Monetary Policy in Open Economies: Price Inertia and Inflation Targeting

In this paper we consider a two-country model. Each country is characterised by several different sources of nominal inertia. This distinguishes our model from others in the so called New Open Economy Macroeconomics and makes it a suitable framework within which analyse the stabilising properties of monetary policies. We show that the variance of inflation induced by domestic inflationary shocks is lower under CPI targeting than when we target a measure of output price inflation. In fact, market segmentation and staggered wage and price setting result in lower and more persistent foreign inflation responses to a domestic inflationary shocks. This inertia in foreign price adjustments is completely passed through into CPI inflation but not into output price inflation. These differences cannot be detected in traditional models that usually introduce sluggish adjustments of domestic output prices as the only source of inertia. Furthermore, we find a limited role for the exchange rate in affecting the stabilising properties of the rules.monetary policy, inflation targeting, open economy, exchange rate, staggered price

Conditionally conjugate mean-field variational Bayes for logistic models

Variational Bayes (VB) is a common strategy for approximate Bayesian inference, but simple methods are only available for specific classes of models including, in particular, representations having conditionally conjugate constructions within an exponential family. Models with logit components are an apparently notable exception to this class, due to the absence of conjugacy between the logistic likelihood and the Gaussian priors for the coefficients in the linear predictor. To facilitate approximate inference within this widely used class of models, Jaakkola and Jordan (2000) proposed a simple variational approach which relies on a family of tangent quadratic lower bounds of logistic log-likelihoods, thus restoring conjugacy between these approximate bounds and the Gaussian priors. This strategy is still implemented successfully, but less attempts have been made to formally understand the reasons underlying its excellent performance. To cover this key gap, we provide a formal connection between the above bound and a recent P\'olya-gamma data augmentation for logistic regression. Such a result places the computational methods associated with the aforementioned bounds within the framework of variational inference for conditionally conjugate exponential family models, thereby allowing recent advances for this class to be inherited also by the methods relying on Jaakkola and Jordan (2000)

A nested expectation-maximization algorithm for latent class models with covariates

We develop a nested EM routine for latent class models with covariates which allows maximization of the full-model log-likelihood and, differently from current methods, guarantees monotone log-likelihood sequences along with improved convergence rates

Does gender matter for public spending? Empirical evidence from Italian municipalities.

This paper studies whether municipal expenditure in Italy is influenced by female representation in city councils. To correctly capture the causal relation we use the instrumental variable technique. Our instrument is based on a temporary change in the Italian normative occurred between 1993 and 1995 that reserved a gender quota in party lists for municipal elections, causing an exogenous change in the number of women elected in city councils. We take advantage of the fact that not all the municipalities have been treated by the law, due to its short period of enforcement. Despite the existence of gender specific preferences in the society, we find no evidence that the allocation of resources among different spending categories is affected by the gender of politicians. Our results are consistent with the Median voter theorem. Alternatively, they may suggest that the gender is not a determinant of politicians’ voting behaviour, implying that the preferences of the women involved in political activities are close to those of their male colleagues.gender, political representation, municipal expenditure

Intra-settlement politics and conflict in enumerations

While traditionally an instrument of government power, enumerations are increasingly conducted by urban communities themselves to gain recognition and negotiate with city authorities. Most literature focuses on the productive relationship between communities and government enabled by enumerations, and how enumerations transfer power to communities. However, in highly unequal informal settlements, it is very important to understand who within the community gets such power. Through the ethnographic account of an enumeration promoted by a slum-upgrading project in Nairobi, this paper makes a contribution to the analysis of power in enumerations. The article reveals the strategies of local elites to shape the exercise in their favour. Often, local elites present themselves as representatives of the wider community and draw on this power and legitimacy to advance their specific claims. Therefore, rather than looking only at the relationship between state and community, analyses of enumeration processes should also pay more attention to the complexity of internal communities’ dynamics and conflicting interests, and how these play out in the relationships with the state

Transforming Institutions: The Politics of Debt Relief in Kenya

Through a multi-sited and multi-level exploration of the processes around debt relief in Kenya, and of the complex network of actors involved and their interests, the political nature of debt relief is investigated and assessed. An actor-network approach is used to investigate the political processes taking place between civil society and the state, and how global policies have been translated into the local arena and played out in the local politics. This paper will illustrate how both the state and civil society are fragmented arenas of contrasting interests and separation among the two is only analytical while in reality the borders are blurred. This paper argues that debt relief is the result of a complex political process that, once in place, can create new political processes, thus having implications beyond the economic sphere. Debt relief mobilises a high number of actors pursuing different agendas, creating new possibilities and new relationships with a transformative potential that challenges power relations and changes institutions

Collective or individual titles? Conflict over tenure regularisation in a Kenyan informal settlement

Providing formal titles to residents in densely populated informal settlements without fuelling conflict or encouraging gentrification presents several challenges. It has been argued that, in some contexts, forms of collective tenure such as a Community Land Trust may help to overcome some of these problems. This paper analyses one attempt to legalise informal tenure arrangements, minimise relocation and prevent gentrification by introducing collective titling in an informal settlement in Nairobi. The paper demonstrates how attempts to build consensus on the most appropriate tenure system were deeply embedded in local conflicts between existing structure-owners (owners of shacks/buildings on land which is not theirs) and tenants. The state was unable to carry out the land reforms it had proposed – to protect the land user rights of all residents – because they implied a redistribution that was resisted by local elite actors. This paper argues that tenure reforms are shaped by context-specific power relations; in this case the process was characterised by the implementers’ need to maintain fragile agreements with local elites in order to avoid conflict. Tenure reforms are based on different ideas of whose rights should be recognised and competing claims are both negotiated through and shaped by the implementation process. Tenure reforms for contested land in informal settlements not only require technical mechanisms to prevent gentrification and displacement, but must reflect a serious consideration of local power relations and the capacity of the state to deal with conflicts arising from redistributive plans