Inflation targeting in emerging economies: What do the data say?

In a recent thought-provoking paper, Ball and Sheridan [Ball, L., Sheridan, N., 2005. Does inflation targeting matter? In: Bernanke, B.S., Woodford, M. (Eds.), The Inflation-Targeting Debate, University of Chicago Press] show that the available evidence for a group of developed economies does not lend credence to the belief that adopting an inflation targeting regime (IT) was instrumental in bringing inflation and inflation volatility down. Here, we extend Ball and Sheridan`s analysis for a subset of 36 emerging market economies and find that, for them, the story is quite different. Compared to non-targeters, developing countries adopting the IT regime not only experienced greater drops in inflation, but also in growth volatility, thus corroborating the view that the regime`s ""constrained flexibility"" to deal with adverse shocks delivered concrete welfare gains. (c) 2006 Elsevier B.V. All rights reserved.

Inflation targeting and macroeconomic stability in a Post Keynesian economy

This paper examines the compatibility of inflation targeting with an economy that is Post Keynesian in character. We show that in a Post Keynesian environment, policymakers can both set and achieve an inflation target without adverse consequences for the real economy, as long as an appropriate policy mix is chosen. The latitude that policymakers have in making this choice is investigated. One of our key results is that orthodox policy regimes do not provide appropriate policy mixes. Indeed, the more orthodox the policy regime becomes, the less viable is inflation targeting in a Post Keynesian economy.

The economic determinants of the Brazilian nominal term structure of interest rates

The purpose of this study is to identify the effects of monetary policy and macroeconomic shocks on the dynamics of the Brazilian term structure of interest rates. We estimate a near-VAR model under the identification scheme proposed by Christiano et al. (1996, 1999). The results resemble those of the US economy: monetary policy shocks that flatten the term structure of interest rates. We find that monetary policy shocks in Brazil explain a significantly larger share of the dynamics of the term structure than in the USA. Finally, we analyse the importance of standard macroeconomic variables (e. g. GDP, inflation and measure of country risk) to the dynamics of the term structure in Brazil.

Inflation Targeting Matters: Evidence from OECD Economies` Sacrifice Ratios

Using data from OECD economies, we show that inflation targeters suffered smaller output losses during disinflations when compared to nontargeters. We also study why some countries choose to inflation target while others do not and find that higher average inflation and smaller debt levels render the adoption of the regime more likely. Applying Heckman`s procedure to control for selection bias does not alter the link between inflation targeting and less costly disinflations.

Who chooses to inflation target?

In this article, we seek what are the factors behind a country`s decision to move to Inflation Targeting. We find that high past inflation, low debt levels and the absence of a nominal exchange rate anchor increase the probability that a country will end up opting for it. (C) 2007 Elsevier B.V. All rights reserved.

Nominal versus indexed debt: A quantitative horse race

The main arguments in favor and against nominal and indexed debts are the incentive to default through inflation versus hedging against unforeseen shocks. We model and calibrate these arguments to assess their quantitative importance. We use a dynamic equilibrium model with tax distortion, government outlays uncertainty, and contingent-debt service. Our framework also recognizes that contingent debt can be associated with incentive problems and lack of commitment. Thus, the benefits of unexpected inflation are tempered by higher interest rates. We obtain that costs from inflation more than offset the benefits from reducing tax distortions. We further discuss sustainability of nominal debt in developing (volatile) countries. (C) 2010 Elsevier Ltd. All rights reserved.

CMB and LSS constraints on a single-field model of inflation

A new inflationary scenario whose exponential potential V (Phi) has a quadratic dependence on the field Phi in addition to the standard linear term is confronted with the five-year observations of the Wilkinson-Microwave Anisotropy Probe and the Sloan Digital Sky Survey data. The number of e-folds (N), the ratio of tensor-to-scalar perturbations (r), the spectral scalar index of the primordial power spectrum (n(s)) and its running (dn(s)/d ln k) depend on the dimensionless parameter a multiplying the quadratic term in the potential. In the limit a. 0 all the results of the exponential potential are fully recovered. For values of alpha not equal 0, we find that the model predictions are in good agreement with the current observations of the Cosmic Microwave Background (CMB) anisotropies and Large-Scale Structure (LSS) in the Universe. Copyright (C) EPLA, 2008.

