Credit Market Distortions, Asset Prices and Monetary Policy

In this paper we develop a sticky price DSGE model to study the role of capital market imperfections for monetary policy implementation. Recent empirical and theoretical studies have stressed the effect of firms’ external finance on their pricing decisions. The so-called cost channel of the transmission mechanism has been explored within New Keynesian frameworks that pose particular emphasis on inflation dynamics. These models generally disregard the role of external …nance for the dynamics of asset prices. We ask whether monetary policy should respond to deviations of asset prices from their frictionless level and, more importantly, if the answer to this question changes when financial frictions are properly taken into account. We analyze these issues from the vantage of equilibrium determinacy and stability under adaptive learning. We show that usual conditions for equilibrium uniqueness and E-stability are significantly altered when the cost channel matters. Nevertheless, we find that responding to actual or expected asset price misalignments helps at restoring determinacy and stability under learning. These conclusions are further enforced in the presence of a high degree of pass-through from policy to bank lending rates

Credit Market Distortions, Asset Prices and Monetary Policy

Abstract: We study the conditions that ensure rational expectations equilibrium (REE) determinacy and expectational stability (E-stability) in a standard sticky-price model augmented with the cost channel. We allow for varying degrees of pass-through of the policy rate to bank-lending rates. Strong cost-side effects heavily constrain the policy rate response to inflation from above, so that inflation tar- geting policies may not be capable of ensuring REE uniqueness. In such cases, it is advisable to combine inflation responses with an appropriate reaction to the output gap and/or firm profitability. The negative reaction of real activity and asset prices to inflationary shocks adds a negative force to inflation responses that counteracts the borrowing cost effect and avoids expectations of higher inflation to become self-fulfilling.Monetary Policy;Cost Channel;Asset Prices;Determinacy;E-stability

Spectroscopic fingerprints of a surface Mott-Hubbard insulator: the case of SiC(0001)

We discuss the spectroscopic fingerprints that a surface Mott-Hubbard insulator should show at the intra-atomic level. The test case considered is that of the Si-terminated SiC(0001) sqrt{3}xsqrt{3} surface, which is known experimentally to be insulating. We argue that, due to the Mott-Hubbard phenomenon, spin unpaired electrons in the Si adatom dangling bonds are expected to give rise to a Si-2p core level spectrum with a characteristic three-peaked structure, as seen experimentally. This structure results from the joint effect of intra-atomic exchange, spatial anisotropy, and spin-orbit coupling. Auger intensities are also discussed.Comment: 4 pages, 2 figures, ECOSS-18 conferenc

Atomic spin sensitive dissipation on magnetic surfaces

We identify the mechanism of energy dissipation relevant to spin-sensitive nanomechanics including the recently introduced magnetic exchange force microscopy, where oscillating magnetic tips approach surface atomic spins. The tip-surface exchange couples spin and atom coordinates, leading to a spin-phonon problem with Caldeira-Leggett type dissipation. In the overdamped regime, that can lead to a hysteretic flip of the local spin with a large spin-dependent dissipation, even down to the very low experimental tip oscillation frequencies, describing recent observations for Fe tips on NiO. A phase transition to an underdamped regime with dramatic drop of magnetic tip dissipation should in principle be possible by tuning tip-surface distance.Comment: 4 pages, 4 figure

Microscopic theory of vibronic dynamics in linear polyenes

We propose a novel approach to calculate dynamical processes at ultrafast time scale in molecules in which vibrational and electronic motions are strongly mixed. The relevant electronic orbitals and their interactions are described by a Hubbard model, while electron-phonon interaction terms account for the bond length dependence of the hopping and the change in ionic radii with valence charge. The latter term plays a crucial role in the non-adiabatic internal conversion process of the molecule. The time resolved photoelectron spectra are in good qualitative agreement with experiments.Comment: 3 figures, other comment

Reference-dependent Preferences and the Transmission of Monetary Policy

This paper proposes a novel explanation of the vast empirical evidence showing that output and prices react asymmetrically to monetary policy innovations over contractions and expansions in the business cycle. We use VAR techniques to show that monetary policy exerts stronger e¤ects on the U.S. GDP during contractionary phases, as compared to expansionary ones. As to prices, their response is not statistically different across different cyclical stages. We show that these facts are consistent with a New Neoclassical Synthesis model based on the assumption that households' utility partly depends on deviations of their consumption from a reference level below which aversion to loss is displayed. In line with the theory developed by Kahneman and Tversky (1979), losses in consumption utility loom larger than gains. This implies state-dependent degrees of real rigidity and elasticity of intertemporal substitution in consumption that generate competing effects on the responses of output and inflation following a monetary innovation. The key predictions of the model are in line with the data. We then explore the state-dependent trade-off between inflation and output stabilization that naturally arises in this context. Greater elasticity of inflation to real activity during expansionary stages of the cycle promotes a stronger degree of policy activism in the response to the expected rate of inflation under discretion, compared to what is otherwise prescribed during contractions.Reference-dependent Preferences;Asymmetry;Monetary policy.

Dynamical chiral symmetry breaking in sliding nanotubes

We discovered in simulations of sliding coaxial nanotubes an unanticipated example of dynamical symmetry breaking taking place at the nanoscale. While both nanotubes are perfectly left-right symmetric and nonchiral, a nonzero angular momentum of phonon origin appears spontaneously at a series of critical sliding velocities, in correspondence with large peaks of the sliding friction. The non-linear equations governing this phenomenon resemble the rotational instability of a forced string. However, several new elements, exquisitely "nano" appear here, with the crucial involvement of Umklapp and of sliding nanofriction.Comment: To appear in PR

Theory of Quantum Annealing of an Ising Spin Glass

Probing the lowest energy configuration of a complex system by quantum annealing was recently found to be more effective than its classical, thermal counterpart. Comparing classical and quantum Monte Carlo annealing protocols on the random two-dimensional Ising model we confirm the superiority of quantum annealing relative to classical annealing. We also propose a theory of quantum annealing, based on a cascade of Landau-Zener tunneling events. For both classical and quantum annealing, the residual energy after annealing is inversely proportional to a power of the logarithm of the annealing time, but the quantum case has a larger power which makes it fasterComment: RevTex, 8 pages, 3 figure