The new Keynesian approach to monetary policy analysis: Lessons and new directions

I discuss several lessons regarding the design and conduct of monetary policy that have emerged out of the New Keynesian research program. Those lessons include the bene.ts of price stability, the gains from commitment about future policies, the importance of nat-ural variables as benchmarks for policy, and the bene.ts of a credible anti-inflationary stance. I also point to one challenge facing NK modelling efforts: the need to come up with relevant sources of policy tradeoffs. A potentially useful approach to meeting that challenge, based on the introduction of real imperfections, is presented.

The science of monetary policy: A new Keynesian perspective

This paper reviews the recent literature on monetary policy rules. We exposit the monetary policy design problem within a simple baselinetheoretical framework. We then consider the implications of adding various real world complications. Among other things, we show that the optimal policy implicitly incorporates inflation targeting. Wealso characterize the gains from making credible commitments to fightinflation. In contrast to conventional wisdom, we show that gains from commitment may emerge even in the central bank is not trying toinadvisedly push output above its natural level. We also consider theimplications of frictions such as imperfect information.

Study of relations among age at first calving, average weight gains and weights from weaning to maturity in Nellore cattle

Dados de 23.120 animais da raça Nelore foram utilizados para estimar herdabilidade e correlações genéticas para a idade ao primeiro parto, o ganho em peso da desmama ao ano e do ano ao sobreano, o peso à desmama, o peso ao ano, o peso ao sobreano e os pesos aos 2 e aos 5 anos de idade. Utilizou-se o método da máxima verossimilhança restrita, em análise multicaracterística. As herdabilidades estimadas para idade ao primeiro parto, ganho da desmama ao ano, ganho do ano ao sobreano, peso à desmama, peso ao ano, peso ao sobreano e peso aos 2 aos 5 anos foram de 0,17 ± 0,01; 0,23 ± 0,03; 0,25 ± 0,03; 0,28 ± 0,02; 0,26 ± 0,03; 0,30 ± 0,03; 0,32 ± 0,02 e 0,36 ± 0,04, respectivamente. Correlações genéticas baixas e negativas foram estimadas entre a idade ao primeiro parto e os pesos medidos em diferentes idades, que variaram de -0,26 a -0,14. As correlações genéticas estimadas entre a idade ao primeiro parto e os ganhos de peso também foram negativas, porém levemente superiores (-0,29 e -0,32). Os resultados indicam que a seleção para maior ganho de peso pode reduzir a idade ao primeiro parto e aumentar o peso adulto de fêmeas da raça Nelore. Mudança genética mais rápida para diminuição da idade ao primeiro parto das fêmeas pode ser obtida com a inclusão dessa característica nos índices de seleção.

Assessing excess profits from different entry regulations

Entry regulations affecting professional services such as pharmacies are common practice in many European countries. We assess the impact of entry regulations on profits estimating a structural model of entry using the information provided by a policy experiment. We use the case of different regional policies governing the opening of new pharmacies in Spain to show that structural models of entry ought to be estimated with data from policy experiments to pin down how entry regulations change payoffs functions of the incumbents. Contrary to the public interest rationales, regulations are not boosting only small town pharmacies payoffs nor increasing all pharmacies payoffs alike. The gains from regulations are very unevenly distributed,suggesting that private interests are shaping the current mix of entry and markup regulations.

How Optimal is US Monetary Policy?

Most of the literature estimating DSGE models for monetary policy analysis assume that policy follows a simple rule. In this paper we allow policy to be described by various forms of optimal policy - commitment, discretion and quasi-commitment. We find that, even after allowing for Markov switching in shock variances, the inflation target and/or rule parameters, the data preferred description of policy is that the US Fed operates under discretion with a marked increase in conservatism after the 1970s. Parameter estimates are similar to those obtained under simple rules, except that the degree of habits is significantly lower and the prevalence of cost-push shocks greater. Moreover, we find that the greatest welfare gains from the ‘Great Moderation’ arose from the reduction in the variances in shocks hitting the economy, rather than increased inflation aversion. However, much of the high inflation of the 1970s could have been avoided had policy makers been able to commit, even without adopting stronger anti-inflation objectives. More recently the Fed appears to have temporarily relaxed policy following the 1987 stock market crash, and has lost, without regaining, its post-Volcker conservatism following the bursting of the dot-com bubble in 2000.

Interaction between calcium intake and menarcheal age on bone mass gain: an eight-year follow-up study from prepuberty to postmenarche.