Local star formation triggered by supernova shocks in magnetized diffuse neutral clouds

In this work, considering the impact of a supernova remnant (SNR) with a neutral magnetized cloud we derived analytically a set of conditions that are favourable for driving gravitational instability in the cloud and thus star formation. Using these conditions, we have built diagrams of the SNR radius, R(SNR), versus the initial cloud density, n(c), that constrain a domain in the parameter space where star formation is allowed. This work is an extension to previous study performed without considering magnetic fields (Melioli et al. 2006, hereafter Paper I). The diagrams are also tested with fully three-dimensional MHD radiative cooling simulations involving a SNR and a self-gravitating cloud and we find that the numerical analysis is consistent with the results predicted by the diagrams. While the inclusion of a homogeneous magnetic field approximately perpendicular to the impact velocity of the SNR with an intensity similar to 1 mu G within the cloud results only a small shrinking of the star formation zone in the diagram relative to that without magnetic field, a larger magnetic field (similar to 10 mu G) causes a significant shrinking, as expected. Though derived from simple analytical considerations these diagrams provide a useful tool for identifying sites where star formation could be triggered by the impact of a supernova blast wave. Applications of them to a few regions of our own Galaxy (e.g. the large CO shell in the direction of Cassiopeia, and the Edge Cloud 2 in the direction of the Scorpious constellation) have revealed that star formation in those sites could have been triggered by shock waves from SNRs for specific values of the initial neutral cloud density and the SNR radius. Finally, we have evaluated the effective star formation efficiency for this sort of interaction and found that it is generally smaller than the observed values in our own Galaxy (SFE similar to 0.01-0.3). This result is consistent with previous work in the literature and also suggests that the mechanism presently investigated, though very powerful to drive structure formation, supersonic turbulence and eventually, local star formation, does not seem to be sufficient to drive global star formation in normal star-forming galaxies, not even when the magnetic field in the neutral clouds is neglected.

Sustentabilidade financeira e econômica do gasto público em saúde no nível municipal: reflexões a partir de dados de municípios mato-grossenses

O financiamento do SUS é regido pelo modelo de federalismo fiscal, pelas regras de partilha do Orçamento da Seguridade Social (OSS), por normas do Ministério da Saúde, e pela Emenda Constitucional nº. 29 (EC-29), que vincula à saúde recursos dos entes federados brasileiros. Discute-se aqui a sustentabilidade do gasto público com saúde no nível municipal. Foram estudados 21 municípios, utilizando-se dados dos balanços municipais. De 1996 a 2006 as receitas correntes gerais per capita subiram 280% acima da inflação acumulada e do Produto Interno Bruto (PIB) nacional, variando conforme o porte do município, o qual também definiu a composição dos orçamentos municipais. Já o orçamento que conforma a base da EC-29 elevou-se bem menos (178%), impondo limitações ao incremento da contrapartida municipal em saúde. Acredita-se que o observado nesses municípios se reproduza em milhares de municípios brasileiros e comprometa a capacidade de investimento municipal em saúde, principalmente a partir de 2008. A situação ainda pode se agravar tendo em vista a extinção da Contribuição Provisória sobre a Movimentação ou Transmissão de Valores e de Créditos e Direitos de Natureza Financeira (CPMF), a tramitação dos Projetos de Lei nº. 306/08 e nº. 233/08, e a recessão mundial, a partir da crise do sistema financeiro norte-americano.

Origin of primordial magnetic fields

Magnetic fields of intensities similar to those in our galaxy are also observed in high redshift galaxies, where a mean field dynamo would not have had time to produce them. Therefore, a primordial origin is indicated. It has been suggested that magnetic fields were created at various primordial eras: during inflation, the electroweak phase transition, the quark-hadron phase transition (QHPT), during the formation of the first objects, and during reionization. We suggest here that the large-scale fields similar to mu G, observed in galaxies at both high and low redshifts by Faraday rotation measurements (FRMs), have their origin in the electromagnetic fluctuations that naturally occurred in the dense hot plasma that existed just after the QHPT. We evolve the predicted fields to the present time. The size of the region containing a coherent magnetic field increased due to the fusion of smaller regions. Magnetic fields (MFs) similar to 10 mu G over a comoving similar to 1 pc region are predicted at redshift z similar to 10. These fields are orders of magnitude greater than those predicted in previous scenarios for creating primordial magnetic fields. Line-of-sight average MFs similar to 10(-2) mu G, valid for FRMs, are obtained over a 1 Mpc comoving region at the redshift z similar to 10. In the collapse to a galaxy (comoving size similar to 30 kpc) at z similar to 10, the fields are amplified to similar to 10 mu G. This indicates that the MFs created immediately after the QHPT (10(-4) s), predicted by the fluctuation-dissipation theorem, could be the origin of the similar to mu G fields observed by FRMs in galaxies at both high and low redshifts. Our predicted MFs are shown to be consistent with present observations. We discuss the possibility that the predicted MFs could cause non-negligible deflections of ultrahigh energy cosmic rays and help create the observed isotropic distribution of their incoming directions. We also discuss the importance of the volume average magnetic field predicted by our model in producing the first stars and in reionizing the Universe.

