Quasi-Fiscal Policies of Independent Central Banks and Inflation

Recently, central banks expanded their balance sheets by unconventional actions, including credit easing operations. Although such quasi-?scal operations are signi?cant in size and assumed to be crucial for the economy?s recovery, little theory is available to explain the possible macroeconomic consequences of these operations. The main contribution of this paper is to show that quasi-?scal shocks may a¤ect in?ation in plausible cases by utilizing a simple DSGE model that embraces the budgetary inde- pendence of the central banks. In the active quasi-?scal policy regime, the shocks in the central bank?s earnings alter the private agent?s portfolio between consumption and the nominal money balance, thus a¤ecting in?ation. Conventional macroeconomic models have implicitly assumed policy regimes in which the aforementioned mechanism does not restrict equilibria; however, this paper shows that such assumptions generally are not guaranteed to hold. The extensions of the basic model show that quasi-?scal shocks may produce undesirable e¤ects, such as in?ation following de?ationary mone- tary policy during the implementation of exit strategy.

Solving Endogeneity in Assessing the Efficacy of Foreign Exchange Market Interventions

Sterilized foreign exchange market interventions have been suspected of being inefficient by many empirical studies, but they are plagued by endogeneity problems. To solve the problems, this paper identifies a system that depicts interactions between the interventions and the foreign exchange rate. The model shows that the interventions are effective when the interventions alter the market participants' conditional expectations of the rate without decreasing the conditional variances. This paper estimates Markov-switching type policy reaction functions by conditional MLE, and market demand/supply curves by IV estimation with generated regressors. The empirical results verify that the interventions of the Bank of Korea from 2001 to 2002 were indeed effective.Sterilized intervention, Endogeneity, Markov-switching policy function

Comments on "The Role of the Central Asian Mountains on the Midwinter Suppression of North Pacific Storminess" - Reply

We thank Chang and Lin for their thoughtful and constructive comments on our study (Park et al. 2010). In Park et al. (2010), we did not explicitly state that the topography-forced stationary waves are the direct cause for the reduced downstream transient eddy kinetic energy (EKE). The response of stationary waves to topography may saturate even with a relatively small mountain (Cook and Held 1992); furthermore, their magnitudes are much smaller than thermally forced stationary waves (Chang 2009; Held et al. 2002). Instead, we suggest that quasistationary waves generated by the central Asian mountains may strongly affect North Pacific storminess by changing the year-to-year variability of westerly winds over the eastern Eurasian continent. Observational analyses indicate that the midwinter suppression of North Pacific storminess does not occur every year. Some years experience stronger and more meridionally confined zonal winds over the western North Pacific, leading to stronger midwinter suppression (Harnik and Chang 2004; Nakamura and Sampe 2002)

An emergent geometric description for a topological phase transition in the Kitaev superconductor model

Resorting to Wilsonian renormalization group (RG) transformations, we propose an emergent geometric description for a topological phase transition in the Kitaev superconductor model. An effective field theory consists of an emergent bulk action with an extra dimension, an ultraviolet (UV) boundary condition for an initial value of a coupling function, and an infrared (IR) effective action with a fully renormalized coupling function. The bulk action describes the evolution of the coupling function along the direction of the extra dimension, where the extra dimension is identified with an RG scale and the resulting equation of motion is nothing but a $\beta-$function. In particular, the IR effective field theory turns out to be consistent with a Callan-Symanzik equation which takes into account both the bulk and IR boundary contributions. This derived Callan-Symanzik equation gives rise to a metric structure. Based on this emergent metric tensor, we uncover the equivalence of the entanglement entropy between the emergent geometric description and the quantum field theory in the vicinity of the quantum critical point.Comment: Two figures adde