Macroeconomic Policy Coordination among the Industrial Economies

macroeconomics, policy coordination, industrial economy

Fiscal sustainability in a new Keynesian model

Recent work on optimal monetary and fiscal policy in New Keynesian models suggests that it is optimal to allow steady-state debt to follow a random walk. In this paper we consider the nature of the time inconsistency involved in such a policy and its implication for discretionary policymaking. We show that governments are tempted, given inflationary expectations, to utilize their monetary and fiscal instruments in the initial period to change the ultimate debt burden they need to service. We demonstrate that this temptation is only eliminated if following shocks, the new steady-state debt is equal to the original (efficient) debt level even though there is no explicit debt target in the government's objective function. Analytically and in a series of numerical simulations we show which instrument is used to stabilize the debt depends crucially on the degree of nominal inertia and the size of the debt stock. We also show that the welfare consequences of introducing debt are negligible for precommitment policies, but can be significant for discretionary policy. Finally, we assess the credibility of commitment policy by considering a quasi-commitment policy, which allows for different probabilities of reneging on past promises

Pulmonary function in primary pulmonary hypertension

AbstractObjectivesThe study was done to ascertain the degree to which abnormalities in resting lung function correlate with the disease severity of patients with primary pulmonary hypertension (PPH).BackgroundPatients with PPH are often difficult to diagnose until several years after the onset of symptoms. Despite the seriousness of the disorder, the diagnosis of PPH is often delayed because it is unsuspected and requires invasive measurements. Although PPH often causes abnormalities in resting lung function, these abnormalities have not been shown to be statistically significant when correlated with other measures of PPH severity.MethodsResting lung mechanics and diffusing capacity for carbon monoxide DLcowere assessed in 79 patients whose findings conformed to the classical diagnostic criteria of PPH and who had no evidence of secondary causes of pulmonary hypertension. These findings were correlated with severity of disease as assessed by cardiac catheterization, New York Heart Association (NYHA) class, and cardiopulmonary exercise testing.ResultsWhen PPH patients were first evaluated at our referral clinic, the DLcoand lung volumes were decreased in approximately three-quarters and one-half, respectively. The decreases in DLco, and to a lesser extent lung volumes, correlated significantly with decreases in peak oxygen uptake (reflecting maximum cardiac output), peak oxygen pulse (reflecting maximum stroke volume), and anaerobic threshold (reflecting sustainable exercise capacity) and higher NYHA class.ConclusionsPatients with PPH commonly have abnormalities in lung mechanics and DLcolevels that correlate significantly with disease severity. These measurements can be useful in evaluating patients with unexplained dyspnea and fatigue

Escaping expectation traps: how much commitment is required?

We study the degree of precommitment that is required to eliminate multiplicity of policy equilibria, which arise if the policy maker acts under pure discretion. We apply a framework developed by Schaumburg and Tambalotti (2007) and Debertoli and Nunes (2010) to a standard New Keynesian model with government debt. We demonstrate the existence of expectation traps under limited commitment and identify the minimum degree of commitment which is needed to escape from these traps. We find that the degree of precommitment which is sufficient to generate uniqueness of the Pareto-preferred equilibrium requires the policy maker to stay in office for a period of two to five years. This is consistent with monetary policy arrangements in many developed countries

Successful Tricuspid Valve Replacement in a Patient with Severe Pulmonary Arterial Hypertension and Preserved Right Ventricular Systolic Function

A 56-year-old patient with severe pulmonary hypertension developed severe tricuspid regurgitation, right-sided heart failure, and congestive hepatopathy. She was transferred for possible lung transplant and/or tricuspid valve surgery. Clinical and echocardiographic assessment provided confidence that acute tricuspid valve failure was responsible for the decompensation and that tricuspid valve replacement despite pulmonary hypertension could be performed

International Policy Coordination in Dynamic Macroeconomic Models

Recent analyses of the gains to policy coordination have focused on the strategic aspects of macroeconomic policy making in a static setting. A major theme is that noncooperative policy making is likely to be Pareto inefficient because of the presence of beggar-thy-neighbor policies. This paper extends the analysis to a dynamic setting, thereby introducing three important points of realism to the static game. First, the payoffs to beggar-thy-neighbor policies look very different in one-period and multiperiod games, and thus so do the gains to coordination. Second, we show that policy coordination may reduce economic welfare if governments are myopic in their policy making, as is sometimes claimed. Third, governments act under a fundamental constraint that they cannot bind the actions of later governments, and we investigate how this constraint alters the gains to policy coordination