Inflation dynamics: a cross-country investigation

We document that "persistent and lagged" inflation (with respect to output) is a world-wide phenomenon in that these short-run inflation dynamics are highly synchronized across countries. In particular, the average cross-country correlation of inflation is significantly and systematically stronger than that of output, while the cross-country correlation of money growth is essentially zero. We investigate whether standard monetary models driven by monetary shocks are consistent with the empirical facts. We find that neither the new Keynesian sticky-price model nor the sticky-information model can fully explain the data. An independent contribution of the paper is to provide a simple solution technique for solving general equilibrium models with sticky information. ; Earlier title: Inflation and money: a puzzleMoney ; Inflation (Finance)

Another look at sticky prices and output persistence

Price rigidity is the key mechanism for propagating business cycles in traditional Keynesian theory. Yet the New Keynesian literature has failed to show that sticky prices by themselves can effectively propagate business cycles in general equilibrium. We show that price rigidity in fact can (by itself) give rise to a strong propagation mechanism of the business cycle in standard New Keynesian models, provided that investment is also subject to a cash-in-advance constraint. In particular, we show that reasonable price stickiness can generate highly persistent, hump-shaped movements in output, investment and employment in response to either monetary or non-monetary shocks, even if investment is only partially cash-in-advance constrained. Hence, whether or not price rigidity is responsible for output persistence (and the business cycle in general) may not be a theoretical question, but an empirical one.Prices ; Business cycles

Solving linear difference systems with lagged expectations by a method of undetermined coefficients

This paper proposes a solution method to solve linear difference models with lagged expectations. Variables with lagged expectations expand the model's state space greatly when N is large; and getting the system into a canonical form solvable by the traditional methods involves substantial manual work (e.g., arranging the state vector and the associated coefficient matrices to accommodate variables with lagged expectations), which is prone to human errors. Our method avoids the need of expanding the state space of the system and shifts the burden of analysis from the individual economist/model solver toward the computer. Hence it can be a very useful tool in practice, especially in testing and estimating economics models with a high order of lagged expectations. Examples are provided to demonstrate the usefulness of the method. We also discuss the implications of lagged expectations on the equilibrium properties of indeterminate DSGE models, such as the serial correlation properties of sunspots shocks in these models.Monetary policy ; Macroeconomics

Another Look at Sticky Prices and Output Persistence

Price rigidity is the key mechanism for propagating business cycles in traditional Keynesian theory. Yet the New Keynesian literature has failed to show that sticky prices by itself can effectively propagate business cycles in general equilibrium. This situation may be a direct consequence of the notion that money-in-utility (MIU) and cash-in-advance (CIA) are equivalent mechanisms for generating money demand. They are not. We show that price rigidity in fact can (by itself) give rise to a powerful propagation mechanism of the business cycle under CIA constraint in standard New Keynesian general equilibrium models. In particular, we show that reasonable price stickiness can generate highly persistent, hump-shaped movements in output, investment and employment in response to either monetary or non-monetary shocks. Hence, whether or not price rigidity is responsible for output persistence (and the business cycle in general) is not a theoretical question, but an empirical one.

KS0−KL0K_S^0-K_L^0 Asymmetries and CPCP Violation in Charmed Baryon Decays into Neutral Kaons

We study the $K^0_S-K^0_L$ asymmetries and $CP$ violations in charm-baryon decays with neutral kaons in the final state. The $K^0_S-K^0_L$ asymmetry can be used to search for two-body doubly Cabibbo-suppressed amplitudes of charm-baryon decays, with the one in $\Lambda^+_c\to pK^0_{S,L}$ as a promising observable. Besides, it is studied for a new $CP$-violation effect in these processes, induced by the interference between the Cabibbo-favored and doubly Cabibbo-suppressed amplitudes with the neutral kaon mixing. Once the new CP-violation effect is determined by experiments, the direct $CP$ asymmetry in neutral kaon modes can then be extracted and used to search for new physics. The numerical results based on $SU(3)$ symmetry will be tested by the experiments in the future.Comment: 15 pages, 3 tables. Version published in JHE

China’s Challenging the “Ricardo Law” Circle： Is world development inevitably antagonistic or conflictive

World historical development, especially the development of modern and contemporary globalization, tends to be antagonistic, conflictive and non-harmonious. Its theoretical demonstration is “Ricardo Law” circle, namely the rule that social productivity development and historical progress are at the expense of certain social classes and strata. Western countries after the Second World War have hence changed partly in certain ideas, productivity and specific regulations. Will China be fettered by “Ricardo Law” circle in our transformational socialism and has to apply the antagonistic, conflictive and non-harmonious method to achieve the alienating “development”? This paper analyzes the harmony and conflict thoughts and policies of the western economics represented by “Ricardo Law” in order to probe into our socialist social and economic harmony theory. Key words: Ricardo Law, harmony and conflict thoughts of western economics, Harmonious Society Theory Résumé: Le développement historique du monde, notamment le développement de la globalisation moderne et contemporaine, tend à s’avérer antagoniste, conflictuel et non harmonieux. La démonstration théorique est le cercle de la « loi de Ricardo », à savoir la règle que le développement de la force productive sociale et le progrès social sont aux dépens de certaines classes et souches sociales. Après le Seconde guerre mondiale, les pays occidentaux ont changé en partie certaines idées et des régulations spécifiques. Est-ce que la Chine sera enchaînée par la loi de Ricardo dans notre socialisme transformationnel et aura à appliquer la méthode antagoniste, conflictuelle et non harmonieuse pour accomplir le développement aliéné ? Le présent article analyse les pensées et politiques d’harmonie et de conflit des pays occidentaux, représentées par la loi de Ricardo, dans le but d’explorer la théorie d’harmonie économique et sociale socialiste de notre pays. Mots-Clés: loi de Ricardo, pensées d’harmonie et de conflit des pays occidentaux, théorie de la société harmonieus