Central Bank Performance under Inflation Targeting

Gosselin examines and reports on the various factors that contribute to successful inflation targeting. Using a panel of 21 inflation-targeting countries over the period 1990Q1-2007Q2, Gosselin finds that the ability of central banks to hit their targets varies considerably. Some of these differences can be explained by exchange rate fluctuations, fiscal deficits, and differences in financial development. Others are explained by differences in the targeting framework itself and the manner in which it is implemented.

Central Bank Performance under Inflation Targeting

The inflation targeting (IT) regime is 17 years old. With practice of IT now in more than 21 countries, there is enough evidence gathered to take stock of the IT experience. In this paper, we analyze the inflation record of IT central banks. We extend the work of Albagli and Schmidt-Hebbel (2004) by looking at a broad range of factors that can influence inflation target deviations and by identifying the empirical determinants of successful monetary policy under IT. We find that part of the cross-country and time variation in inflation deviations from targets can be explained by exchange rate movements, fiscal deficits, and differences in financial sector development. With respect to the components of the IT framework, we find that a higher inflation target and a larger inflation control range are associated with more variable inflation (and output) outcomes. Although the literature tends to suggest that greater central bank transparency is desirable, our findings imply that transparency might be associated with less satisfactory inflation performance. Interestingly, central banks using economic models do a better job of stabilizing inflation around the target and output around trend.Central bank research; Inflation targets; Monetary policy framework

An Empirical Analysis of Foreign Exchange Reserves in Emerging Asia

Over the past few years, the ability of the United States to finance its current account deficit has been facilitated by massive purchases of U.S. Treasury bonds and agency securities by Asian central banks. In this process, Asian central banks have accumulated large stockpiles of U.S.-dollar foreign exchange reserves. How far is the current level of reserves from that predicted by the standard macroeconomic determinants? The authors answer this question by using Pedroni's (1999) panel cointegration tests as the basis for the estimation of a long-run reserve-demand function in a panel of eight Asian emerging-market economies. This is a key innovation relative to the existing research on international reserves modelling: although the data are typically I(1), the literature ignores this fact and makes statistical inference based on unadjusted standard errors. While the authors find evidence of a positive structural break in the demand for international reserves by Asian central banks in the aftermath of the financial crisis of 1997-98, their results indicate that the actual level of reserves accumulated in 2003-04 was still in excess relative to that predicted by the model. Therefore, as long as historical relationships hold, a slowdown in the rate of accumulation of reserves is likely. This poses negative risks for the U.S. dollar. However, both the substantial capital losses that Asian central banks would incur if they were to drastically change their holding policy and the evidence that the currency composition of reserves evolves only gradually mitigate the risks of a rapid depreciation of the U.S. dollar triggered by Asian central banks.Econometric and statistical methods; International topics; Financial stability

MUSE: The Bank of Canada's New Projection Model of the U.S. Economy

Staff projections provided for the Bank of Canada's monetary policy decision process take into account the integration of Canada's very open economy within the global economy, as well as its close real and financial linkages with the United States. To provide inputs for this projection, the Bank has developed several models, including MUSE, NEUQ (the New European Quarterly Model), and BoC-GEM (Bank of Canada Global Economy Model), to analyze and forecast economic developments in the rest of the world. The authors focus on MUSE, the model currently used to describe interaction among the principal U.S. economic variables, including gross domestic product, inflation, interest rates, and the exchange rate. Brief descriptions are also provided of NEUQ and BoC-GEM.

Modélisation « PAC » du secteur extérieur de l'économie américaine

In this paper, the authors use polynomial adjustment cost (PAC) models to analyze and forecast the main components of the U.S. trade sector. For instance, they model and measure the elasticities of imports and exports to changes in the exchange rate and income. PAC models provide a theoretical justification for the presence of lags within a dynamic equation where optimizing agents' expectations are completely rational and forward looking. This approach thereby adds theoretical depth to a model that has a good forecasting performance. To the authors' knowledge, this paper is the first study to model the U.S. trade sector using a PAC approach. Overall, the models' main elasticities are reasonable. Moreover, the authors find that the out-ofsample forecasting performance of their PAC models is at least as good as that of other models. Their results show that this theoretical structure is not added at the expense of the empirical features of the models.Econometric and statistical methods; International topics; Domestic demand and components

