Money in monetary policy design under uncertainty: a formal characterization of ECB-style cross-checking

The European Central Bank has assigned a special role to money in its two pillar strategy and has received much criticism for this decision. The case against including money in the central bank’s interest rate rule is based on a standard model of the monetary transmission process that underlies many contributions to research on monetary policy in the last two decades. In this paper, we develop a justification for including money in the interest rate rule by allowing for imperfect knowledge regarding unobservables such as potential output and equilibrium interest rates. We formulate a novel characterization of ECB-style monetary cross-checking and show that it can generate substantial stabilization benefits in the event of persistent policy misperceptions regarding potential output. JEL Classification: E32, E41, E43, E52, E5

Central bank misperceptions and the role of money in interest rate rules

Research with Keynesian-style models has emphasized the importance of the output gap for policies aimed at controlling inflation while declaring monetary aggregates largely irrelevant. Critics, however, have argued that these models need to be modified to account for observed money growth and inflation trends, and that monetary trends may serve as a useful cross-check for monetary policy. We identify an important source of monetary trends in form of persistent central bank misperceptions regarding potential output. Simulations with historical output gap estimates indicate that such misperceptions may induce persistent errors in monetary policy and sustained trends in money growth and inflation. If interest rate prescriptions derived from Keynesian-style models are augmented with a cross-check against money-based estimates of trend inflation, inflation control is improved substantially

Money in monetary policy design under uncertainty : the two-pillar Phillips curve versus ECB-style cross-checking

The European Central Bank has assigned a special role to money in its two pillar strategy and has received much criticism for this decision. In this paper, we explore possible justifications. The case against including money in the central bank’s interest rate rule is based on a standard model of the monetary transmission process that underlies many contributions to research on monetary policy in the last two decades. Of course, if one allows for a direct effect of money on output or inflation as in the empirical “two-pillar” Phillips curves estimated in some recent contributions, it would be optimal to include a measure of (long-run) money growth in the rule. In this paper, we develop a justification for including money in the interest rate rule by allowing for imperfect knowledge regarding unobservables such as potential output and equilibrium interest rates. We formulate a novel characterization of ECB-style monetary cross-checking and show that it can generate substantial stabilization benefits in the event of persistent policy misperceptions regarding potential output. Such misperceptions cause a bias in policy setting. We find that cross-checking and changing interest rates in response to sustained deviations of long-run money growth helps the central bank to overcome this bias. Our argument in favor of ECB-style cross-checking does not require direct effects of money on output or inflation. JEL Classification: E32, E41, E43, E52, E5

Wolf spiders of the Pacific region: the genus \u3ci\u3eZoica\u3c/i\u3e (Araneae, Lycosidae)

The wolf spider genus Zoica Simon 1898 is currently known only from the Indo-Australasian region, including India in the west to northern Western Australia and Papua New Guinea in the east. Here we extend the known distribution of the genus into the Pacific region by describing two new species, Z. carolinensis new species from the Caroline Islands, Federated States of Micronesia, and Z. pacifica new species from the Republic of the Marshall Islands

Money in Monetary Policy Design under Uncertainty: The Two-Pillar Phillips Curve versus ECB-Style Cross-Checking

The European Central Bank has assigned a special role to money in its two pillar strategy and has received much criticism for this decision. In this paper, we explore possible justifications. The case against including money in the central bank’s interest rate rule is based on a standard model of the monetary transmission process that underlies many contributions to research on monetary policy in the last two decades. Of course, if one allows for a direct effect of money on output or inflation as in the empirical “two-pillar” Phillips curves estimated in some recent contributions, it would be optimal to include a measure of (long-run) money growth in the rule. In this paper, we develop a justification for including money in the interest rate rule by allowing for imperfect knowledge regarding unobservables such as potential output and equilibrium interest rates. We formulate a novel characterization of ECB-style monetary cross-checking and show that it can generate substantial stabilization benefits in the event of persistent policy misperceptions regarding potential output. Such misperceptions cause a bias in policy setting. We find that cross-checking and changing interest rates in response to sustained deviations of long-run money growth helps the central bank to overcome this bias. Our argument in favor of ECB-style cross-checking does not require direct effects of money on output or inflation.Monetary Policy, Quantity Theory, Phillips Curve, European Central Bank Policy Under Uncertainty

Money in Monetary Policy Design under Uncertainty: A Formal Characterization of ECB-Style Cross-Checking

The European Central Bank has assigned a special role to money in its two pillar strategy and has received much criticism for this decision. The case against including money in the central bank’s interest rate rule is based on a standard model of the monetary transmission process that underlies many contributions to research on monetary policy in the last two decades. In this paper, we develop a justification for including money in the interest rate rule by allowing for imperfect knowledge regarding unobservables such as potential output and equilibrium interest rates. We formulate a novel characterization of ECB-style monetary cross-checking and show that it can generate substantial stabilization benefits in the event of persistent policy misperceptions regarding potential output.Monetary Policy, Money, Quantity Theory, Phillips Curve, European Central Bank, Policy Under Uncertainty

New Global F-theory GUTs with U(1) symmetries

We construct global F-theory GUTs with SU(5) x U(1) gauge group defined by specifying a fully resolved Calabi-Yau fourfold and consistent four-form G-flux. Its specific U(1) charged matter spectrum allows the desired Yukawa couplings, but forbids dangerous proton decay operators. The model we find: (1) does not follow from an underlying higgsed E8 gauge group (2) leaves the class of theories that can be analyzed with current split-spectral cover techniques. This avoids recently proposed no-go theorems for models with hypercharge flux, as required to break the GUT group. The appearance of additional fields is related geometrically to considering a more general class of sections and 4-1 splits. We show explicitly that the four-dimensional chiral matter index can still be computed using three-dimensional one-loop Chern-Simons terms.Comment: 24 pages, 2 figure

Complete Intersection Fibers in F-Theory

Global F-theory compactifications whose fibers are realized as complete intersections form a richer set of models than just hypersurfaces. The detailed study of the physics associated with such geometries depends crucially on being able to put the elliptic fiber into Weierstrass form. While such a transformation is always guaranteed to exist, its explicit form is only known in a few special cases. We present a general algorithm for computing the Weierstrass form of elliptic curves defined as complete intersections of different codimensions and use it to solve all cases of complete intersections of two equations in an ambient toric variety. Using this result, we determine the toric Mordell-Weil groups of all 3134 nef partitions obtained from the 4319 three-dimensional reflexive polytopes and find new groups that do not exist for toric hypersurfaces. As an application, we construct several models that cannot be realized as toric hypersurfaces, such as the first toric SU(5) GUT model in the literature with distinctly charged 10 representations and an F-theory model with discrete gauge group Z_4 whose dual fiber has a Mordell-Weil group with Z_4 torsion.Comment: 41 pages, 4 figures and 18 tables; added references in v