On the sustainability of currency boards : evidence from Argentina and Hong Kong : [Version: September 2008]

This paper examines the sustainability of the currency board arrangements in Argentina and Hong Kong. We employ a Markov switching model with two regimes to infer the exchange rate pressure due to economic fundamentals and market expectations. The empirical results suggest that economic fundamentals and expectations are key determinants of a currency board’s sustainability. We also show that the government’s credibility played a more important role in Argentina than in Hong Kong. The trade surplus, real exchange rate and inflation rate were more important drivers of the sustainability of the Hong Kong currency board

A Structural Investigation into the Price and Wage Dynamics in Hong Kong

This paper estimates the degree of wage and price flexibility of the Hong Kong economy with the use of a stylised dynamic stochastic general equilibrium (DSGE) model developed for the Hong Kong economy. It also studies the factors contributing to deflation in Hong Kong following the Asian financial crisis (i.e. during the period from 1998 to 2003) and finds that declining import prices were the main culprit. Consistent with earlier studies on the subject and anecdotal evidence, wages and prices in Hong Kong are found to be (relatively) flexible.DSGE, Bayesian Estimation, Nominal Rigidities

Modeling asteroid binary systems with the full two-body problem using surface integrals

An asteroid binary system, where two asteroids are in mutual orbit, is important to study as it can provide knowledge of the history of the asteroid population. The most important mechanism to form asteroid binaries in the near-Earth population, and for asteroids with diameters less than 10 km, is rotational fission. Rotational fission occurs when a rubble pile asteroid, which can be thought of as a collection of rocks held together by gravity, reaches a critical spin rate and the rubble pile starts to shed mass. Studying the dynamics of asteroid binaries allows one to better understand how they have evolved. However, due to their non-spherical shapes, one has to take into account both the translational and rotational motion of asteroids, which is known as the full two-body problem. The study of the full two-body problem is a challenge as the mutual gravitational potential between two non-spherical bodies cannot be expressed analytically. Previous studies have used approximations to model the mutual potential between two asteroids. However, these approximations often suffer from inaccuracies when the bodies are close to each other, and also from truncation errors. In this thesis, we make use of a new method to determine the mutual potential, between two asteroids, with the use of surface integrals. We apply this method to study the dynamics of the 1999 KW4 binary system, where both bodies are modeled as ellipsoids. With the use of an order nine Runge-Kutta method, the system energy and angular momentum are conserved to the 11th decimal digit. One of the advantages of the surface integration method is that the results are valid even if the bodies are close to each other. We make use of this advantage to study the dynamics of asteroid systems formed by rotational fission, as the two bodies are very close to each other in the initial formation stages. We consider ellipsoidal bodies for the simulations. Six models are considered, three where the secondary takes different densities and three where we change the shape of the secondary. The simulations show that more than 80\% of the simulations result in the two bodies colliding. The secondary is more likely to escape the gravitational pull of the primary, forming an asteroid pair, and experience secondary fission, if the secondary has a higher density than the primary, or has a more elongated shape. We also compare the rotation periods of the bodies from the simulations with the ones from observations of asteroid binaries and pairs. The rotation periods from the simulations match very well with the rotation periods of observed asteroid pairs. The surface integration scheme can yield exact values to the mutual gravitational potential between two ellipsoidal bodies. This method can therefore be used to determine the accuracy of methods that approximates the mutual potential between two ellipsoids. We compare the surface integration scheme with an approach that expands the mutual potential with the use of inertia integrals. The differences in the gravitational force and torque, between the two methods, are less than 1\% if the bodies are separated by $2-3$ times the radius of the primary. If the bodies are almost touching, however, the differences can exceed 100\% if the shape of the primary becomes elongated. The discrepancies in the torques are typically an order magnitude larger than the difference in the forces.publishedVersio

Competition, Consumer Welfare, and the Social Cost of Monopoly

Conventional deadweight loss measures of the social cost of monopoly ignore, among other things, the social cost of inducing competition and thus cannot accurately capture the loss in social welfare. In this Article, we suggest an alternative method of measuring the social cost of monopoly. Using elements of general equilibrium theory, we propose a social cost metric where the benchmark is the Pareto optimal state of the economy that uses the least amount of resources, consistent with consumers' utility levels in the monopolized state. If the primary goal of antitrust policy is the enhancement of consumer welfare, then the proper benchmark is Pareto optimality, not simply competitive markets. We discuss the implications of our approach for antitrust law as well as how our methodology can be used in practice for allegations of monopoly power given a history of price-demand observations.Monopoly power, Antitrust economics, Applied general equilibrium

Error Free Perfect Secrecy Systems

Shannon's fundamental bound for perfect secrecy says that the entropy of the secret message cannot be larger than the entropy of the secret key initially shared by the sender and the legitimate receiver. Massey gave an information theoretic proof of this result, however this proof does not require independence of the key and ciphertext. By further assuming independence, we obtain a tighter lower bound, namely that the key entropy is not less than the logarithm of the message sample size in any cipher achieving perfect secrecy, even if the source distribution is fixed. The same bound also applies to the entropy of the ciphertext. The bounds still hold if the secret message has been compressed before encryption. This paper also illustrates that the lower bound only gives the minimum size of the pre-shared secret key. When a cipher system is used multiple times, this is no longer a reasonable measure for the portion of key consumed in each round. Instead, this paper proposes and justifies a new measure for key consumption rate. The existence of a fundamental tradeoff between the expected key consumption and the number of channel uses for conveying a ciphertext is shown. Optimal and nearly optimal secure codes are designed.Comment: Submitted to the IEEE Trans. Info. Theor

Improved Spin Dynamics Simulations of Magnetic Excitations

Using Suzuki-Trotter decompositions of exponential operators we describe new algorithms for the numerical integration of the equations of motion for classical spin systems. These techniques conserve spin length exactly and, in special cases, also conserve the energy and maintain time reversibility. We investigate integration schemes of up to eighth order and show that these new algorithms can be used with much larger time steps than a well established predictor-corrector method. These methods may lead to a substantial speedup of spin dynamics simulations, however, the choice of which order method to use is not always straightforward.Comment: J. Mod. Phys. C (in press