Assessing Inflation Targeting in Latin America With a DSGE Model

In this paper we assess Inflation Targeting with a unique treatment and control group of strictly Latin American countries. We estimate a small Dynamic Stochastic General Equilibrium model to determine whether economic behavior within an economy fundamentally changes under Inflation Targeting. We find that although Inflation Targeting central banks appear to be if anything, slightly more aggressive in responding to inflation than Non-Inflation Targeting central banks, this has not resulted in more forward looking inflation expectations by economic agents.

A Quarterly Post-World War II Real GDP Series for New Zealand

There are no official quarterly real GDP estimates for New Zealand for the period prior to 1977. We develop a seasonally adjusted series for 1947q2 to 2006q2, by linking quarterly observations from two recent official series to temporally disaggregated observations for an earlier time period. Annual real GDP series are disaggregated, using the information from two quarterly diffusion indexes, developed by Haywood and Campbell (1976). Three econometric models are used: the Chow and Lin (1971) model that disaggregates the level of GDP, and the Fernández (1981) and Litterman (1983) models that disaggregate changes in GDP. Statistical properties of the series are evaluated, and movements in the new series are benchmarked against qualitative research findings from New Zealand's post-WWII economic history. Our preferred quarterly series is based on results generated from the Chow-Lin model.Quarterly real GDP series; temporal disaggregation; business cycles; New Zealand

Smad7:β-catenin Complex Regulates Myogenic Gene Transcription

Recent reports indicate that Smad7 promotes skeletal muscle differentiation and growth. We previously documented a non-canonical role of nuclear Smad7 during myogenesis, independent of its role in TGF-β signaling. Here further characterization of the myogenic function of Smad7 revealed β-catenin as a Smad7 interacting protein. Biochemical analysis identified a Smad7 interaction domain (SID) between aa575 and aa683 of β-catenin. Reporter gene analysis and chromatin immunoprecipitation demonstrated that Smad7 and β-catenin are cooperatively recruited to the extensively characterized ckm promoter proximal region to facilitate its muscle restricted transcriptional activation in myogenic cells. Depletion of endogenous Smad7 and β-catenin in muscle cells reduced ckm promoter activity indicating their role during myogenesis. Deletion of the β-catenin SID substantially reduced the effect of Smad7 on the ckm promoter and exogenous expression of SID abolished β-catenin function, indicating that SID functions as a trans dominant-negative regulator of β-catenin activity. β-catenin interaction with the Mediator kinase complex through its Med12 subunit led us to identify MED13 as an additional Smad7-binding partner. Collectively, these studies document a novel function of a Smad7-MED12/13-β-catenin complex at the ckm locus, indicating a key role of this complex in the program of myogenic gene expression underlying skeletal muscle development and regeneration.York University Librarie

Trust and the Distribution of Caution

Trust is often considered a determinant of economic performance. The exogeneity of trust, however, is questionable. We develop a model with heterogeneous agents to determine aggregate trustworthiness, trust, and output. People differ according to their risk aversion (caution). The distribution of risk aversion across individuals -- along with the threat of punishment -- is critical in the process by which trust is formed. The mean and variance of the distribution of caution have direct and indirect effects on trust. For the mean, the direct effect of caution is intuitive: societies with more cautious populations would have less trust. The indirect effect, however works through the perception of trustworthiness and leads to more trust. The net effect is, paradoxically, positive in homogenous societies. In heterogeneous societies, the reverse is true. Trust and output are endogenous, and not monotonically related across countries with different moments of the distribution of caution.trust; trustworthiness; risk aversion; caution; output

Respect, responsibility, and production

We examine the impact of the values respect for others and responsibility on productivity and the accumulation of physical and human capital for a sample of 58 countries. We find that these two core values are important and that their impact is substantial. Respect for others works primarily through productivity whereas responsibility is important to investment in physical and human capital. We also show that respect and responsibility are embedded in institutions and may overcome the negative macroeconomic effects associated with fractionalized societies.values; respect for others; responsibility; institutions; productivity; human capital; output per worker

Parity Reversion in Real Exchange Rates: Fast, Slow, or Not at All?

This paper tests for purchasing power parity (PPP) using real effective exchange rate data for 90 developed and developing countries in the post-Bretton Woods period. Support for PPP is found, since the majority of countries experience finite deviations of real exchange rates from parity. The speed of parity reversion is found to be typically much faster for developed countries than for developing countries and to be considerably faster for countries with flexible nominal exchange rate regimes compared with countries having fixed nominal exchange rate regimes. Copyright 2006, International Monetary Fund

Regional business cycles in New Zealand: Do they exist? What might drive them?

We use National Bank of New Zealand Regional Economic Activity data, to identify and characterise classical business cycle turning points, for New Zealand's 14 regions and aggregate New Zealand activity. Using Concordance statistic measures, logistic model and GMM estimation methods, meaningful regional business cycles have been identified and a number of significant associations established. All regions exhibit cyclical asymmetry for both durations and amplitudes, and synchronisations between aggregate NZ activity and each region are contemporaneous. The regional cycles rarely die of old age but are terminated by particular events. The regions most highly synchronised with the NZ activity cycle are Auckland, Canterbury, and Nelson-Marlborough; those least so are Gisborne and Southland. Noticeably strong co-movements are evident for certain regions. Geographical proximity matters, and unusually dry conditions can be associated with cyclical downturns in certain regions. There is no discernable evidence of association with net immigration movements, and no significant evidence of regional cycle movements being associated with real national house price cycles. The agriculture-based nature of the New Zealand economy is highlighted by the strong influence of external economic shocks on rural economic performance. In particular, there is considerable evidence of certain regional cycles being associated with movements in New Zealand's aggregate terms of trade, real prices of milksolids, real dairy land prices and total rural land prices.Classical business cycle; Turning Points; Regional business cycles; Concordance statistics; New Zealand