Large change in the predicted number of small halos due to a small amplitude oscillating inflaton potential

A smooth inflaton potential is generally assumed when calculating the primordial power spectrum, implicitly assuming that a very small oscillation in the inflaton potential creates a negligible change in the predicted halo mass function. We show that this is not true. We find that a small oscillating perturbation in the inflaton potential in the slow-roll regime can alter significantly the predicted number of small halos. A class of models derived from supergravity theories gives rise to inflaton potentials with a large number of steps and many trans-Planckian effects may generate oscillations in the primordial power spectrum. The potentials we study are the simple quadratic (chaotic inflation) potential with superimposed small oscillations for small field values. Without leaving the slow-roll regime, we find that for a wide choice of parameters, the predicted number of halos change appreciably. For the oscillations beginning in the 10(7)-10(8) M(circle dot) range, for example, we find that only a 5% change in the amplitude of the chaotic potential causes a 50% suppression of the number of halos for masses between 10(7)-10(8) M(circle dot) and an increase in the number of halos for masses <10(6) M(circle dot) by factors similar to 15-50. We suggest that this might be a solution to the problem of the lack of observed dwarf galaxies in the range 10(7)-10(8) M(circle dot). This might also be a solution to the reionization problem where a very large number of Population III stars in low mass halos are required.

Duality linking standard and tachyon scalar field cosmologies

In this work we investigate the duality linking standard and tachyon scalar field homogeneous and isotropic cosmologies in N + 1 dimensions. We determine the transformation between standard and tachyon scalar fields and between their associated potentials, corresponding to the same background evolution. We show that, in general, the duality is broken at a perturbative level, when deviations from a homogeneous and isotropic background are taken into account. However, we find that for slow-rolling fields the duality is still preserved at a linear level. We illustrate our results with specific examples of cosmological relevance, where the correspondence between scalar and tachyon scalar field models can be calculated explicitly.

Anisotropic singularities in modified gravity models

We show that the common singularities present in generic modified gravity models governed by actions of the type S = integral d(4)x root-gf(R, phi, X). with X = -1/2 g(ab)partial derivative(a)phi partial derivative(b)phi, are essentially the same anisotropic instabilities associated to the hypersurface F(phi) = 0 in the case of a nonminimal coupling of the type F(phi)R, enlightening the physical origin of such singularities that typically arise in rather complex and cumbersome inhomogeneous perturbation analyses. We show, moreover, that such anisotropic instabilities typically give rise to dynamically unavoidable singularities, precluding completely the possibility of having physically viable models for which the hypersurface partial derivative f/partial derivative R = 0 is attained. Some examples are explicitly discussed.

Price dispersion and price indexes

The traditional theory of price index numbers is based on the law of one price. But in the real world, we frequently observe the existence of an equilibrium price dispersion instead of one price of equilibrium. This article discusses the effects of price dispersion on two price indexes: the cost of living index and the consumer price index. With price dispersion and consumer searching for the lowest price, these indexes cannot be interpreted as deterministic indicators, but as stochastic indicators, and they can be biased if price dispersion is not taken into account. A measure for the bias of the consumer price index is proposed and the article ends with an estimation of the bias based on data obtained from the consumer price index calculated for the city of Sao Paulo, Brazil, from January 1988 through December 2004. The period analysed is very interesting, because it exhibits different inflationary environments: high levels and high volatility of the rates of inflation with great price dispersion until July 1994 and low and relatively stable rates of inflation with prices less dispersed after August 1994.

Optimal reserve management and sovereign debt

Most models currently used to determine optimal foreign reserve holdings take the level of international debt as given. However, given the sovereign`s willingness-to-pay incentive problems, reserve accumulation may reduce sustainable debt levels. In addition, assuming constant debt levels does not allow addressing one of the puzzles behind using reserves as a means to avoid the negative effects of crisis: why do not sovereign countries reduce their sovereign debt instead? To study the joint decision of holding sovereign debt and reserves, we construct a stochastic dynamic equilibrium model calibrated to a sample of emerging markets. We obtain that the reserve accumulation does not play a quantitatively important role in this model. In fact, we find the optimal policy is not to hold reserves at all. This finding is robust to considering interest rate shocks, sudden stops, contingent reserves and reserve dependent output costs. (c) 2008 Elsevier B.V. All rights reserved.