Exchange Rate Misalignment, Capital Flows, and Optimal Monetary Policy Trade-offs

What determines the optimal monetary trade-offs between internal objectives (inflation, and output gap) and external objectives (competitiveness and trade imbalances) when inefficient capital flows cause exchange rate misalignment and distort current account positions? We characterize this trade-offs analytically, using the workhorse model of modern monetary theory in open economies under incomplete markets�where inefficient capital flows and exchange rate misalignments can arise independently of nominal distortions. We derive a quadratic approximation of the utility-based global policy loss function under fairly general assumptions on preferences and openness, and solve for the optimal targeting rules under cooperation. We show that, in economies with a low degree of exchange rate pass-through, the optimal response to inefficient capital inflows associated with real appreciation is contractionary, above and beyond the natural rate: the optimal policy curbs excessive demand at the cost of exacerbating currency overvaluation. In contrast, a high degree of pass-through, and/or low trade elasticities, warrants expansionary policies that lean against exchange rate appreciation and competitive losses, at the cost of inefficient inflation

Networked markets and relational contracts

Empirical studies of commercial relationships between firms reveal that (i) suppliers encounter situations in which they can gain in the short run by acting opportunistically---for example, delivering a lower quality than promised after being paid; and (ii) good conduct is sustained not exclusively by formal contracts but through informal relationships and the expectation of future business. In such relationships, the need to offer each supplier a large enough share of future business to deter cheating limits the number of supply relationships each buyer can sustain. The market thus becomes networked, with trade restricted to durable relationships. We propose and analyze a simple dynamic model to examine the structure of such overlapping relational contracts in equilibrium. Due to exogenous stochastic shocks, suppliers are not always able to make good on their promises even if they wish to, and so links are constantly dissolving and new ones are forming to take their place. This induces a Markov process on networks. We study how the stationary distribution over networks depends on the parameters---most importantly, the value of trade and the probability of shocks. When the rate at which shocks hit increases, as might happen during an economic downturn, maintaining incentive compatibility with suppliers requires promising each more future business and this necessitates maintaining fewer relationships with suppliers. This results in a destruction of social capital, and even if the rate of shocks later returns to its former level, it can take considerable time for social capital to be rebuilt because of search frictions. This creates a novel way for shocks to be persistent. It also suggests new connections between the theory of relational contracting, on the one hand, and the macroeconomic analysis of recessions, on the other

The Acquisitions Proposals and Their Effect on Corporations, Shareholders and Creditors: Reform of Reorganizations and Liquidations

Mr. Faber sets the stage for the debate on the need for reform of our present system by summarizing some basic principles of current law, together with the exceptions that developed over the years. Mr. Faber makes the case for re-examination of Subchapter C, as well as other portions of the tax law. Mr. LeDuc seeks a framework within which to construct a tentative answer to the question that this conference is about: must corporate and shareholder income be taxed complexly? Mr. LeDuc suggests that, in order to create a framework to analyze the necessity for complexity in taxation of corporations and shareholders, we therefore have to look at the problem on both the substantive and procedural planes, and presents a four step framework to analyze the problem

Prospects for measurement and control of the scattering length of metastable helium using photoassociation techniques

A numerical investigation of two-laser photoassociation (PA) spectroscopy on spin-polarized metastable helium (He*) atoms is presented within the context of experimental observation of the least-bound energy level in the scattering potential and subsequent determination of the s-wave scattering length. Starting out from the model developed by Bohn and Julienne [Phys. Rev. A \textbf{60}, (1999) 414], PA rate coefficients are obtained as a function of the parameters of the two lasers. The rate coefficients are used to simulate one- and two-laser PA spectra. The results demonstrate the feasibility of a spectroscopic determination of the binding energy of the least-bound level. The simulated spectra may be used as a guideline when designing such an experiment, whereas the model may also be employed for fitting experimentally obtained PA spectra. In addition, the prospects for substantial modification of the He* scattering length by means of optical Feshbach resonances are considered. Several experimental issues relating to the numerical investigation presented here are discussed.Comment: 9 pages, 7 figure

Human fur gene encodes a yeast KEX2-like endoprotease that cleaves pro-beta-NGF in vivo.

Extracts from BSC-40 cells infected with vaccinia recombinants expressing either the yeast KEX2 prohormone endoprotease or a human structural homologue (fur gene product) contained an elevated level of a membrane-associated endoproteolytic activity that could cleave at pairs of basic amino acids (-LysArg- and -ArgArg-). The fur-directed activity (furin) shared many properties with Kex2p including activity at pH 7.3 and a requirement for calcium. By using antifurin antibodies, immunoblot analysis detected two furin translation products (90 and 96 kD), while immunofluorescence indicated localization to the Golgi apparatus. Coexpression of either Kex2p or furin with the mouse beta-nerve growth factor precursor (pro-beta-NGF) resulted in greatly enhanced conversion of the precursor to mature nerve growth factor. Thus, the sequence homology shared by furin and the yeast KEX2 prohormone processing enzyme is reflected by significant functional homology both in vitro and in vivo

Frequency shifts of photoassociative spectra of ultracold metastable Helium atoms : a new measurement of the s-wave scattering length

We observe light-induced frequency shifts in one-color photoassociative spectra of magnetically trapped $^4$He$^*$ atoms in the metastable $2^3S_1$ state. A pair of ultracold spin-polarized $2^3S_1$ helium atoms is excited into a molecular bound state in the purely long range $0_u^+$ potential connected to the $2^3S_1 - 2^3P_0$ asymptote. The shift arises from the optical coupling of the molecular excited bound state with the scattering states and the bound states of two colliding $2^3S_1$ atoms. We measure the frequency-shifts for several ro-vibrational levels in the $0^+_u$ potential and find a linear dependence on the photoassociation laser intensity. Comparison with a theoretical analysis provides a good indication for the s-wave scattering length $a$ of the quintet ($^5\Sigma_g^+$) potential, $a=7.2\pm 0.6$ nm, which is significantly lower than most previous results obtained by non-spectroscopic methods.Comment: 7 pages, 4 figure

Shape oscillations in non-degenerate Bose gases - transition from the collisionless to the hydrodynamic regime

We investigate collective oscillations of non-degenerate clouds of Rb-87 atoms as a function of density in an elongated magnetic trap. For the low-lying M=0 monopole-quadrupole shape oscillation we measure the oscillation frequencies and damping rates. At the highest densities the mean-free-path is smaller than the axial dimension of the sample, which corresponds to collisionally hydrodynamic conditions. This allows us to cover the cross-over from the collisionless to the hydrodynamic regime. The experimental results show good agreement with theory. We also analyze the influence of trap anharmonicities on the oscillations in relation to observed temperature dependencies of the dipole and quadrupole oscillation frequencies. We present convenient expressions to quantify these effects.Comment: 10 pages, 5 figure