Measuring business cycles by saving for a rainy day

We propose a simple saving-based measure of the cyclical component in GDP. The measure is motivated by the prediction that the representative consumer changes savings in response to temporary deviations of income from its stochastic trend, while satisfying a present-value budget constraint. To evaluate our procedure, we employ the bivariate error correction model of Cochrane (1994) to the member countries of the G-7 and Australia. Our estimates reveal, that to a close approximation, the stochastic trend component of GDP is consumption and the transitory component is the error correction term, which justifies the use of our saving-based measure.Business cycles ; Saving and investment ; Gross domestic product ; Consumer behavior

Noisy Information, Distance and Law of One Price Dynamics Across US Cities

Using micro price data across US cities, we provide evidence that both the volatility and persistence of deviations from the law of one price (LOP) are positively correlated with the distance between cities. A standard, two-city, equilibrium model with time-varying technology under homogeneous information can predict the relationship between the volatility and distance but not between the persistence and distance. To account for the latter fact, we augment the standard model with noisy signals about the state of nominal aggregate demand that are asymmetric across cities. We further establish that the interaction of imperfect information and sticky prices improves the fit of the model.

Accounting for Persistence and Volatility of Good-level Real Exchange Rates: The Role of Sticky Information

Volatile and persistent real exchange rates are observed not only in aggregate series but also in the individual good level data. Kehoe and Midrigan (2007) recently showed that, under a standard assumption on nominal price stickiness, empirical frequencies of micro price adjustment cannot replicate the time-series properties of the law- of-one-price deviations. We extend their sticky price model by combining good specific price adjustment with information stickiness in the sense of Mankiw and Reis (2002). Under a reasonable assumption on the money growth process, we show that the model fully explains both persistence and volatility of the good-level real exchange rates. Furthermore, our framework allows for multiple cities within a country. Using a panel of U.S.- Canadian city pairs, we estimate a dynamic price adjustment process for each 165 individual goods. The empirical result suggests that the dispersion of average time of information update across goods is comparable to that of average time of price adjustment.Good-level Real Exchange Rates, Law of One Price, Sticky Information, Dynamic Panel

Lattice study of infrared behaviour in SU(3) gauge theory with twelve massless flavours

We present details of a lattice study of infrared behaviour in SU(3) gauge theory with twelve massless fermions in the fundamental representation. Using the step-scaling method, we compute the coupling constant in this theory over a large range of scale. The renormalisation scheme in this work is defined by the ratio of Polyakov loops in the directions with different boundary conditions. We closely examine systematic effects, and find that they are dominated by errors arising from the continuum extrapolation. Our investigation suggests that SU(3) gauge theory with twelve flavours contains an infrared fixed point.Comment: 29 pages, 15 figures, 4 tables. Minor revision. Published versio

Two-photon decay of the neutral pion in lattice QCD

We perform non-perturbative calculation of the \pi^0 to {\gamma}{\gamma} transition form factor and the associated decay width using lattice QCD. The amplitude for two-photon final state, which is not an eigenstate of QCD, is extracted through an Euclidean time integral of the relevant three-point function. We utilize the all-to-all quark propagator technique to carry out this integral as well as to include the disconnected quark diagram contributions. The overlap fermion formulation is employed on the lattice to ensure exact chiral symmetry on the lattice. After examining various sources of systematic effects except for possible discretization effect, we obtain \Gamma=7.83(31)(49) eV for the pion decay width, where the first error is statistical and the second is our estimate of the systematic error.Comment: 5 pages, 4 figures. Changes made addressing to referee's comments, version accepted by PR

Electromagnetic and spin polarisabilities in lattice QCD

We discuss the extraction of the electromagnetic and spin polarisabilities of nucleons from lattice QCD. We show that the external field method can be used to measure all the electromagnetic and spin polarisabilities including those of charged particles. We then turn to the extrapolations required to connect such calculations to experiment in the context of finite volume chiral perturbation theory. We derive results relevant for lattice simulations of QCD, partially-quenched QCD and quenched QCD. Our results for the polarisabilities show a strong dependence on the lattice volume and quark masses, typically differing from the infinite volume limit by ~10% for current lattice volumes and quark masses.Comment: Minor change