Nonlinearities in the Real Exchange Rate and Monetary Policy: Interest Rate Rules Reconsidered

Empirical research during the last ten years has found significant evidence in favour of a nonlinear-threshold type behaviour of the real exchange rate. Interest rate rules which include the exchange rate appear to have either an insignificant effect on or generate small coefficients for the real exchange rate. However, the empirical studies do not take into account the nonlinear behaviour of the exchange rate. The inclusion of nonlinearities in the real exchange rate could imply nonlinear behaviour in the interest rate rule, whenever the exchange rate is included. We use a two-country sticky price model to show that nonlinear Taylor-type rules where the exchange rate is included lead to lower variation in output and inflation.Taylor rules, real exchange rate, nonlinearities

Essays on exchange rates and optimal monetary policy for open economies

The thesis consists of three chapters of self-contained empirical and theoretical studies. In Chapter 1, I examine whether the Balassa-Samuelson effect is indeed the reason behind the behaviour of the currencies of transition economies. So far, in the literature, transition Economies appear to be subject to the Balassa-Samuelson effect. This implies that their currencies experience a prolonged appreciation in real terms as their convergence goes on. However, in the current literature, the effects of the capital account have not been analyzed extensively. In this paper I show that the capital account, rather than productivity, is a key determinant of the appreciation of the currencies of transition economies. I find that a long-run relationship exists between the real exchange rate, productivity, the real interest rate differential and the capital account. Moreover, those variables are found to cointegrate in a nonlinear fashion according to a smooth transition autoregressive model. This implies that a multivariate smooth transition error correction model is the appropriate model to describe their short-run and long-run dynamics. In Chapter 2, I examine the importance of a real exchange rate target in the monetary policy of a central bank. I address that question both empirically and theoretically. Using monthly data I estimate of a structural VAR model for the Eurozone providing evidence in favour of real exchange rate targeting. I examine this case theoretically using a twocountry DSGE model; I find that when the home central bank includes a real exchange rate target in its interest rate rule, it achieves lower welfare losses compared to the Taylor rule. Contrary to similar papers, I compute the optimized coefficients in the interest rate rules considered. I show that the benefits from real exchange rate targeting at home rise as persistence in inflation and output increases. In the robustness analysis I show that a rise in the fraction of backward looking consumers affects negatively the performance of the real exchange rate targeting rule and positively that of the Taylor rule. Asymmetries in the degree of rule-of-thumb behavior in consumption have important effects, as regards the performance of a real exchange rate targeting rule. The performance of both rules is not sensitive to variations in the degree of backward looking price setting behavior . In Chapter 3, I show, using both empirical and theoretical analysis, that changes in monetary policy in one country can have important effects on other economies. My new empirical evidence shows that changes in the monetary policy behaviour of the Fed since the start of the Euro, well captured by a Markov-switching Taylor rule, have had significant effects on the behaviour of inflation and output in the Eurozone even though ECB’s monetary policy is found to be fairly stable. Using a two-country DSGE model, I examine this case theoretically; monetary policy in one of the countries (labelled foreign) switches regimes according to a Markov-switching process and this has nonnegligible effects in the other (home) country. Switching by the foreign central bank renders commitment to a time invariant interest rate rule suboptimal for the home central bank. This is because home agents expectations change as foreign monetary policy changes which affects the dynamics of home inflation and output. Optimal policy in the home country instead reacts to the regime of the foreign monetary policy and so implies a time-varying reaction of the home Central Bank. Following this time-varying optimal policy at home eliminates the effects in the home country of foreign regime shifts, and also reduces dramatically the effects in the foreign country. Therefore, changes in foreign monetary regimes should not be neglected in considering monetary policy at home

Markov switching monetary policy in a two-country DSGE model

In this paper I show, using both empirical and theoretical analysis, that changes in monetary policy in one country can have important effects on other economies. My new empirical evidence shows that changes in the monetary policy behaviour of the Fed since the start of the Euro, well captured by a Markov-switching Taylor rule, have had significant effects on the behaviour of inflation and output in the Eurozone even though ECB's monetary policy is found to be fairly stable. Using a two-country DSGE model, I examine this case theoretically; monetary policy in one of the countries (labelled foreign) switches regimes according to a Markov-switching process and this has non-negligible effects in the other (home) country. Switching by the foreign central bank renders commitment to a time invariant interest rate rule suboptimal for the home central bank. This is because home agents expectations change as foreign monetary policy changes which affects the dynamics of home inflation and output. Optimal policy in the home country instead reacts to the regime of the foreign monetary policy and so implies a time-varying reaction of the home Central Bank. Following this time-varying optimal policy at home eliminates the effects in the home country of foreign regime shifts, and also reduces dramatically the effects in the foreign country. Therefore, changes in foreign monetary regimes should not be neglected in considering monetary policy at home

The Genomes On Line Database (GOLD) in 2007: status of genomic and metagenomic projects and their associated metadata

