Robust Control and Persistence in the New Keynesian Economy

Since Keynes no economist would deny that expectations under uncer- tain conditions matter for the conduct of monetary policy, but still opin- ions about their formation are diverse. We build a hybrid New Keynesian Framework to analyze the influence of model uncertainty on optimal in- terest rates under di¤erent degrees of rational forward-looking behavior, using recently developed robust control techniques. Impulse response functions illustrate that uncertainty seems to be a rationale for more aggressive interest rate reactions, but also suggest that the degree of forward-looking behavior seems to be more important than an appro- priate fear about the misspecification of a given model. Furthermore, we argue that assuming to control inflation through expectations is a policy on the razor's edge, since robust expectations overestimate shock impacts. This questions the gains from commitment under uncertainty.Robust Control, Knightian Uncertainty, Monetary Policy, Forward-Looking Expectations, Model Uncertainty.

What Can an Open-Economy DSGE Model Tell Us about Hong Kong’s Housing Market?

This paper develops an open-economy DSGE model with a housing-market sector and a borrowing constraint. Contrary to standard conventions, domestic households are allowed to invest in foreign housing and vice versa. Using Bayesian methods, the model is applied to data for Hong Kong. The results show that Hong Kong’s housing market is quite open to foreign investment, and perhaps more significantly, that variations in the loan-to-value ratio and housing preference shocks largely explain business cycle volatility.DSGE models; housing; open economy; Hong Kong

Stock market wealth effects in an estimated DSGE model for Hong Kong

This paper develops and estimates an open economy dynamic stochastic general equilibrium (DSGE) model of the Hong Kong economy. The model features short-run price rigidities generated by monopolistic competition and staggered reoptimisation. The model is enhanced with wealth effects due to stock price dynamics, which we believe to be important. For this reason we adopt a perpetual youth approach. Model parameters and unobserved components are estimated with a Bayesian maximum likelihood procedure, conditional on prior information concerning the values of parameters.DSGE models; wealth effects; open economy; Hong Kong

Adjustment in EMU: Is Convergence Assured?

Using a modified version of the model presented by Belke and Gros (2007), we analyze the stability of adjustment in a currency union. Using econometric estimates for parameter values we check the stability conditions for the 11 original EMU countries and Greece. We found significant instability in the model for a large number of countries. We then simulate the adjustment process for some empirically observed parameter values and find that even for countries with relatively smooth adjustment, the adjustment to a price shock in EMU might take several decades. Keywords: EMU, convergence, stability.EMU, convergence, stability, inflation

Coronabonds are a pragmatic response to a crisis – and are not about cross-EU transfers or solidarity

Common debt instruments created by the European Union, of which coronabonds are currently the most urgent and salient example, evoke in some countries the fear that the Eurozone may be heading towards a ‘transfer union’. Some advocates also misleadingly justify these innovations by an appeal to European ‘solidarity’. Yet, in practice, Michael Paetz and Patrick Kaczmarczyk argue that such instruments require only a dose of pragmatism. We need to fundamentally reframe the debate around ‘debt mutualisation’ in Europe on more evidence-based and realistic lines if the Eurozone is to survive

Stock price dynamics and the business cycle in an estimated DSGE model for South Africa

This paper develops and estimates an open economy dynamic stochastic general equilibrium model of South Africa. We devote special attention to the impact of stock price wealth effects on output and the interest rate. For this reason we adopt a perpetual youth approach, which allows for a limited decision horizon. We estimate the model using Bayesian techniques and find that (i) about 9 percent of the volatility in production can be explained by financial shocks, and (ii) the SARB does not and should not react on stock price disturbances. Moreover, stock prices seem to be unaffected by shocks from the real economy.http://www.elsevier.com/locate/intfin2017-09-30hb2016Economic

Blumenols as shoot markers of root symbiosis with arbuscular mycorrhizal fungi.

