Interest Rate Policy and Supply-side Adjustment Dynamics

In contrast to the present consensus view of stabilization policy, theoretical and empirical research strongly support the consideration of supply-side adjustment to pronounced variations of factor-utilization in order to trace a more realistic pattern of macroeconomic adjustment dynamics within simulation studies. Against this background, our paper seeks to illuminate the relevance of endogenous supply-side adjustment for monetary policy research. We modify a basic New Keynesian model by explicitly considering demand-side stimulus on the evolution of productive capacity and analyze stability, impulse response, and welfare issues if the central bank follows a simple monetary policy rule. Thereby, we control for the robustness of our policy implications by various states of output gap mismeasurement the central bank might be confronted with. We find that, in contrast to a basic New Keynesian Model, output gap stabilization plays a more prominent role when potential output is endogenous.monetary policy, factor-utilization, endogenous potential output, output gap mismeasurement

On the Relationship Between Exchange Rates and Interest Rates: Evidence from the Southern Cone

The purpose of this paper is to provide a closer view on the interaction of exchange rate volatility and interest rate volatility in the Mercosur countries. We discuss several models that explain systematic correlations between the movements of both variables and their second statistical moments, i.e. their volatilities. In contrast to the “fear of floating” argument that could lead to a volatility trade-off, we argue that both variables are largely driven either by the credibility of a country or by politics in general and thus should move in the same direction. Subsequently, we test this hypothesis of a positive correlation between both variables empirically. As a final step, we control for the impact of third variables such as exchange rate misalignment, financial stress, and monetary volatility. Our results show that – independent from third variables –there is a notable co-movement of exchange rates and interest rates in Mercosur countries.

Equilibrium and efficiency in the tug-of-war

We characterize the unique Markov perfect equilibrium of a tug-of-war without exogenous noise, in which players have the opportunity to engage in a sequence of battles in an attempt to win the war. Each battle is an all-pay auction in which the player expending the greater resources wins. In equilibrium, contest effort concentrates on at most two adjacent states of the game, the tipping states, which are determined by the contestants' relative strengths, their distances to final victory, and the discount factor. In these states battle outcomes are stochastic due to endogenous randomization. Both relative strength and closeness to victory increase the probability of winning the battle at hand. Patience reduces the role of distance in determining outcomes. Applications range from politics, economics and sports, to biology, where the equilibrium behavior finds empirical support: many species have developed mechanisms such as hierarchies or other organizational structures by which the allocation of prizes are governed by possibly repeated conflict. Our results contribute to an explanation why. Compared to a single stage conflict, such structures can reduce the overall resources that are dissipated among the group of players. -- Wir beschreiben das eindeutige Markoff-perfekte Gleichgewicht in einem mehrstufigen Konflikt ohne exogene Unsicherheit (noise), bei dem die Spieler versuchen, in einer Serie von aufeinander folgenden kleineren Gefechten einen Konflikt zu gewinnen. Jedes Gefecht ist eine all-pay auction, bei der derjenige Spieler gewinnt, der die meisten Ressourcen eingesetzt hat. Im Gleichgewicht konzentriert sich der Mitteleinsatz auf höchstens zwei benachbarte Zustände, die wir als spielentscheidende Zustände (tipping states) bezeichnen. Die Lage dieser Zustände hängt von der relativen Stärke der Spieler, der Zahl der verbleibenden Spielstufen bis zum Gesamtsieg und dem Diskontierungsfaktor ab. An diesen kritischen Zuständen ist der Konfliktausgang zufällig aufgrund der stochastischen Verteilung der im Gleichgewicht gewählten Mengen von Konfliktressourcen. Sowohl die relative Stärke als auch die Nähe zur finalen Konfliktstufe erhöhen die Wahrscheinlichkeit, das einzelne Gefecht zu gewinnen. Geringe Kosten des Wartens verringern den Einfluss der Entfernung zum Gesamtsieg auf den Ausgang der einzelnen Gefechte. Die Anwendungsgebiete sind zahlreich und reichen von der Politik über die Wirtschaft und den Sport bis zur Biologie. Dort findet das Gleichgewichtsergebnis empirisch Unterstützung: Viele Arten haben eigene Mechanismen entwickelt, z.B. Hierarchien oder andere Organisationsstrukturen, bei denen die Allokation der Siegerprämie in sich möglicherweise wiederholenden Konflikten erfolgt. Unsere Ergebnisse liefern hierzu eine Erklärung. Im Vergleich mit einem einstufigen Konflikt können solche Strukturen den Ressourceneinsatz der Spieler reduzieren.Winner-take-all,all-pay auction,tipping,multi-stage contest,dynamic game,pre-emption,conflict,dominance

On the Relationship Between Exchange Rates and Interest Rates: Evidence from the Southern Cone

This paper provides a closer view on the interaction of exchange rate volatility and interest rate volatility in the Mercosur countries. We discuss several models that explain systematic correlations between the movements of both variables and their seconCurrency union, exchange rate and interest rate variability, volatility trade-off, Mercosur

Baryon Asymmetry and Gravitational Waves from Pseudoscalar Inflation

In models of inflation driven by an axion-like pseudoscalar field, the inflaton, a, may couple to the standard model hypercharge via a Chern-Simons-type interaction, $L \subset a/(4\Lambda) F\tilde{F}$. This coupling results in explosive gauge field production during inflation, especially at its last stage, which has interesting phenomenological consequences: For one thing, the primordial hypermagnetic field is maximally helical. It is thus capable of sourcing the generation of nonzero baryon number, via the standard model chiral anomaly, around the time of electroweak symmetry breaking. For another thing, the gauge field production during inflation feeds back into the primordial tensor power spectrum, leaving an imprint in the stochastic background of gravitational waves (GWs). In this paper, we focus on the correlation between these two phenomena. Working in the approximation of instant reheating, we (1) update the investigation of baryogenesis via hypermagnetic fields from pseudoscalar inflation and (2) examine the corresponding implications for the GW spectrum. We find that successful baryogenesis requires a suppression scale Lambda of around Lambda ~ 3 x 10^17 GeV, which corresponds to a relatively weakly coupled axion. The gauge field production at the end of inflation is then typically accompanied by a peak in the GW spectrum at frequencies in the MHz range or above. The detection of such a peak is out of reach of present-day technology; but in the future, it may serve as a smoking-gun signal for baryogenesis from pseudoscalar inflation. Conversely, models that do yield an observable GW signal suffer from the overproduction of baryon number, unless the reheating temperature is lower than the electroweak scale.Comment: 37 pages + references, 9 figures, 1 tabl

Endoscopic imaging of quantum gases through a fiber bundle

We use a coherent fiber bundle to demonstrate the endoscopic absorption imaging of quantum gases. We show that the fiber bundle introduces spurious noise in the picture mainly due to the strong core-to-core coupling. By direct comparison with free-space pictures, we observe that there is a maximum column density that can be reliably measured using our fiber bundle, and we derive a simple criterion to estimate it. We demonstrate that taking care of not exceeding such maximum, we can retrieve exact quantitative information about the atomic system, making this technique appealing for systems requiring isolation form the environment