Uncertainty and UK Monetary Policy

This paper provides empirical evidence on the response of monetary policymakers to uncertainty. Using data for the UK since the introduction of inflation targets in October 1992, we find that the impact of inflation on interest rates is lower when inflation is more uncertain and is larger when the output gap is more uncertain. These findings are consistent with the predictions of the theoretical literature. We also find that uncertainty has reduced the volatility but has not affected the average value of interest rates and argue that monetary policy would have been less passive in the absence of uncertainty

Testing the Opportunistic Approach to Monetary Policy

The Opportunistic Approach to Monetary Policy is an influential but untested model of optimal monetary policy. We provide the first tests of the model, using US data from 1983Q1-2004Q1. Our results support the Opportunistic Approach. We find that policymakers respond to the gap between inflation and an intermediate target that reflects the recent history of inflation. We find that there is no response of interest rates to inflation when inflation is within 1% of the intermediate target but a strong response when inflation is further from the intermediate target

Uncertainty and Monetary Policy Rules in the United States

This paper analyses the impact of uncertainty about the true state of the economy on monetary policy rules in the US since the early 1980s. Extending the Taylor rule to allow for this type of uncertainty, we find evidence that the predictions of the theoretical literature on responses to uncertainty are reflected in the behaviour of policymakers, suggesting that policymakers are adhering to prescriptions for optimal policy. We find that the impact of uncertainty was most marked in 1983, when uncertainty increased interest rates by up to 140 basis points, in 1989-90, when uncertainty increased interest rates by up to 50 basis points and in 1996-2001 when uncertainty reduced interest rates by up to 50 basis points over five years

Noncommutative GUT inspired theories and the UV finiteness of the fermionic four point functions

We show at one-loop and first order in the noncommutativity parameters that in any noncommutative GUT inspired theory the total contribution to the fermionic four point functions coming only from the interaction between fermions and gauge bosons, though not UV finite by power counting, is UV finite at the end of the day. We also show that this is at odds with the general case for noncommutative gauge theories --chiral or otherwise-- defined by means of Seiberg-Witten maps that are the same --barring the gauge group representation-- for left-handed spinors as for right-handed spinors. We believe that the results presented in this paper tilt the scales to the side of noncommutative GUTS and noncommutative GUT inspired versions of the Standard Model.Comment: 11 pages, 3 figures. Version 2: references fixed and completed. Version 3: Comments adde

Testing Myopia in Economic Models

This paper suggests a simple test of whether agents are forward-looking or myopic that can be implemented on the type of backward-looking econometric models that are usually estimated.. We argue that myopic behaviour implies a simple parametric restriction that will not hold if agents are forward-looking. We illustrate our tests by examining price adjustment in the UK using aggregate quarterly data from 1963-1997. Our evidence strongly suggests that pricesetting is forward-looking and not myopic

The Seiberg-Witten map and supersymmetry

The lack of any local solution to the first-order-in-h omegamn Seiberg-Witten (SW) map equations for U(1) vector superfields compels us to obtain the most general solution to those equations that is a quadratic polynomial in the ordinary vector superfield, v, its chiral and antichiral projections and the susy covariant derivatives of them all. Furnished with this solution, which is local in the susy Landau gauge, we construct an ordinary dual of noncommutative U(1) SYM in terms of ordinary fields which carry a linear representation of the N=1 susy algebra. By using the standard SW map for the N=1 U(1) gauge supermultiplet we define an ordinary U(1) gauge theory which is dual to noncommutative U(1) SYM in the WZ gauge. We show that the ordinary dual so obtained is supersymmetric, for, as we prove as we go along, the ordinary gauge and fermion fields that we use to define it carry a nonlinear representation of the N=1 susy algebra. We finally show that the two ordinary duals of noncommutative U(1) SYM introduced above are actually the same N=1 susy gauge theory. We also show in this paper that the standard SW map is never the theta theta--bar component of a local superfield in v and check that, at least at a given approximation, a suitable field redefinition of that map makes the noncommutative and ordinary --in a Bmn field-- susy U(1) DBI actions equivalent.Comment: 28 pages. No figure

Non linear inflationary dynamics: evidence from the UK

This paper estimates a variety of models of inflation using quarterly data for the UK between 1965 and 2001. We find strong evidence that the persistence of inflation is nonlinear and that inflation adjusted more rapidly in periods of macroeconomic stress such as the mid-1970s, the early 1980s and the late 1980s-early 1990s. Our results imply that inflation will respond more strongly and more rapidly to changes in interest rates when the price level is further away from the steady state level. This has implications for optimal monetary policy

The Complex Reaction of Monetary Policy to the Exchange Rate

We estimate a flexible non-linear monetary policy rule for the UK to examine the response of policymakers to the real exchange rate. We have three main findings. First, policymakers respond to real exchange rate misalignment rather than to the real exchange rate itself. Second, policymakers ignore small deviations of the exchange rate; they only respond to real exchange under-valuations of more than 4% and over-valuations of more than 5%. Third, the response of policymakers to inflation is smaller when the exchange rate is over-valued and larger when it is under-valued. None of these responses is allowed for in the widely-used Taylor rule, suggesting that monetary policy is better analysed using a more sophisticated model, such as the one suggested in this paper

New Results from an old Friend: The Crab Nebula and its Pulsar

We summarize here the results, most of which are preliminary, of a number of recent observations of the Crab nebula system with the Chandra X-Ray Observatory. We discuss four different topics: (1) The motion on long (> 1yr) time scales of the southern jet. (2) The discovery that pulsar is not at the center of the projected ring on the sky and that the ring may well lie on the axis of symmetry but appears to be displaced at a latitude of about 5 degrees. (Note that this deprojection is by no means unique.) (3) The results and puzzling implications of the Chandra phase-resolved spectroscopy of the pulsar when compared to observations of pulse-phase variations of similar and dissimilar measures in other regions of the spectrum. (4) The search for the X-ray location of the site of the recently-discovered gamma-ray flaring. We also comment briefly on our plan to use the Chandra data we obtained for the previous project to study the nature of the low-energy flux variations recently detected at hard X-ray energies.Comment: 6 pages, 5 figures, submitted to the proceedings of the conference: "The Extreme and Variable High Energy Sky", 19-23 September 2011, Chia Laguna (Cagliari) - Ital