Optimal Monetary Policy with Asymmetric Targets

We investigate the derivation of optimal interest rate rules in a simple stochastic framework. The monetary authority chooses to minimise an asymmetric loss function made up of the sum of squared components, where the monetary authority places positive weight on squared negative (positive) deviations of output (inflation) and zero weight on squared positive (negative) deviations. Recent approaches to monetary policy under asymmetric preferences have emphasised the adoption of a linear exponential (linex) preference structure. This paper presents a new and different analytic methodology that is based on the explicit calculation of semi-variances. This approach can be used to derive precise coefficients of the optimal interest rate rules. We derive optimal interest rate rules based on two different informational assumptions. In the first case, which we call a fixed interest rate rule, the monetary authority knows only the structure of the economy and the variance of sectoral shocks so that interest rates must take a constant value. In the second case, which we call a flexible interest rate rule, the monetary also has access to additional information in that it can observe the contemporaneous inflation rate. In this second case, we restrict our analysis to the class of linear interest rate rules. The more standard approach in the literature derives optimal monetary policy rules using symmetric loss functions, where monetary policy is designed to minimise the sum of squared components. We also compare optimal interest rate rules under both symmetric and asymmetric loss functions.Monetary Economics; Interest Rate Rule; Inflation Target; Output Target; Asymmetric Loss Function; One-sided Target; Linex Preferences; Semi-Variance; Symmetric Loss Function.

Reverse-Shooting versus Forward-Shooting over a Range of Dimensionalities

This paper investigates the properties of dynamic solutions that have been derived using the well-known reverse-shooting and forwardshooting algorithms. Given an arbitrary large-scale model about which we have limited information, how successful are the algorithms likely to be in solving this model? We address this question using a range of investment models, both linear and non-linear. By extending the investment models to allow for multi-dimensional specifications of the capital stock, we are able to examine the computational efficiency of the competing algorithms as the dimensionality of the capital stock is allowed to increase. Our approach provides insights into how the complexity of the solutions to a broad range of macroeconomic models increases with the dimensionality of the models.Macroeconomics; Reverse-shooting; Forward-shooting; Saddlepath instability; Computational techniques; Investment models.

Solving Macroeconomic Models with "Off-the-Shelf" Software: An Example of Potential Pitfalls

When working with large-scale models or numerous small models, there can be a temptation to rely on default settings in proprietary software to derive solutions to the model. In this paper we show that, for the solution of non-linear dynamic models, this approach can be inappropriate. Alternative linear and non-linear specifications of a particular model are examined. One version of the model, expressed in levels, is highly non-linear. A second version of the model, expressed in logarithms, is linear. The dynamic solution of each model version has a combination of stable and unstable eigenvalues so that any dynamic solution requires the calculation of appropriate “jumps” in endogenous variables. We can derive a closed-form solution of the model, which we use as our "true" benchmark, for comparison with computational solutions of both linear and non-linear models. Our approach is to compare the "goodness of fit" of reverse-shooting solutions for both the linear and non-linear model, by comparing the computational solutions with the benchmark solution. Under the basic solution method with default settings, we show that there is significant difference between the computational solution for the non-linear model and the benchmark closed-form solution. We show that this result can be substantially improved using modifications to the solver and to parameter settings.Solving non-linear models, reverse-shooting, computational economics, computer software

Biomarkers of disease : concentrations in the serum of women during natural and stimulated ovarian cycles and during early pregnancy