Un modèle « PAC » d'analyse et de prévision des dépense des ménages américains

Traditional structural models cannot distinguish whether changes in activity are a function of altered expectations today or lagged responses to past plans. Polynomial-adjustment-cost (PAC) models remove this ambiguity by explicitly separating observed dynamic behaviour into movements that have been induced by changes in expectations, and responses to expectations, that have been delayed because of adjustment costs. In these models, agents’ decisions are a function of forecasts of a desired level for the decision variable and, owing to frictions, this level is reached only gradually. In this paper, the authors use PAC models to analyze and forecast U.S. household spending. They find that the estimated models are rather rich from a theoretical and dynamic view-point. For example, the authors find that household spending is a function of forward-looking expectations, short- and long-term interest rates, human and non-human wealth, liquidity constraints, and uncertainty with respect to future business cycles. Moreover, out-of-sample forecasts and stability tests show that this theoretical structure is not added at the expense of the model’s empirical features.Economic models; Econometric and statistical methods; Business fluctuations and cycles

Understanding the influence basic service and value-added service usage has on customer churn in Pay-TV subscription services

Similarly to other North-American markets, new digital services and alternatives to the traditional pay-TV service are proliferating while the Canadian pay-TV industry is witnessing persistent subscriber losses. In an attempt to support changing viewing behaviors, generate more value and protect the subscriber base, pay-TV operators are extending their core TV service using value-added services (VAS). However, whether or not VAS successfully contributes to reducing subscriber attrition is unknown for academics and operators alike. Using survival analysis, the research examines VAS usage and churn behaviors for 11 647 pay-TV customers over a 12-month period. The results show that VAS users are not systematically less likely to churn and their churn behavior largely depends on usage frequency and usage patterns. Customers with constant or increasing usage frequency are less likely to churn than non VAS users and heaviest users appear to exhibit the greatest level of risk. Results also show that beneficial effects of VAS are generated by free services while payable VAS actually increases customers’ risk. These findings show that churn prediction models need to look beyond the core service and examine actual behavioral usage statistics for both the core service and value-added services. From a managerial perspective, the results confirm that service extensions do indeed generate value and operators can further reduce customer attrition by maximizing VAS adoption. However, the results also show operators need to maintain and stimulate usage to preserve the beneficial effect of VAS and better understand the drivers that increase service switching behaviors

Altered resting-state functional connectivity patterns in late middle-aged and older adults with obstructive sleep apnea

IntroductionObstructive sleep apnea (OSA) is increasingly recognized as a risk factor for cognitive decline, and has been associated with structural brain alterations in regions relevant to memory processes and Alzheimer’s disease. However, it is unclear whether OSA is associated with disrupted functional connectivity (FC) patterns between these regions in late middle-aged and older populations. Thus, we characterized the associations between OSA severity and resting-state FC between the default mode network (DMN) and medial temporal lobe (MTL) regions. Second, we explored whether significant FC changes differed depending on cognitive status and were associated with cognitive performance.MethodsNinety-four participants [24 women, 65.7 ± 6.9 years old, 41% with Mild Cognitive Impairment (MCI)] underwent a polysomnography, a comprehensive neuropsychological assessment and a resting-state functional magnetic resonance imaging (MRI). General linear models were conducted between OSA severity markers (i.e., the apnea-hypopnea, oxygen desaturation and microarousal indices) and FC values between DMN and MTL regions using CONN toolbox. Partial correlations were then performed between OSA-related FC patterns and (i) OSA severity markers in subgroups stratified by cognitive status (i.e., cognitively unimpaired versus MCI) and (ii) cognitive scores in the whole sample. All analyzes were controlled for age, sex and education, and considered significant at a p < 0.05 threshold corrected for false discovery rate.ResultsIn the whole sample, a higher apnea-hypopnea index was significantly associated with lower FC between (i) the medial prefrontal cortex and bilateral hippocampi, and (ii) the left hippocampus and both the posterior cingulate cortex and precuneus. FC patterns were not associated with the oxygen desaturation index, or micro-arousal index. When stratifying the sample according to cognitive status, all associations remained significant in cognitively unimpaired individuals but not in the MCI group. No significant associations were observed between cognition and OSA severity or OSA-related FC patterns.DiscussionOSA severity was associated with patterns of lower FC in regions relevant to memory processes and Alzheimer’s disease. Since no associations were found with cognitive performance, these FC changes could precede detectable cognitive deficits. Whether these FC patterns predict future cognitive decline over the long-term needs to be investigated

Global, regional, and national life expectancy, all-cause mortality, and cause-specific mortality for 249 causes of death, 1980-2015 : a systematic analysis for the Global Burden of Disease Study 2015

