Monetary policy analysis in models without money (commentary)

Monetary policy

An sS Model with Adverse Selection

We present a model of the market for used cars in which agents face a fixed cost of adjustment, the magnitude of which depend on the degree of adverse selection in the secondary market. We find that, unlike typical models, the sS bands in our model contract as the variance of the shock process increases. We also analyze a dynamic version of the model in which agents are allowed to make decisions that are conditional of the age of a used car. We find that, as a car ages, the lemons problem tends to decline in importance, and the sS bands contract.

Comparative Statics in Markets for Indivisible Goods

We complete the study of comparative statics initiated in Caplin and Leahy [2010], which introduced a new mathematical apparatus for understanding NTU allocation markets, as such covering the housing market and other markets for large indivisible goods. We introduce homotopy methods to characterize how equilibrium changes in response to arbitrary parameter changes. Generically, we show that there can be five and only five qualitatively distinct forms of market transition: Graft; Prune and Plant; Prune and Graft; Cycle and Reverse; and Shift and Replant. Our path-following methods identify new algorithms for computing market equilibria.

How much wind energy will be curtailed on the 2020 Irish power system?

This paper describes a model of the 2020 Irish electricity system which was developed and solved in a mixed integer programming, unit commitment and economic dispatch tool called PLEXOS. The model includes all generators on the island of Ireland, a simplified representation of the neighbouring British system including proposed wind capacity and interconnectors between the two systems. The level of wind curtailment is determined under varying levels of three influencing factors. The first factor is the amount of offshore wind, the second is the allowed limit of system non-synchronous penetration (SNSP) and the third is inclusion or exclusion of transmission constraints. A binding constraint, resulting from the 2020 EU renewable energy targets, is that 37% of generation comes from wind. When the SNSP limit was increased from 60% to 75% there was a reduction in wind curtailment from 14% to 7%, with a further reduction when the proportion of wind capacity installed offshore was increased. Wind curtailment in the range of SNSP limit of 70-100% is influenced primarily by the inclusion of transmission constraints. Large changes in the dispatch of conventional generators were also evident due to the imposition of SNSP limits and transmission constraints

Fixed Costs: The Demise of Marginal q

The standard version of q theory, in which investment is positively related to marginal q, breaks down in the presence of fixed costs of adjustment. With fixed costs, investment is a non-monotonic function of q. Therefore its inverse, which is the traditional investment function, does not exist. Depending upon auxiliary assumptions, the correlation between investment and marginal q can be either positive or negative. Given certain homogeneity assumptions, a version of the theory based on average q still holds, although under the same assumptions profits and sales perform as well as average q. More generally, q is no longer a sufficient statistic.

Reassessing FHA Risk

Federal Housing Administration (FHA) insurance has doubled over the past two years and is projected to redouble to $1.5 trillion over the next five. Despite clear signs of strain in the FHA’s Mutual Mortgage Insurance Fund, a recent actuarial review indicates that the FHA will not need any form of government support. We identify four risk factors that make such a funding request more likely; the review underestimates how many FHA borrowers are underwater and in economic distress; it uses measures of house values that lower loss estimates; it does not incorporate early-warning signals of future losses that are available from mortgage delinquency; and it ignores potential risks associated with recent down-payment assistant programs despite higher losses on previous programs of this type. We propose measures that could be taken to improve the predictive accuracy of FHA risk assessment.

A Study of 3CR Radio Galaxies from z = 0.15 to 0.65. II. Evidence for an Evolving Radio Structure