Molecular biomarkers are chemical signatures that all cell types possess. They are used in medicine to evaluate both normal biological events and pathogenic processes. A series of biomarkers associated with cancer of the breast, ovaries and other parts of the female reproductive tract and the monitoring of pregnancy were measured in disease‐free women. The biomarkers measured were prostate specific antigen (PSA), CA125, CA15‐3, CA72‐4, and pregnancy associated plasma protein‐a (PAPP‐A). The patterns of change during natural and stimulated ovarian cycles and early pregnancy were investigated to determine if these biomarkers could reflect normal events relating to ovulation and implantation/placentation. In addition, the study was able to investigate the possible erroneous crossing of clinical cut‐off values associated with disease due to other biological processes rather than the disease itself. total of 73 blood samples (10 women) taken throughout the natural menstrual cycle, 64 blood samples (11 women) during stimulated ovarian cycles and 86 blood samples (14 women) during early pregnancy monitoring were collected and all samples were analysed by batch analysis on the Roche Cobas e411. Concentrations of CA125, tPSA, CA15‐3 and CA72‐4 showed no significant difference between the natural and stimulated ovarian cycle groups (p≥0.5989). On average the mean PAPP‐A of the natural group was 2.41±0.58 mIU/L higher than the stimulated group (t = 4.10, p \u3c 0.001). CA125 and CA15‐3 results were both significantly influenced by the stage of the cycle (p= In conclusion, batch analysis of all samples from each of the participants was conducted to maximise the possibility that any changes seen in biomarker concentrations were due to biological fluctuations and not because of assay variability. Ovarian stimulation reduced serum PAPP‐A levels, whilst CA125 and CA15‐3 were unaffected by ovarian stimulation per se but showed cyclical changes throughout both natural and stimulated cycles. PAPP‐A, CA125, tPSA and CA15‐3 all showed consistent changes in early pregnancy, and their combined benefits as markers of different aspects of implantation, embryogenesis and placentation warrants further investigation. Only CA125 in early pregnancy crossed the cut‐off associated with disease, ie ovarian cancer, and other gynaecological and inflammatory conditions. Care must therefore be taken when using CA125 determinations to detect disease if the woman is less than 7 weeks pregnant as transient elevations during this time appear normal

Optimal Monetary Policy in an Open Economy

This paper analyzes the optimal intertemporal tradeoff between inflation and output in an open economy under perfect foresight. The announcement of the optimal plan may, or may not, generate an initial jump in the exchange rate. That depends upon the real adjustment costs, which such unanticipated changes impose on the economy. In the case that such jumps occur, the question of time consistency of the optimal policy arises. A time consistent solution is obtained provided: (i) the policy maker is not too myopic; (ii) the adjustment costs associated with the jump in the exchange rate are of an appropriate form. The optimal monetary rule is derived and properties of this rule, as well as the overall optimal adjustment of the economy are discussed.

REVERSE SHOOTING IN A MULTI-DIMENSIONAL SETTING

This paper investigates the properties of dynamic solutions that have been derived using the well-known reverse-shooting algorithm. Given an arbitrary large-scale model about which we have limited information, how successful is the algorithm likely to be in solving this model? We address this question using a range of investment models, both linear and non-linear. By extending the investment models to allow for multidimensional specifications of the capital stock, we are able to examine the computational efficiency of the reverse shooting algorithm as the dimensionality of the capital stock is allowed to increase. Our approach provides insights into how the complexity of the solutions to a broad range of macroeconomic models increases with the dimensionality of the models.Macroeconomics; Reverse shooting; Saddlepath instability; Computational techniques; Investment models

Humour as a narrative of difference in responding to crisis events in marital relationships

Two concepts which have emerged out of Narrative and Solution Focused Therapies are the ideas of externalizing the problem through the re-storying of events and discovering and building upon the story of difference to create lasting change. By placing himself within the narrative tradition and drawing upon these two therapeutic concepts, the author seeks to show that humorous stories are important narratives of difference which function to build intimacy within the marital relationship. The author begins with a Literature Review of works dealing with Humour and Psychology, Family Systems and Theology. He then examines 10 methodological challenges related to the study of humour. In order to achieve greater triangulation the author draws upon three qualitative methodologies - a thematic approach, an events-based approach and a conversation analysis approach - to examine the use of humour in the marriage relationship. The research field for the study was 20 couples who had been married from I0 to 60 years. Questionnaires and interviews were sent to these couples and from the data the author examined the process whereby couples come to reframe stories of crisis into stories of humour and hope. Two key terms are developed out of this process - reminiscing and referencing . Finally, the author examines issues related to the practice of pastoral care and marriage and family therapy and suggests changes in practice which would better support the important role which humour plays in the marriage relationship