The magnitude of the macroeconomic impact of oil price: the case of BRICS

This paper aims to investigate the importance of the macroeconomic impact of oil prices variations on Brazil, Russia, India, China and South Africa (BRICS). The topic was selected due to the significance of those leading emerging economies in global markets and to the determining role of oil in the current economy of the BRICS. The research was built upon on the Granger causality test, the impulse response function and the Cholesky variance decomposition by fitting both linear and non-linear multivariate vector autoregression (VAR) models. The model includes oil price inflation and consumer price inflation, interest rates, unemployment rates, exchange rates, imports and exports, and total industrial production. The results showed a significant impact of oil prices on the BRICS economies mainly in terms of total industrial production, exports and imports, and evidence of asymmetry was found. The remaining outcomes showed different results depending on whether the country is oil-exporting or oil-importing

Imperfection Information, Optimal Monetary Policy and Informational Consistency

This paper examines the implications of imperfect information (II) for optimal monetary policy with a consistent set of informational assumptions for the modeller and the private sector an assumption we term the informational consistency. We use an estimated simple NK model from Levine et al. (2012), where the assumption of symmetric II significantly improves the fit of the model to US data to assess the welfare costs of II under commitment, discretion and simple Taylor-type rules. Our main results are: first, common to all information sets we find significant welfare gains from commitment only with a zero-lower bound constraint on the interest rate. Second, optimized rules take the form of a price level rule, or something very close across all information cases. Third, the combination of limited information and a lack of commitment can be particularly serious for welfare. At the same time we find that II with lags introduces a ‘tying ones hands’ effect on the policymaker that may improve welfare under discretion. Finally, the impulse response functions under our most extreme imperfect information assumption (output and inflation observed with a two-quarter delay) exhibit hump-shaped behaviour and the fiscal multiplier is significantly enhanced in this case

Evaluating Historical Episodes using Shock Decompositions in the DSGE Model

We present alternative methods for calculating and interpreting the influence of exogenous shocks on historical episodes within the context of DSGE models. We show analytically why different methods for calculating shock decompositions can generate conflicting interpretations of the same historical episodes. We illustrate this point using an extended version of Drautzburg and Uhlig's (2015) model of the U.S. economy, focusing on the periods 1964-1966, 1979-1987, 2007-2008 and 2016-2018. We argue that the best method for analyzing particular episodes is one which isolates the influence of the shocks during the period under consideration and where the initial conditions represent the system's distance from steady state at the beginning of the episode

On the Impact of Financial Inclusion on Financial Stability and Inequality: The Role of Macroprudential Policies

Financial Inclusion - access to financial products by households and firms - is one of the main albeit challenging priorities, both for Advanced Economies (AEs) as well as Emerging Markets (EMs), even more so for the latter. Financial inclusion facilitates consumption smoothing, lowers income inequality, enables risk diversification, and tends to positively affect economic growth. Financial stability is another rising priority among policy makers. This is evident in the re-emergence of macroprudential policies after the global financial crisis, minimizing systemic risk, particularly risks associated with rapid credit growth. However, there are significant policy tradeoffs that could exist between both financial inclusion and financial stability, with mixed evidence on the link between the two objectives. Given the importance of macroprudential policies as a toolbox to achieve financial stability, we examine the impact of macroprudential policies on financial inclusion - a potential cause for financial instability if not carefully implemented. Using panel regressions for 67 countries over the period 2000-2014, our results point to mixed effects of macroprudential policies. The usage (and tightening) of some tools, such as the debt-to-income ratio, appear to reduce financial inclusion whereas others, such as the required reserve ratio (RRR), increase it. Specifically, both institutional quality and financial development appear to increase the effectiveness of macroprudential policies on financial inclusion. Institutional quality helps macroprudential policies boost financial inclusion, with mixed effects as a result of financial development, but the results are more significant when we include either institutional quality or financial development. This leads us to believe that macroprudential policies conditional on better institutional quality and financial development improves financial inclusion. This has important policy implications for financial stability

Information, VARs and DSGE Models

How informative is a time series representation of a given vector of observables about the structural shocks and impulse response functions in a DSGE model? In this paper we refer to this econometrician’s problem as “E-invertibility” and consider the corresponding information problem of the agents in the assumed DGP, the DSGE model, which we refer to as “A-invertibility” We consider how the general nature of the agents’ signal extraction problem under imperfect information impacts on the econometrician’s problem of attempting to infer the nature of structural shocks and associated impulse responses from the data. We also examine a weaker condition of recoverability. A general conclusion is that validating a DSGE model by comparing its impulse response functions with those of a data VAR is more problematic when we drop the common assumption in the literature that agents have perfect information as an endowment. We develop measures of approximate fundamentalness for both perfect and imperfect information cases and illustrate our results using analytical and numerical examples

Jews and the English countryside: some notable contributions to conservation, access, and order

