Endogenous Cycles in Optimal Monetary Policy with a Nonlinear Phillips Curve

There is by now a large consensus in modern monetary policy. This consensus has been built upon a dynamic general equilibrium model of optimal monetary policy with sticky prices a la Calvo and forward looking behavior. In this paper we extend this standard model by introducing nonlinearity into the Phillips curve. As the linear Phillips curve may be questioned on theoretical grounds and seems not to be favoured by empirical evidence, a similar procedure has already been undertaken in a series papers over the last few years, e.g., Schaling (1999), Semmler and Zhang (2004), Nobay and Peel (2000), Tambakis (1999), and Dolado et al. (2004). However, these papers were mainly concerned with the analysis of the problem of inflation bias, by deriving an interest rate rule which is nonlinear, leaving the issues of stability and the possible existence of endogenous cycles in such a framework mostly overlooked. Under the specific form of nonlinearity proposed in our paper (which allows for both convexity and concavity and secures closed form solutions), we show that the introduction of a nonlinear Phillips curve into a fully deterministic structure of the standard model produces significant changes to the major conclusions regarding stability and the efficiency of monetary policy in the standard model. We should emphasize the following main results: (i) instead of a unique fixed point we end up with multiple equilibria; (ii) instead of saddle--path stability, for different sets of parameter values we may have saddle stability, totally unstable and chaotic fixed points (endogenous cycles); (iii) for certain degrees of convexity and/or concavity of the Phillips curve, where endogenous fluctuations arise, one is able to encounter various results that seem interesting. Firstly, when the Central Bank pays attention essentially to inflation targeting, the inflation rate may have a lower mean and is certainly less volatile; secondly, for changes in the degree of price stickiness the results are not are clear cut as in the previous case, however, we can also observe that when such stickiness is high the inflation rate tends to display a somewhat larger mean and also higher volatility; and thirdly, it shows that the target values for inflation and the output gap (π^,x^), both crucially affect the dynamics of the economy in terms of average values and volatility of the endogenous variables --- e.g., the higher the target value of the output gap chosen by the Central Bank, the higher is the inflation rate and its volatility --- while in the linear case only the π^ does so (obviously, only affecting in this case the level of the endogenous variables). Moreover, the existence of endogenous cycles due to chaotic motion may raise serious questions about whether the old dictum of monetary policy (that the Central Bank should conduct policy with discretion instead of commitment) is not still very much in the business of monetary policy.Optimal monetary policy, Interest Rate Rules, Nonlinear Phillips Curve, Endogenous Fluctuations and Stabilization

Chaotic Dynamics in Optimal Monetary Policy

There is by now a large consensus in modern monetary policy. This consensus has been built upon a dynamic general equilibrium model of optimal monetary policy as developed by, e.g., Goodfriend and King (1997), Clarida et al. (1999), Svensson (1999) and Woodford (2003). In this paper we extend the standard optimal monetary policy model by introducing nonlinearity into the Phillips curve. Under the specific form of nonlinearity proposed in our paper (which allows for convexity and concavity and secures closed form solutions), we show that the introduction of a nonlinear Phillips curve into the structure of the standard model in a discrete time and deterministic framework produces radical changes to the major conclusions regarding stability and the efficiency of monetary policy. We emphasize the following main results: (i) instead of a unique fixed point we end up with multiple equilibria; (ii) instead of saddle--path stability, for different sets of parameter values we may have saddle stability, totally unstable equilibria and chaotic attractors; (iii) for certain degrees of convexity and/or concavity of the Phillips curve, where endogenous fluctuations arise, one is able to encounter various results that seem intuitively correct. Firstly, when the Central Bank pays attention essentially to inflation targeting, the inflation rate has a lower mean and is less volatile; secondly, when the degree of price stickiness is high, the inflation rate displays a larger mean and higher volatility (but this is sensitive to the values given to the parameters of the model); and thirdly, the higher the target value of the output gap chosen by the Central Bank, the higher is the inflation rate and its volatility.Comment: 11 page

Reflectance Confocal Microscopy for the Diagnosis of Galli-Galli Disease

info:eu-repo/semantics/publishedVersio

Trombose e ruptura da veia superficial do pénis simulando fractura peniana

As rupturas traumáticas dos vasos penianos durante actividade sexual são raras. Relatamos caso clínico de doente com ruptura e trombose da veia superficial do pénis simulando como fractura peniana. Breves considerações sobre o diagnóstico e tratamento destas entidade são tecidas

Operation planning of hydro stations using genetic algorithms considering their impact on the electricity market prices

With the advent of restructuring, generation companies have to plan the operation of their stations in order to maximize their profits. This is very relevant for companies having a large share of hydro stations, and even more if these stations have pumping capacity. This paper describes a model to plan the operation of a set of hydro stations eventually installed in cascade and admitting that some of them are pumping stations. Once a first set of operation orders is obtained using a Genetic Algorithm, their generation/load values are included in the expected market selling/buying curves and the hourly prices are updated. These prices are then used to refine the operation orders originating an iterative process so that hydro stations are price makers. The paper includes results for a hydro system in order to illustrate the application of the developed approach

Crescimento e acúmulo de macronutrientes na cultura da cebola em Baraúna (RN) e Petrolina (PE).

Com o objetivo de avaliar o crescimento e o acúmulo de nutrientes por cultivares de cebola experimentos foram desenvolvidos na estação experimental de Bebedouro (Petrolina, PE) pertencente à Embrapa Semiárido, no período de maio a outubro de 2009 e em Baraúna, RN, em área comercial, no período de junho a outubro de 2009. O delineamento utilizado em cada experimento foi em blocos casualizados completos, com quatro repetições em esquema fatorial 2 x 6. Os tratamentos resultaram da combinação de duas cultivares de cebola (IPA 11 e Texas Grano 502) e seis épocas de coleta (15, 30, 45, 60, 75 e 90 DAT). Em cada coleta foram utilizadas seis plantas por repetição. A cebola, cultivares IPA 11 e Texas Grano, apresentou crescimento inicial lento intensificando-o a partir dos 30 dias após o transplantio. Maiores incrementos na matéria seca total, da parte aérea e do bulbo, ocorreram no período de 60 a 75 DAT. Os nutrientes foram absorvidos pela cebola na seguinte ordem: Ca > K > N > Mg > P e Ca > N > K > Mg > P para ?Texas Grano 502? e ?IPA 11? em Petrolina e K > Ca > N > Mg > P e N > K > Ca > Mg > P para Texas Grano 502 e IPA 11 em Baraúna. As cultivares Texas Grano 502 e IPA 11 exportaram mais nutrientes em Baraúna