The Genomes On Line Database (GOLD) is a comprehensive resource that provides information on genome and metagenome projects worldwide. Complete and ongoing projects and their associated metadata can be accessed in GOLD through pre-computed lists and a search page. As of September 2007, GOLD contains information on more than 2900 sequencing projects, out of which 639 have been completed and their sequence data deposited in the public databases. GOLD continues to expand with the goal of providing metadata information related to the projects and the organisms/environments towards the Minimum Information about a Genome Sequence’ (MIGS) guideline. GOLD is available at http://www.genomesonline.org and has a mirror site at the Institute of Molecular Biology and Biotechnology, Crete, Greece at http://gold.imbb.forth.gr

Microbial co-habitation and lateral gene transfer: what transposases can tell us

Interactions between microbial communities are revealed using a network of lateral gene transfer events

Gene Context Analysis in the Integrated Microbial Genomes (IMG) Data Management System

Computational methods for determining the function of genes in newly sequenced genomes have been traditionally based on sequence similarity to genes whose function has been identified experimentally. Function prediction methods can be extended using gene context analysis approaches such as examining the conservation of chromosomal gene clusters, gene fusion events and co-occurrence profiles across genomes. Context analysis is based on the observation that functionally related genes are often having similar gene context and relies on the identification of such events across phylogenetically diverse collection of genomes. We have used the data management system of the Integrated Microbial Genomes (IMG) as the framework to implement and explore the power of gene context analysis methods because it provides one of the largest available genome integrations. Visualization and search tools to facilitate gene context analysis have been developed and applied across all publicly available archaeal and bacterial genomes in IMG. These computations are now maintained as part of IMG's regular genome content update cycle. IMG is available at: http://img.jgi.doe.gov

Metagenomes of tropical soil-derived anaerobic switchgrass-adapted consortia with and without iron

Tropical forest soils decompose litter rapidly with frequent episodes of anoxia, making it likely that bacteria using alternate terminal electron acceptors (TEAs) such as iron play a large role in supporting decomposition under these conditions. The prevalence of many types of metabolism in litter deconstruction makes these soils useful templates for improving biofuel production. To investigate how iron availability affects decomposition, we cultivated feedstock-adapted consortia (FACs) derived from iron-rich tropical forest soils accustomed to experiencing frequent episodes of anaerobic conditions and frequently fluctuating redox. One consortium was propagated under fermenting conditions, with switchgrass as the sole carbon source in minimal media (SG only FACs), and the other consortium was treated the same way but received poorly crystalline iron as an additional terminal electron acceptor (SG + Fe FACs). We sequenced the metagenomes of both consortia to a depth of about 150 Mb each, resulting in a coverage of 26× for the more diverse SG + Fe FACs, and 81× for the relatively less diverse SG only FACs. Both consortia were able to quickly grow on switchgrass, and the iron-amended consortium exhibited significantly higher microbial diversity than the unamended consortium. We found evidence of higher stress in the unamended FACs and increased sugar transport and utilization in the iron-amended FACs. This work provides metagenomic evidence that supplementation of alternative TEAs may improve feedstock deconstruction in biofuel production

Genome sequence of Microvirga lupini strain LUT6(T), a novel Lupinus alphaproteobacterial microsymbiont from Texas

Microvirga lupini LUT6(T) is an aerobic, non-motile, Gram-negative, non-spore-forming rod that can exist as a soil saprophyte or as a legume microsymbiont of Lupinus texensis. LUT6(T) was isolated in 2006 from a nodule recovered from the roots of the annual L. texensis growing in Travis Co., Texas. LUT6(T) forms a highly specific nitrogen-fixing symbiosis with endemic L. texensis and no other Lupinus species can form an effective nitrogen-fixing symbiosis with this isolate. Here we describe the features of M. lupini LUT6(T), together with genome sequence information and its annotation. The 9,633,614 bp improved high quality draft genome is arranged into 160 scaffolds of 1,366 contigs containing 10,864 protein-coding genes and 87 RNA-only encoding genes, and is one of 20 rhizobial genomes sequenced as part of a DOE Joint Genome Institute 2010 Community Sequencing Project

Genome sequence of <i>Ensifer medicae</i> strain WSM1369; an effective microsymbiont of the annual legume <i>Medicago sphaerocarpos</i>

Ensifer medicae WSM1369 is an aerobic, motile, Gram-negative, non-spore-forming rod that can exist as a soil saprophyte or as a legume microsymbiont of Medicago. WSM1369 was isolated in 1993 from a nodule recovered from the roots of Medicago sphaerocarpos growing at San Pietro di Rudas, near Aggius in Sardinia (Italy). WSM1369 is an effective microsymbiont of the annual forage legumes M. polymorpha and M. sphaerocarpos. Here we describe the features of E. medicae WSM1369, together with genome sequence information and its annotation. The 6,402,557 bp standard draft genome is arranged into 307 scaffolds of 307 contigs containing 6,656 protein-coding genes and 79 RNA-only encoding genes. This rhizobial genome is one of 100 sequenced as part of the DOE Joint Genome Institute 2010 Genomic Encyclopedia for Bacteria and Archaea-Root Nodule Bacteria (GEBA-RNB) project