High-through-put (HTP) screening for functional arbuscular mycorrhizal fungi (AMF)-associations is challenging because roots must be excavated and colonization evaluated by transcript analysis or microscopy. Here we show that specific leaf-metabolites provide broadly applicable accurate proxies of these associations, suitable for HTP-screens. With a combination of untargeted and targeted metabolomics, we show that shoot accumulations of hydroxy- and carboxyblumenol C-glucosides mirror root AMF-colonization in Nicotiana attenuata plants. Genetic/pharmacologic manipulations indicate that these AMF-indicative foliar blumenols are synthesized and transported from roots to shoots. These blumenol-derived foliar markers, found in many di- and monocotyledonous crop and model plants (Solanum lycopersicum, Solanum tuberosum, Hordeum vulgare, Triticum aestivum, Medicago truncatula and Brachypodium distachyon), are not restricted to particular plant-AMF interactions, and are shown to be applicable for field-based QTL mapping of AMF-related genes

Arabidopsis thaliana encodes a bacterial-type heterodimeric isopropylmalate isomerase involved in both Leu biosynthesis and the Met chain elongation pathway of glucosinolate formation

The last steps of the Leu biosynthetic pathway and the Met chain elongation cycle for glucosinolate formation share identical reaction types suggesting a close evolutionary relationship of these pathways. Both pathways involve the condensation of acetyl-CoA and a 2-oxo acid, isomerization of the resulting 2-malate derivative to form a 3-malate derivative, the oxidation-decarboxylation of the 3-malate derivative to give an elongated 2-oxo acid, and transamination to generate the corresponding amino acid. We have now analyzed the genes encoding the isomerization reaction, the second step of this sequence, in Arabidopsis thaliana. One gene encodes the large subunit and three encode small subunits of this enzyme, referred to as isopropylmalate isomerase (IPMI) with respect to the Leu pathway. Metabolic profiling of large subunit mutants revealed accumulation of intermediates of both Leu biosynthesis and Met chain elongation, and an altered composition of aliphatic glucosinolates demonstrating the function of this gene in both pathways. In contrast, the small subunits appear to be specialized to either Leu biosynthesis or Met chain elongation. Green fluorescent protein tagging experiments confirms the import of one of the IPMI small subunits into the chloroplast, the localization of the Met chain elongation pathway in these organelles. These results suggest the presence of different heterodimeric IPMIs in Arabidopsis chloroplasts with distinct substrate specificities for Leu or glucosinolate metabolism determined by the nature of the different small subunit

Human Non-neutralizing HIV-1 Envelope Monoclonal Antibodies Limit the Number of Founder Viruses during SHIV Mucosal Infection in Rhesus Macaques

HIV-1 mucosal transmission begins with virus or virus-infected cells moving through mucus across mucosal epithelium to infect CD4+ T cells. Although broadly neutralizing antibodies (bnAbs) are the type of HIV-1 antibodies that are most likely protective, they are not induced with current vaccine candidates. In contrast, antibodies that do not neutralize primary HIV-1 strains in the TZM-bl infection assay are readily induced by current vaccine candidates and have also been implicated as secondary correlates of decreased HIV-1 risk in the RV144 vaccine efficacy trial. Here, we have studied the capacity of anti-Env monoclonal antibodies (mAbs) against either the immunodominant region of gp41 (7B2 IgG1), the first constant region of gp120 (A32 IgG1), or the third variable loop (V3) of gp120 (CH22 IgG1) to modulate in vivo rectal mucosal transmission of a high-dose simian-human immunodeficiency virus (SHIV-BaL) in rhesus macaques. 7B2 IgG1 or A32 IgG1, each containing mutations to enhance Fc function, was administered passively to rhesus macaques but afforded no protection against productive clinical infection while the positive control antibody CH22 IgG1 prevented infection in 4 of 6 animals. Enumeration of transmitted/founder (T/F) viruses revealed that passive infusion of each of the three antibodies significantly reduced the number of T/F genomes. Thus, some antibodies that bind HIV-1 Env but fail to neutralize virus in traditional neutralization assays may limit the number of T/F viruses involved in transmission without leading to enhancement of viral infection. For one of these mAbs, gp41 mAb 7B2, we provide the first co-crystal structure in complex with a common cyclical loop motif demonstrated to be critical for infection by other retroviruses

Environmental policy under model uncertainty: a robust optimal control approach

The design of optimal environmental policy inherits model uncertainty. We investigate the consequences in a simple linear model, where the aim of the policymaker is to stabilise the atmospheric content of carbon. We study how decision-makers' concerns about robustness alters policy using the Hansen and Sargent (2003, 2008) approach. The analysis shows that a policymaker, who fears about model misspecification should react more aggressively to changes in the stock of atmospheric carbon and reduce emissions stronger