As a Jewish practising solicitor and a regular rambler, the author developed an interest in the law of public rights of way.1 It was part of the English legal system, but one that was not in the standard curriculum for law students. Eventually he became the Honorary Solicitor to the Ramblers Association, which campaigned for greater lawful access to the countryside, especially by protecting the network of public rights of way. This was at a time when a doyen of the rambling movement, Benny Rothman, was attracting much publicity because he was held up as an example of a campaigner who had fought for what is known as “the Right to Roam”, which is explained later. He was also Jewish, and he became an inspiration to the author. Jews in England have largely been urban in their day to day way of life, but there are exceptions. The contributions to nature conservation and countryside recreation activities of those mentioned in this article are widely accepted by countryside managers to be significant. This paper is an attempt to bring together some strands of their influence and to explain the important effect they have had, both on the English countryside evident today and in the manner in which many people can enjoy, appreciate, and understand the countryside. With the exception of Jewish writers such as Siegfried Sassoon (1886–1967) and artists such as David Bomberg (1890–1957) in whose works nature or landscape often play an important role, the interest of most British Jewry had been confided to taking a stroll in the countryside. It is likely that one of the factors which prevented Jews from ‘mingling’ with nature was the prohibition on travelling on the Sabbath and on leaving the borders of cities and towns on religious grounds. Hence the interest of some Jews, mainly secular or less Orthodox, in the countryside had grown under the influence of the non-Jewish milieu. The particular areas to be examined are firstly nature conservation; secondly, the need to record the existing rights of the public which were being forgotten owing to changes in lifestyle, particularly as a result of modern transportation; thirdly, to achieve public access to the countryside; fourthly, the establishment of National Parks. It is in most of these that one finds notable contributions. In spite of the diverse backgrounds of the people involved, this paper does not purport to be able to find a specifically Jewish link between any of the persons identified, ranging from the wealthy to a Communist agitator, from modern Orthodox to possible convert to Christianity, and from researcher to campaigner. Their only common denominator was their Jewish creed and love of nature. I make no claim for the influence of religion, although a tenable theory is that the Jews as a people are stubborn and inquisitive by nature. In addition, Jews are said to be a “stiff-necked people” (Exodus 32:9)

A Floating versus Managed Exchange Rate Regime in a DSGE Model of India

We first develop a two-bloc model of an emerging open economy interacting with the rest of the world calibrated using Indian and US data. The model features a financial accelerator and is suitable for examining the effects of financial stress on the real economy. Three variants of the model are highlighted with increasing degrees of financial frictions. The model is used to compare two monetary interest rate regimes: domestic Inflation targeting with a floating exchange rate (FLEX(D)) and a managed exchange rate (MEX). Both rules are characterized as a Taylor-type interest rate rules. MEX involves a nominal exchange rate target in the rule and a constraint on its volatility. We find that the imposition of a low exchange rate volatility is only achieved at a significant welfare loss if the policymaker is restricted to a simple domestic inflation plus exchange rate targeting rule. If on the other hand the policymaker can implement a complex optimal rule then an almost fixed exchange rate can be achieved at a relatively small welfare cost. This finding suggests that future research should examine alternative simple rules that mimic the fully optimal rule more closely.DSGE model, Indian economy, monetary interest rate rules, floating versus managed exchange rate, financial frictions

An Estimated DSGE Model of the Indian Economy

We develop a closed-economy DSGE model of the Indian economy and estimate it by Bayesian Maximum Likelihood methods using Dynare. We build up in stages to a model with a number of features important for emerging economies in general and the Indian economy in particular: a large proportion of credit-constrained consumers, a financial accelerator facing domestic firms seeking to finance their investment, and an informal sector. The simulation properties of the estimated model are examined under a generalized inflation targeting Taylor-type interest rate rule with forward and backward-looking components. We find that, in terms of model posterior probabilities and standard moments criteria, inclusion of the above financial frictions and an informal sector significantly improves the model fit.Indian economy, DSGE model, Bayesian estimation, monetary interest rate rules, financial frictions.

SAO/NASA joint investigation of astronomical viewing quality at Mount Hopkins Observatory: 1969-1971

Quantitative measurements of the astronomical seeing conditions have been made with a stellar-image monitor system at the Mt. Hopkins Observatory in Arizona. The results of this joint SAO-NASA experiment indicate that for a 15-cm-diameter telescope, image motion is typically 1 arcsec or less and that intensity fluctuations due to scintillation have a coefficient of irradiance variance of less than 0.12 on the average. Correlations between seeing quality and local meteorological conditions were investigated. Local temperature fluctuations and temperature gradients were found to be indicators of image-motion conditions, while high-altitude-wind conditions were shown to be somewhat correlated with scintillation-spectrum bandwidth. The theoretical basis for the relationship of atmospheric turbulence to optical effects is discussed in some detail, along with a description of the equipment used in the experiment. General site-testing comments and applications of the seeing-test results are also included