Background Improving survival and extending the longevity of life for all populations requires timely, robust evidence on local mortality levels and trends. The Global Burden of Disease 2015 Study (GBD 2015) provides a comprehensive assessment of all-cause and cause-specific mortality for 249 causes in 195 countries and territories from 1980 to 2015. These results informed an in-depth investigation of observed and expected mortality patterns based on sociodemographic measures. Methods We estimated all-cause mortality by age, sex, geography, and year using an improved analytical approach originally developed for GBD 2013 and GBD 2010. Improvements included refinements to the estimation of child and adult mortality and corresponding uncertainty, parameter selection for under-5 mortality synthesis by spatiotemporal Gaussian process regression, and sibling history data processing. We also expanded the database of vital registration, survey, and census data to 14 294 geography-year datapoints. For GBD 2015, eight causes, including Ebola virus disease, were added to the previous GBD cause list for mortality. We used six modelling approaches to assess cause-specific mortality, with the Cause of Death Ensemble Model (CODEm) generating estimates for most causes. We used a series of novel analyses to systematically quantify the drivers of trends in mortality across geographies. First, we assessed observed and expected levels and trends of cause-specific mortality as they relate to the Socio-demographic Index (SDI), a summary indicator derived from measures of income per capita, educational attainment, and fertility. Second, we examined factors affecting total mortality patterns through a series of counterfactual scenarios, testing the magnitude by which population growth, population age structures, and epidemiological changes contributed to shifts in mortality. Finally, we attributed changes in life expectancy to changes in cause of death. We documented each step of the GBD 2015 estimation processes, as well as data sources, in accordance with Guidelines for Accurate and Transparent Health Estimates Reporting (GATHER). Findings Globally, life expectancy from birth increased from 61.7 years (95% uncertainty interval 61.4-61.9) in 1980 to 71.8 years (71.5-72.2) in 2015. Several countries in sub-Saharan Africa had very large gains in life expectancy from 2005 to 2015, rebounding from an era of exceedingly high loss of life due to HIV/AIDS. At the same time, many geographies saw life expectancy stagnate or decline, particularly for men and in countries with rising mortality from war or interpersonal violence. From 2005 to 2015, male life expectancy in Syria dropped by 11.3 years (3.7-17.4), to 62.6 years (56.5-70.2). Total deaths increased by 4.1% (2.6-5.6) from 2005 to 2015, rising to 55.8 million (54.9 million to 56.6 million) in 2015, but age-standardised death rates fell by 17.0% (15.8-18.1) during this time, underscoring changes in population growth and shifts in global age structures. The result was similar for non-communicable diseases (NCDs), with total deaths from these causes increasing by 14.1% (12.6-16.0) to 39.8 million (39.2 million to 40.5 million) in 2015, whereas age-standardised rates decreased by 13.1% (11.9-14.3). Globally, this mortality pattern emerged for several NCDs, including several types of cancer, ischaemic heart disease, cirrhosis, and Alzheimer's disease and other dementias. By contrast, both total deaths and age-standardised death rates due to communicable, maternal, neonatal, and nutritional conditions significantly declined from 2005 to 2015, gains largely attributable to decreases in mortality rates due to HIV/AIDS (42.1%, 39.1-44.6), malaria (43.1%, 34.7-51.8), neonatal preterm birth complications (29.8%, 24.8-34.9), and maternal disorders (29.1%, 19.3-37.1). Progress was slower for several causes, such as lower respiratory infections and nutritional deficiencies, whereas deaths increased for others, including dengue and drug use disorders. Age-standardised death rates due to injuries significantly declined from 2005 to 2015, yet interpersonal violence and war claimed increasingly more lives in some regions, particularly in the Middle East. In 2015, rotaviral enteritis (rotavirus) was the leading cause of under-5 deaths due to diarrhoea (146 000 deaths, 118 000-183 000) and pneumococcal pneumonia was the leading cause of under-5 deaths due to lower respiratory infections (393 000 deaths, 228 000-532 000), although pathogen-specific mortality varied by region. Globally, the effects of population growth, ageing, and changes in age-standardised death rates substantially differed by cause. Our analyses on the expected associations between cause-specific mortality and SDI show the regular shifts in cause of death composition and population age structure with rising SDI. Country patterns of premature mortality (measured as years of life lost [YLLs]) and how they differ from the level expected on the basis of SDI alone revealed distinct but highly heterogeneous patterns by region and country or territory. Ischaemic heart disease, stroke, and diabetes were among the leading causes of YLLs in most regions, but in many cases, intraregional results sharply diverged for ratios of observed and expected YLLs based on SDI. Communicable, maternal, neonatal, and nutritional diseases caused the most YLLs throughout sub-Saharan Africa, with observed YLLs far exceeding expected YLLs for countries in which malaria or HIV/AIDS remained the leading causes of early death. Interpretation At the global scale, age-specific mortality has steadily improved over the past 35 years; this pattern of general progress continued in the past decade. Progress has been faster in most countries than expected on the basis of development measured by the SDI. Against this background of progress, some countries have seen falls in life expectancy, and age-standardised death rates for some causes are increasing. Despite progress in reducing age-standardised death rates, population growth and ageing mean that the number of deaths from most non-communicable causes are increasing in most countries, putting increased demands on health systems. Copyright (C) The Author(s). Published by Elsevier Ltd.Peer reviewe