromise; Peripheral Nerve Sensitization (PNS) with marked nerve trunk mechanosensitivity; and Musculoskeletal (M) with pain referred from musculoskeletal structures. OBJECTIVE: To investigate construct validity of the classification system. METHODS: Construct validity was investigated by determining the relationship of nerve functioning with subgroups of patients and asymptomatic controls. Thus somatosensory profiles of subgroups of patients with low back related leg pain (LBRLP) and healthy controls were determined by a comprehensive quantitative sensory test (QST) protocol. It was hypothesized that subgroups of patients and healthy controls would show differences in QST profiles relating to underlying pathomechanisms. RESULTS: 77 subjects with LBRLP were recruited and classified in one of the four groups. Additionally, 18 age and gender matched asymptomatic controls were measured. QST revealed signs of pain hypersensitivity in group NS and sensory deficits in group D whereas Groups PNS and M showed no significant differences when compared to the asymptomatic group. CONCLUSIONS: These findings support construct validity for two of the categories of the new classification system, however further research is warranted to achieve construct validation of the classification system as a whole

Synoptic reorganization of atmospheric flow during the Last Glacial Maximum

A coupled global atmosphere–ocean model of intermediate complexity is used to study the influence of glacial boundary conditions on the atmospheric circulation during the Last Glacial Maximum in a systematical manner. A web of atmospheric interactions is disentangled, which involves changes in the meridional temperature gradient and an associated modulation of the atmospheric baroclinicity. This in turn drives anomalous transient eddy momentum fluxes that feed back onto the zonal mean circulation. Moreover, the modified transient activity (weakened in the North Pacific and strengthened in the North Atlantic) leads to a meridional reorganization of the atmospheric heat transport, thereby feeding back onto the meridional temperature structure. Furthermore, positive barotropic conversion and baroclinic production rates over the Laurentide ice sheets and the far eastern North Pacific have the tendency to decelerate the westerlies, thereby feeding back to the stationary wave changes triggered by orographic forcing