Borrowing Constraints, Multiple Equilibria and Monetary Policy

The appealing feature of Kiyotaki and Moore's Financial Accelerator model (Kiyotaki and Moore, 1997, 2002) is the linkage of asset price changes and borrowing constraints. This framework therefore is the natural vehicle to explore the net worth channel of the monetary transmission mechanism. In the original model, however, all the variables, credit included, are in real terms. In order to assess the impact of monetary policy the model must be reformulated to fit a monetary economy. In the present paper we model a monetary economy with financing constraints adopting the Money In the Utility function (MIU) approach.The occurrence of multiple equilibria is a likely outcome of the dynamics generated by the model. A change in the growth rate of money supply can affect real out- put through the impact of inflation on net worth. In a sense the monetary transmission mechanism we are focusing on consists of a combination of the inflation tax effect and the net worth channel. Contrary to the traditional view, at least for some parameter restrictions, an increase of the inflation tax can bring about an increase of aggregate output.

Barriers and drivers to energy efficiency? A New taxonomical approach

This paper develops a new systematic classification and explanation of barriers and drivers to energy efficiency. Using an `actor oriented approach', the paper tries to identify (i) the drivers and barriers that affect the success or failure of energy efficiency investments and (ii) the institutions that are responsible for the emergence of these barriers and drivers. This taxonomy aims to synthesise ideas from three broad perspectives, viz., micro (project/end user), meso (organization), and macro (state, market, civil society). The paper develops a systematic framework by looking at the issues from the perspective of different actors. This not only aids the understanding of barriers and drivers; it also provides scope for appropriate policy interventions. This focus will help policy-makers evaluate to what extent future interventions may be warranted and how one can judge the success of particular interventions.

The Great Climate Debate - A Developing Country Perspective

For over two decades, scientific and political communities have debated whether and how to act on climate change. The present paper revisits these debates and synthesizes the longstanding arguments. Firstly, it provides an overview of the development of international climate policy and discusses clashing positions represented by sceptics and supporters of action on climate change. Secondly, it discusses the market-based measures as a means to increase the win-win opportunities and to attract profit-minded investors to invest in climate change mitigation. Finally, the paper examines whether climate protection policies can yield benefits both for the environment and the economy. The paper suggests the possibility of building environmental and climate policies around development priorities that are vitally important for developing countries and stresses the need for using sustainable development as a framework for climate change policies.Climate change, Sceptic, Supporter, Developing country

Barriers and Drivers to Energy Efficiency - A new Taxonomical Approach

This paper develops a new systematic classification and explanation of barriers and drivers to energy efficiency. Using an actor oriented approach, the paper tries to identify (i) the drivers and barriers that affect the success or failure of energy efficiency investments and (ii) the institutions that are responsible for the emergence of these barriers and drivers. This taxonomy aims to synthesise ideas from three broad perspectives, viz., micro (project/end user), meso (organization), and macro (state, market, civil society). The paper develops a systematic framework by looking at the issues from the perspective of different actors. This not only aids the understanding of barriers and drivers; it also provides scope for appropriate policy interventions. This focus will help policy-makers evaluate to what extent future interventions may be warranted and how one can judge the success of particular interventions.Energy Efficiency, Taxonomical Approach

The Great climate debate : A Developing country perspective

For over two decades, scientific and political communities have debated whether and how to act on climate change. The present paper revisits these debates and synthesizes the longstanding arguments. Firstly, it provides an overview of the development of international climate policy and discusses clashing positions represented by sceptics and supporters of action on climate change. Secondly, it discusses the market-based measures as a means to increase the win-win opportunities and to attract profit-minded investors to invest in climate change mitigation. Finally, the paper examines whether climate protection policies can yield benefits both for the environment and the economy. The paper suggests the possibility of building environmental and climate policies around development priorities that are vitally important for developing countries and stresses the need for using sustainable development as a framework for climate change policies.Climate change, Sceptic, Supporter, Developing country

