Real Balance Effects, Timing and Equilibrium Determination

This paper examines whether the existence and the timing of real balance effects contribute to the determination of the absolute price level, as suggested by Patinkin (1949,1965), and if they affect conditions for local equilibrium uniqueness and stability. I show that there exists a unique price level sequence that is consistent with an equilibrium under interest rate policy, only if beginning-of-period money yields transaction services. Predetermined real money balances can then serve as a state variable, implying that interest rate setting must be passive - a violation of the Taylor-principle - for unique, stable, and non-oscillatory equilibrium sequences. On the contrary, when the end-of-period money stock facilitates transactions, the equilibrium displays nominal indeterminacy and equilibrium uniqueness requires an interest rate setting consistent with the Taylor-principle.Real balance effects, predetermined money, price level determination, real determinacy, monetary policy rules, flexible prices

Money Demand and Macroeconomic Stability Revisited

This paper examines how money demand induced real balance effects contribute to the determination of the price level, as suggested by Patinkin (1949,1965), and if they affect conditions for local equilibrium uniqueness and stability. There exists a unique price level sequence that is consistent with an equilibrium under interest rate policy, only if beginning-of-period money enters the utility function. Real money can then serve as a state variable, implying that interest rate setting must be passive for unique, stable, and non-oscillatory equilibrium sequences. When end-ofperiod money provides utility, an equilibrium is consistent with infinitely many price level sequences, and equilibrium uniqueness requires an active interest rate setting. The stability results are, in general, independent of the magnitude of real balance effects, and apply also when prices are sticky. In contrast, under a constant money growth policy, equilibrium sequences are (likely to be) locally stable and unique for all model variants.Real balance effects, predetermined money, price level determination, real determinacy, monetary policy rules

Optimal Policy Under Model Uncertainty: A Structural-Bayesian Estimation Approach

In this paper we propose a novel methodology to analyze optimal policies under model uncertainty in micro-founded macroeconomic models. As an application we assess the relevant sources of uncertainty for the optimal conduct of monetary policy within (parameter uncertainty) and across models (specification uncertainty) using EU 13 data. Parameter uncertainty matters only if the zero bound on interest rates is explicitly taken into account. In any case, optimal monetary policy is highly sensitive with respect to specification uncertainty implying substantial welfare gains of a robustly-optimal rule that incorporates this risk.Optimal monetary policy, model uncertainty, Bayesian model estimation.

Money demand and macroeconomic stability revisited

This paper examines how money demand induced real balance effects contribute to the determination of the price level, as suggested by Patinkin (1949,1965), and if they affect conditions for local equilibrium uniqueness and stability. There exists a unique price level sequence that is consistent with an equilibrium under interest rate policy, only if beginning-of-period money enters the utility function. Real money can then serve as a state variable, implying that interest rate setting must be passive for unique, stable, and non oscillatory equilibrium sequences. When end-ofperiod money provides utility, an equilibrium is consistent with infinitely many price level sequences, and equilibrium uniqueness requires an active interest rate setting. The stability results are, in general, independent of the magnitude of real balance effects, and apply also when prices are sticky. In contrast, under a constant money growth policy, equilibrium sequences are (likely to be) locally stable and unique for all model variants. JEL Classification: E32, E41, E52monetary policy rules, predetermined money, price level determination, Real balance effects, real determinacy

Multivariate Estimation of Poisson Parameters

This paper is devoted to the multivariate estimation of a vector of Poisson means. A novel loss function that penalises bad estimates of each of the parameters and the sum (or equivalently the mean) of the parameters is introduced. Under this loss function, a class of minimax estimators that uniformly dominate the maximum likelihood estimator is derived. Crucially, these methods have the property that for estimating a given component parameter, the full data vector is utilised. Estimators in this class can be fine-tuned to limit shrinkage away from the maximum likelihood estimator, thereby avoiding implausible estimates of the sum of the parameters. Further light is shed on this new class of estimators by showing that it can be derived by Bayesian and empirical Bayesian methods. In particular, we exhibit a generalisation of the Clevenson-Zidek estimator, and prove its admissibility. Moreover, a class of prior distributions for which the Bayes estimators uniformly dominate the maximum likelihood estimator under the new loss function is derived. A section is included involving weighted loss functions, notably also leading to a procedure improving uniformly on the maximum likelihood method in an infinite-dimensional setup. Importantly, some of our methods lead to constructions of new multivariate models for both rate parameters and count observations. Finally, estimators that shrink the usual estimators towards a data based point in the parameter space are derived and compared

Nested models and model uncertainty

Uncertainty about the appropriate choice among nested models is a central concern for optimal policy when policy prescriptions from those models differ. The standard procedure is to specify a prior over the parameter space ignoring the special status of some sub-models, e.g. those resulting from zero restrictions. This is especially problematic if a model's generalization could be either true progress or the latest fad found to fit the data. We propose a procedure that ensures that the specified set of sub-models is not discarded too easily and thus receives no weight in determining optimal policy. We find that optimal policy based on our procedure leads to substantial welfare gains compared to the standard practice.Optimal monetary policy, model uncertainty, Bayesian model estimation

Policy Announcements and Welfare

In the presence of idiosyncratic risk, the public revelation of information about uncertain aggregate outcomes such as policy choices can be detrimental to social welfare. By announcing informative signals on non-insurable aggregate risk, the policy maker distorts agents’ insurance incentives and increases the riskiness of the optimal allocation that is feasible in self-enforceable arrangements. As an application, we consider a monetary authority that may reveal changes in the inflation target, and document that the negative effect of distorted insurance incentives can very well dominate conventional effects in favor for the release of better information.Social value of information, policy announcements, monetary policy, transparency

Policy announcements and welfare

In the presence of idiosyncratic risk, the public revelation of information about uncertain aggregate outcomes such as policy choices can be detrimental to social welfare. By announcing informative signals on non-insurable aggregate risk, the policy maker distorts agents¿ insurance incentives and increases the riskiness of the optimal allocation that is feasible in self-enforceable arrangements. As an application, we consider a monetary authority that may reveal changes in the inflation target, and document that the negative effect of distorted insurance incentives can very well dominate conventional effects in favor for the release of better information.social value of information, policy announcements, monetary policy, transparency

Male Sexuality: Why Ownership is Sexy

What I want to address is what I call the eroticism of owning. We have a lot of circumstantial evidence that this eroticism exists. For instance, based on the testimony of women who are or have been sexually owned in marriage, taken in rape, and/or sexually used for a fee in prostitution, it appears that for many men, possession is a principal part of their sexual behavior. Many men can scarcely discern any erotic feelings that are not associated with owning someone else\u27s body