Monetary policy and exchange rate volatility in a small open economy

We lay out a small open economy version of the Calvo sticky price model, and show how the equilibrium dynamics can be reduced to simple representation in domestic inflation and the output gap. We use the resulting framework to analyze the macroeconomic implications of three alternative rule-based policy regimes for the small open economy: domestic inflation and CPI-based Taylor rules, and an exchange rate peg. We show that a key difference amongthese regimes lies in the relative amount of exchange rate volatility that they entail. We also discuss a special case for which domestic inflation targeting constitutes the optimal policy, and where a simple second order approximation to the utility of the representative consumer can be derived and used to evaluate the welfare losses associated with the suboptimal rules.

Women, Work and the Iowa Economy, September 2008

Women play a substantial and crucial role in the Iowa economy. Women make up almost half the labor force, participating in the labor force at one of the highest rates in the nation. At the same time, disparities persist as to women’s prospects for success in that same economy. For instance, although women in Iowa are more likely than men to receive post-secondary education, they are also more likely to be in poverty and to earn a lower wage than male peers. The “gender gap,” the difference between male and female wages, is a much-discussed but often misunderstood tool that helps measure women’s success in the workforce. Women’s median wages are lower than men’s median wages largely because of differences in male and female occupations and work history, although gender discrimination in the workforce also plays a role. This report investigates Iowa’s gender gap in ways that clearly show both its causes and effects and suggests policy responses that could ensure women’s full and equal participation in Iowa’s economic future. Understanding the differences between men’s and women’s experiences in the state economy is important for developing policies that can effectively address barriers to economic success for all Iowans.

The political economy of employment protection

This paper develops a model of job creation and job destruction in agrowing economy with embodied technical progress, that we use toanalyze the political support for employment protection legislationssuch as the ones that are observed in most European countries.We analyze the possibility of Condorcet cycles due to the fact thatworkers about to become unemployed prefer both an increase and areduction in firing costs over the status quo. Despite this problem, we show the existence of local, and sometimes global majority winners.In voting in favour of employment protection, incumbent employeestrade off lower living standards (because employment protectionmaintains workers in less productive activities) against longer job duration. We show that the gains from, and consequently the politicalsupport for employment protection (as defined by maximunjob tenure) are larger, the lower the rate of creative destruction and the largerthe worker's bargaining power. Numerical simulations suggest a hump-shaped response of firing costs to these variables, as well as negative impact of exogeneous turnover on employment protection.

Stable sunspot equilibria in a cash-in-advance economy

We analyze a monetary model with flexible labor supply, cash-inadvance constraints and seigniorage-financed government deficits. If the intertemporal elasticity of substitution of labor is greater than one, there are two steady states, one determinate and the other indeterminate. If the elasticity is less than one, there is a unique steady state, which can be indeterminate. Only in the latter case do there exist sunspot equilibria that are stable under adaptive learning. A sufficient reduction in government purchases can in many cases eliminate the sunspot equilibria while raising consumption/labor taxes even enough to balance the budget may fail to achieve determinacy.

Iowa's Workforce and the Economy, 2008

A discussion of Iowa's key economic indicators as well as commentary on various apsects of the statewide econony.

Which inflation to target? A small open economy with sticky wages indexed to past inflation

In a closed economy context there is common agreement on price inflation stabilization being one of the objects of monetary policy. Moving to an open economy context gives rise to the coexistence of two measures of inflation: domestic inflation (DI) and consumer price inflation (CPI). Which one of the two measures should be the target variable? This is the question addressed in this paper. In particular, I use a small open economy model to show that once sticky wages indexed to past CPI inflation are introduced, a complete inward looking monetary policy is no more optimal. I first, derive a loss function from a secondorder approximation of the utility function and then, I compute the fully optimalmonetary policy under commitment. Then, I use the optimal monetary policy as a benchmark to compare the performance of different monetary policy rules. The main result is that once a positive degree of indexation is introduced in the model the rule performing better (among the Taylor type rules considered) is the one targeting wage inflation and CPI inflation. Moreover this rule delivers results very close to the one obtained under the fully optimal monetary policy with commitment.

Pial and arachnoid welding for restoration of normal cord anatomy after excision of intramedullary spinal cord tumors.

A significant postoperative problem in patients undergoing excision of intramedullary tumors is painful dysesthesiae, attributed to various causes, including edema, arachnoid scarring and cord tethering. The authors describe a technique of welding the pia and arachnoid after the excision of intramedullary spinal cord tumors used in seven cases. Using a fine bipolar forcep and a low current, the pial edges of the myelotomy were brought together and welded under saline irrigation. A similar method was used for closing the arachnoid while the dura was closed with a running 5-0 vicryl suture. Closing the pia and arachnoid restores normal cord anatomy after tumor excision and may reduce the incidence of postoperative painful dysesthesiae.

Infrastructure Plan for Iowas's Future Economy: A Strategic Direction

This plan makes 25 recommendations that, when takes together, will take Iowa's infrastructure to the next level, ensure quality of life, and allow the economy to be globally competitive. It requires two fundamental changes in Iowans' prectices: cooperative planning and integration of infrastructure sectors.

Transnational authority in the knowledge-based economy: Who sets the standards of ICT training and certification?

This article examines the extent and limits of nonstate forms of authority in international relations. It analyzes how the information and communication technology (ICT) infrastructure for the tradability of services in a global knowledge-based economy relies on informal regulatory practices for the adjustment of ICT-related skills. By focusing on the challenge that highly volatile and short-lived cycles of demands for this type of knowledge pose for ensuring the right qualification of the labor force, the article explores how companies and associations provide training and certification programs as part of a growing market for educational services setting their own standards. The existing literature on non-conventional forms of authority in the global political economy has emphasized that the consent of actors, subject to informal rules and some form of state support, remains crucial for the effectiveness of those new forms of power. However, analyses based on a limited sample of actors tend toward a narrow understanding of the issues concerned and fail to fully explore the differentiated space in which non state authority is emerging. This article develops a three-dimensional analytical framework that brings together the scope of the issues involved, the range of nonstate actors concerned, and the spatial scope of their authority. The empirical findings highlight the limits of these new forms of nonstate authority and shed light on the role of the state and international governmental organizations in this new context.