Radio structure parameters were measured from the highest quality radio maps available for a sample of 3CR radio galaxies in the redshift range 0.15 < z < 0.65. Combined with similar data for quasars in the same redshift range, these morphology data are used in conjunction with a quantification of the richness of the cluster environment around these objects (the amplitude of the galaxy-galaxy spatial covariance function, Bgg) to search for indirect evidence of a dense intracluster medium (ICM). This is done by searching for confinement and distortions of the radio structure that are correlated with Bgg. Correlations between physical size and hot spot placement with Bgg show evidence for an ICM only at z 0.4, suggesting an epoch of z ~ 0.4 for the formation of an ICM in these Abell richness class 0-1, FR2-selected clusters. X-ray selected clusters at comparable redshifts, which contain FR1 type sources exclusively, are demonstrably richer than the FR2-selected clusters found in this study. The majority of the radio sources with high Bgg values at z < 0.4 can be described as ``fat doubles'' or intermediate FR2/FR1s. The lack of correlation between Bgg and bending angle or Bgg and lobe length asymmetry suggests that these types of radio source distortion are caused by something other than interaction with a dense ICM. Thus, a large bending angle cannot be used as an unambiguous indicator of a rich cluster around powerful radio sources. These results support the hypothesis made in Paper 1 that cluster quasars fade to become FR2s, then FR1s, on a timescale of 0.9 Gyrs (for H0 = 50 km s^-1 Mpc^-1).Comment: 44 pages, 8 figures, 2 tables; to be published in the September 2002 issue of The Astronomical Journa

Planck pre-launch status: calibration of the Low Frequency Instrument flight model radiometers

The Low Frequency Instrument (LFI) on-board the ESA Planck satellite carries eleven radiometer subsystems, called Radiometer Chain Assemblies (RCAs), each composed of a pair of pseudo-correlation receivers. We describe the on-ground calibration campaign performed to qualify the flight model RCAs and to measure their pre-launch performances. Each RCA was calibrated in a dedicated flight-like cryogenic environment with the radiometer front-end cooled to 20K and the back-end at 300K, and with an external input load cooled to 4K. A matched load simulating a blackbody at different temperatures was placed in front of the sky horn to derive basic radiometer properties such as noise temperature, gain, and noise performance, e.g. 1/f noise. The spectral response of each detector was measured as was their susceptibility to thermal variation. All eleven LFI RCAs were calibrated. Instrumental parameters measured in these tests, such as noise temperature, bandwidth, radiometer isolation, and linearity, provide essential inputs to the Planck-LFI data analysis.Comment: 15 pages, 18 figures. Accepted for publication in Astronomy and Astrophysic

BioDMET: a physiologically based pharmacokinetic simulation tool for assessing proposed solutions to complex biological problems

We developed a detailed, whole-body physiologically based pharmacokinetic (PBPK) modeling tool for calculating the distribution of pharmaceutical agents in the various tissues and organs of a human or animal as a function of time. Ordinary differential equations (ODEs) represent the circulation of body fluids through organs and tissues at the macroscopic level, and the biological transport mechanisms and biotransformations within cells and their organelles at the molecular scale. Each major organ in the body is modeled as composed of one or more tissues. Tissues are made up of cells and fluid spaces. The model accounts for the circulation of arterial and venous blood as well as lymph. Since its development was fueled by the need to accurately predict the pharmacokinetic properties of imaging agents, BioDMET is more complex than most PBPK models. The anatomical details of the model are important for the imaging simulation endpoints. Model complexity has also been crucial for quickly adapting the tool to different problems without the need to generate a new model for every problem. When simpler models are preferred, the non-critical compartments can be dynamically collapsed to reduce unnecessary complexity. BioDMET has been used for imaging feasibility calculations in oncology, neurology, cardiology, and diabetes. For this purpose, the time concentration data generated by the model is inputted into a physics-based image simulator to establish imageability criteria. These are then used to define agent and physiology property ranges required for successful imaging. BioDMET has lately been adapted to aid the development of antimicrobial therapeutics. Given a range of built-in features and its inherent flexibility to customization, the model can be used to study a variety of pharmacokinetic and pharmacodynamic problems such as the effects of inter-individual differences and disease-states on drug pharmacokinetics and pharmacodynamics, dosing optimization, and inter-species scaling. While developing a tool to aid imaging agent and drug development, we aimed at accelerating the acceptance and broad use of PBPK modeling by providing a free mechanistic PBPK software that is user friendly, easy to adapt to a wide range of problems even by non-programmers, provided with ready-to-use parameterized models and benchmarking data collected from the peer-reviewed literature