Fiscal stimulus and the promise of future spending cuts: a comment

Recent evaluations of the fiscal stimulus packages recently enacted in the United States and Europe such as Cogan, Cwik, Taylor and Wieland (2009) and Cwik and Wieland (2009) suggest that the GDP effects will be modest due to crowding-out of private consumption and investment. Corsetti, Meier and Mueller (2009a,b) argue that spending shocks are typically followed by consolidations with substantive spending cuts, which enhance the short-run stimulus effect. This note investigates the implications of this argument for the estimated impact of recent stimulus packages and the case for discretionary fiscal policy

Discrete gravity as a topological field theory with light-like curvature defects

I present a model of discrete gravity, which is formulated in terms of a topological gauge theory with defects. The theory has no local degrees of freedom and the gravitational field is trivial everywhere except at a number of colliding null surfaces, which represent a system of curvature defects propagating at the speed of light. The underlying action is local and it is studied in both its Lagrangian and Hamiltonian formulation. The canonically conjugate variables on the null surfaces are a spinor and a spinor-valued two-surface density, which are coupled to a topological field theory for the Lorentz connection in the bulk. I discuss the relevance of the model for non-perturbative approaches to quantum gravity, such as loop quantum gravity, where similar variables have recently appeared as well.Comment: 52 pages, one figure, one table, v2: published version with extended conclusio

Learning, endogenous indexation and disinflation in the New-Keynesian Model

This paper introduces adaptive learning and endogenous indexation in the New-Keynesian Phillips curve and studies disinflation under inflation targeting policies. The analysis is motivated by the disinflation performance of many inflation-targeting countries, in particular the gradual Chilean disinflation with temporary annual targets. At the start of the disinflation episode price-setting firms’ expect inflation to be highly persistent and opt for backward-looking indexation. As the central bank acts to bring inflation under control, price-setting firms revise their estimates of the degree of persistence. Such adaptive learning lowers the cost of disinflation. This reduction can be exploited by a gradual approach to disinflation. Firms that choose the rate for indexation also re-assess the likelihood that announced inflation targets determine steady-state inflation and adjust indexation of contracts accordingly. A strategy of announcing and pursuing short-term targets for inflation is found to influence the likelihood that firms switch from backward-looking indexation to the central bank’s targets. As firms abandon backward-looking indexation the costs of disinflation decline further. We show that an inflation targeting strategy that employs temporary targets can benefit from lower disinflation costs due to the reduction in backward-looking indexation

And so on: two theories of regress arguments in philosophy

This PhD dissertation is on infinite regress arguments in philosophy. Its main goals are to explain what such arguments from many distinct philosophical debates have in common, and to provide guidelines for using and evaluating them. Two theories are reviewed: the Paradox Theory and the Failure Theory. According to the Paradox Theory, infinite regress arguments can be used to refute an existentially or universally quantified statement (e.g. to refute the statement that at least one discussion is settled, or the statement that discussions are settled only if there is an agreed-upon criterion to settle them). According to the Failure Theory, infinite regress arguments can be used to demonstrate that a certain solution fails to solve an existentially or universally quantified problem (e.g. to demonstrate that a certain solution fails to settle all discussions, or that it fails to settle even one discussion). In the literature, the Paradox Theory is fairly well-developed, and this dissertation provides the Failure Theory with the same tools

Abelian quotients of subgroups of the mapping class group and higher Prym representations

A well-known conjecture asserts that the mapping class group of a surface (possibly with punctures/boundary) does not virtually surject onto $\Z$ if the genus of the surface is large. We prove that if this conjecture holds for some genus, then it also holds for all larger genera. We also prove that if there is a counterexample to this conjecture, then there must be a counterexample of a particularly simple form. We prove these results by relating the conjecture to a family of linear representations of the mapping class group that we call the higher Prym representations. They generalize the classical symplectic representation.Comment: 20 pages, 3 figures; appendix added containing a new counterexample in genus 1; to appear in J. London Math. So

Asset pricing under rational learning about rare disasters : [Version 28 Juli 2011]

This paper proposes a new approach for modeling investor fear after rare disasters. The key element is to take into account that investors’ information about fundamentals driving rare downward jumps in the dividend process is not perfect. Bayesian learning implies that beliefs about the likelihood of rare disasters drop to a much more pessimistic level once a disaster has occurred. Such a shift in beliefs can trigger massive declines in price-dividend ratios. Pessimistic beliefs persist for some time. Thus, belief dynamics are a source of apparent excess volatility relative to a rational expectations benchmark. Due to the low frequency of disasters, even an infinitely-lived investor will remain uncertain about the exact probability. Our analysis is conducted in continuous time and offers closed-form solutions for asset prices. We distinguish between rational and adaptive Bayesian learning. Rational learners account for the possibility of future changes in beliefs in determining their demand for risky assets, while adaptive learners take beliefs as given. Thus, risky assets tend to be lower-valued and price-dividend ratios vary less under adaptive versus rational learning for identical priors. Keywords: beliefs, Bayesian learning, controlled diffusions and jump processes, learning about jumps, adaptive learning, rational learning. JEL classification: D83, G11, C11, D91, E21, D81, C6