Was Bernanke Right? Targeting Asset Prices may not be a Good Idea after all

Should the central bank prevent “excessive” asset price dynamics or should it wait until the boom spontaneously turns into a crash and intervene only afterwards? The debate over this issue goes back at least to the exchange between Bernanke-Gertler (BG) and Cecchetti but has not settled yet. In their 1999 paper BG claimed that price stability and financial stability are ‘highly complementary and mutually consistent objectives’ in a flexible inflation targeting regime which ‘dictates that central banks ... should not respond to changes in asset prices, except insofar as they signal changes in expected inflation.’ (BG, 1999, p.18). This conclusion is straightforward within the variant of the NK-DSGE framework used by BG in which asset inflation shows up as a factor ‘augmenting’ the IS curve. In the present paper, we pursue a different modelling strategy so that, in the end, asset price dynamics will be incorporated into the NK Phillips curve. In our context it is not true anymore that by focusing on inflation the central bank is also checking an asset price boom. We put ourselves, therefore, in the best position to obtain a significant stabilizing role for asset price targeting. It turns out, however, that inflation volatility is higher in the asset price targeting case. After all, therefore, targeting asset prices may not be a good idea.cost channel, asset prices, Taylor rules

Heterogeneity and Aggregation in a Financial Accelerator Model

In this paper we present a macroeconomic model in which changes in the variance (and higher moments of the distribution) of firm's financial conditions - i.e. "distributive shocks" - are bound to play a crucial role in the determination of output fluctuations. Firms differ by degree of financial robustness, which affects (optimal) investment in a bankruptcy risk context (à la Greenwald-Stiglitz). As to households, for the sake of simplicity, we assume that they are homogeneous in every respect so that we can adopt the representative agent hypothesis. We can explore the properties of the macro-dynamic model either via the study of the two-dimensional map defining the laws of motion of the average equity ratio and of the variance of the distribution or via simulations in a multiagent framework.

Asset Prices and Monetary Policy: A New View of the Cost Channel

Should the central bank act to prevent "excessive" asset price dynamics or should it wait until the boom spontaneously turns into a crash and intervene afterwards to attenuate the fallout on the real economy? The standard "three equation" New Keynesian framework is inadequate to analyse this issue for the very simple reason that asset prices are not explicitly included in the model. There are two straightforward ways to take into account asset price dynamics in this framework. First of all, the objective function of the central bank - usually defined in terms of inflation and the output gap - could be "augmented" to take into account asset price inflation. Second, expected asset price inflation can affect the IS curve through a wealth effect. In this paper we follow a different route. In our model in fact, the expected asset price dynamics will be eventually incorporated into the NK Phillips curve. This is due to the assumption of a cost channel for monetary policy which is activated whenever monetary policy affects asset prices and dividends. In fact they determine the cost of external finance in the simple "equity only" financing model we consider, abstracting for simplicity from internal funds and the credit market.

An unusual case of loss of consciousness: when an epileptic brain let the heart slow down

The differential diagnosis of an episode of transient loss of consciousness can be sometimes very tricking, in particular when symptoms peculiar of syncope are mixed with focal neurological symptoms. We report the case of a 54-year-old woman who suddenly claimed, during a polygraphic recording (electroencephalography/electrocardiogram), a feeling of fear and tachycardia followed by loss of consciousness and then a tonic posturing of the left limbs. Polygraphic recording showed a critical electroencephalographic pattern starting from left temporo-zygomatic channels followed after few seconds by a sudden slowing of cortical background activity associated with an episode of asystole, as witnessed simultaneously by electrocardiogram. Muscular activity covered electroencephalographic activity of following minutes. This case provides an opportunity to highlight the existence of rare conditions such as ictal arrhythmias which should be considered in the differential diagnosis of episodes of transient loss of consciousness in particular when dysautonomic and neurological symptoms are intermingled. Autonomic symptoms (vomiting, tachycardia, cyanosis, bradycardia and asystole) may be also more frequent in idiopathic (more rarely symptomatic) epilepsies of childhood (Panayiotopoulos syndrome)