Non-linear multivariate adjustment of the UK real exchange rate

Based on a multivariate non-linear model, this paper recognises an important role for the real exchange rate in affecting UK labour market conditions. The short-run real exchange rate adjusts quickly to disequilibrium deviations of the real exchange rate from its long-run level outside a rather wide interval band. When the real exchange rate is undervalued, short-run unemployment falls as firms respond to an improvement in domestic competitiveness by increasing their demand for labour. Further, there is a strong response of short-run unemployment to the disequilibrium error outside a narrow interval band. To the extent that the real exchange rate equation reflects monetary policy considerations, our results imply that unemployment can be targeted by economic policy. Furthermore, if economic authorities want to avoid large swings in unemployment then they should be prepared to intervene in exchange markets with the aim of keeping real exchange rate movements within a narrow interval band

Fusion rings for degenerate minimal models

We study fusion rings for degenerate minimal models ($p=q$ case) for N=0 and N=1 (super)conformal algebras. We consider a distinguished family of modules at the level $c=1$ and $c=3/2$ and show that the corresponding fusion rings are isomorphic to the representation rings for ${\mathfrak sl}(2, {\bf C})$ and ${\mathfrak osp}(1|2)$ respectively.Comment: Revised and enlarged version. It includes all the results from math.QA/0101165 (to appear in Journal of Algebra

A Non-Linear Multivariate Model of the U.K. Real Exchange Rate

This paper discusses linearity testing for the UK real exchange rate within a multivariate framework. First we estimate a long-run real exchange rate relationship within a system involving real wages, the unemployment rate and the real price of oil. Then we adopt a logistic transition function for the estimated relationship and show that non-linearities in the discrepancy between the real exchange rate and its implied long-run level affect the short-run real exchange rate equation. We also find that when the real exchange rate is undervalued, unemployment falls as firms respond to an improvement in domestic competitiveness by increasing their demand for labour. At the same time, workers respond to the improvement in domestic competitiveness by demanding and getting higher wages. Further, the effect on unemployment and wages is nonlinear

Formal differential operators, vertex operator algebras and zeta--values , II

We introduce certain correlation functions (graded $q$--traces) associated to vertex operator algebras and superalgebras which we refer to as $n$--point functions. These naturally arise in the studies of representations of Lie algebras of differential operators on the circle \cite{Le1}--\cite{Le2}, \cite{M}. We investigate their properties and consider the corresponding graded $q$--traces in parallel with the passage from genus 0 to genus 1 conformal field theory. By using the vertex operator algebra theory we analyze in detail correlation functions in some particular cases. We obtain elliptic transformation properties for $q$--traces and the corresponding $q$--difference equations. In particular, our construction leads to correlation functions and $q$--difference equations investigated by S. Bloch and A. Okounkov \cite{BO}.Comment: 46 pages, LaTeX (10pt, small font), 1 figure, BibTe

Does high M4 money growth trigger large increases in UK inflation? Evidence from a regime-switching model

March 2007 saw an increase of 3.1 percent in the Consumer Price Index (CPI) annual inflation rate and triggered the first explanatory letter from the Governor of the Bank of England to the Chancellor of the Exchequer since the Bank of England was granted operational independence in May 1997. The letter gave rise to a lively debate on whether policymakers should pay attention to the link between inflation and M4 money growth. Using UK data since the introduction of inflation targeting in October 1992, we show that: (i) the relationship between inflation and M4 growth is not stable over time, and (ii) the tendency of M4 to exert inflationary pressures is conditional on annual M4 growth exceeding 10%. Above this threshold, a 1 percentage point increase in the annual growth rate of M4 increases annual inflation by only 0.09 percentage points, whereas a 1 percentage point increase in the disequilibrium between money and its long-run determinants increases annual inflation by only 0.07 percentage points. Since the money effects are very small, the implication is that the Monetary Policy Committee should not be particularly worried for not paying close attention to M4 money movements when setting interest rates.Monetary Policy Committee (MPC), M4, inflation targeting, regimeswitching model.