Both late menarcheal age and low calcium intake (Ca intake) during growth are risk factors for osteoporosis, probably by impairing peak bone mass. We investigated whether lasting gain in areal bone mineral density (aBMD) in response to increased Ca intake varies according to menarcheal age and, conversely, whether Ca intake could influence menarcheal age. In an initial study, 144 prepubertal girls were randomized in a double-blind controlled trial to receive either a Ca supplement (Ca-suppl.) of 850 mg/d or placebo from age 7.9-8.9 yr. Mean aBMD gain determined by dual energy x-ray absorptiometry at six sites (radius metaphysis, radius diaphysis, femoral neck, trochanter, femoral diaphysis, and L2-L4) was significantly (P = 0.004) greater in the Ca-suppl. than in the placebo group (27 vs. 21 mg/cm(2)). In 122 girls followed up, menarcheal age was recorded, and aBMD was determined at 16.4 yr of age. Menarcheal age was lower in the Ca-suppl. than in the placebo group (P = 0.048). Menarcheal age and Ca intake were negatively correlated (r = -0.35; P < 0.001), as were aBMD gains from age 7.9-16.4 yr and menarcheal age at all skeletal sites (range: r = -0.41 to r = -0.22; P < 0.001 to P = 0.016). The positive effect of Ca-suppl. on the mean aBMD gain from baseline remained significantly greater in girls below, but not in those above, the median of menarcheal age (13.0 yr). Early menarcheal age (12.1 +/- 0.5 yr): placebo, 286 +/- 36 mg/cm(2); Ca-suppl., 317 +/- 46 (P = 0.009); late menarcheal age (13.9 +/- 0.5 yr): placebo, 284 +/- 58; Ca-suppl., 276 +/- 50 (P > 0.05). The level of Ca intake during prepuberty may influence the timing of menarche, which, in turn, could influence long-term bone mass gain in response to Ca supplementation. Thus, both determinants of early menarcheal age and high Ca intake may positively interact on bone mineral mass accrual.

Media exposure and internal migration-evidence from Indonesia

This paper investigates the impact of television on internal migration in Indonesia. We exploit the differential introduction of private television throughout the country and the variation in signal reception due to topography to estimate the causal effect of media exposure. Our estimates reveal important long and short run effects. An increase of one standard deviation in the number of private TV channels received in the area of residence reduces future inter-provincial migration by 1.7-2.7 percentage points, and all migration (inter and intra-provincial) by 4-7.4 percentage points. Short run effects are slightly smaller, but still sizeable and statistically significant. We also show that respondents less exposed to private TV are more likely to consider themselves among the poorest groups of the society. As we discuss in a stylized model of migration choice under imperfect information, these findings are consistent with Indonesia citizens over-estimating the net gains from internal migration.

Phenotypic stability and genetic gains in six-year girth growth of Hevea clones

Rubber tree [Hevea brasiliensis (Willd. ex Adr. de Juss.) Müell. Arg.] budgrafts of seven clones were evaluated on five contrasting sites in the plateau region of the São Paulo State, Brazil. The objective of this work was to study the phenotypic stability for girth growth. The experimental design was a randomized block design with three replications and seven treatments. Analysis of variance of girth at six-year plant growth indicated a highly significant clone x site interaction. Only linear sites and clone x site components of clone x year interaction were significant, indicating that the performance of clones over sites for this trait could be predicted. The clones GT 1 and PB 235 showed the greatest stability in relation to girth growth, with foreseen responses to change, introduced in the sites. The clones PB 235 and IAN 873 showed significative difference in relation to regression coefficient, representing clones with specific adaptability on favorable and unfavorable sites respectively. The clone GT 1 became the most promissory one in the study of stability and adaptability even showing low girth growth. Expected genetic gains from planting sites, along with estimates of clonal variance and repeatability of clonal means are generally greatest or close to the greatest when selection is done at the same site.

Stock and Bond Market Integration: Evidence from Russian Financial Markets

Minimizing the risks of an investment portfolio but not in the favour of expected returns is one of the key interests of an investor. Typically, portfolio diversification is achieved using two main strategies: investing in different classes of assets thought to have little or negative correlations or investing in similar classes of assets in multiple markets through international diversification. This study investigates integration of the Russian financial markets in the time period of January 1, 2003 to December 28, 2007 using daily data. The aim is to test the intra-country and cross-country integration of the Russian stock and bond markets between seven countries. Our test methodology for the short-run dynamics testing is the vector autoregressive model (VAR) and for the long-run cointegration testing we use the Johansen cointegration test which is an extension to VAR. The empirical results of this study show that the Russian stock and bond markets are not integrated in the long-run either at intra-country or cross-country level which means that the markets are relatively segmented. The short-run dynamics are also relatively low. This implies a presence of potential gains from diversification.

Labor Provisions from NAFTA to CAFTA: Standards That Work, or a Work in Progress?

The emerging U.S. approach linking free trade to domestic labor protections is a practical framework on which to base substantive and procedural rights. Nevertheless, much more can be done in future agreements to improve these safeguards for workers in a way that will maximize the gains from trade and reduce the most harmful effects of development. In order to improve future agreements, the U.S. should expand access to consultations within the dispute resolution mechanism, focus complaints on core rights such as organization and bargaining, encourage the development of small independent unions in corporatist cultures, and incorporate the ILO into the dispute settlement process. Finally, the civil law systems of Central America and the Anglo-American common law system may have fundamentally different understandings of the rule of law. This difference in understanding may pose a significant disadvantage for developing or civil law systems entering treaties with the U.S., and should be better understood by both sides in order to maintain the credibility of the law and the effectiveness of the treaty.

Bias from farmer self-selection in genetically modified crop productivity estimates: Evidence from Indian data

In the continuing debate over the impact of genetically modified (GM) crops on farmers of developing countries, it is important to accurately measure magnitudes such as farm-level yield gains from GM crop adoption. Yet most farm-level studies in the literature do not control for farmer self-selection, a potentially important source of bias in such estimates. We use farm-level panel data from Indian cotton farmers to investigate the yield effect of GM insect-resistant cotton. We explicitly take into account the fact that the choice of crop variety is an endogenous variable which might lead to bias from self-selection. A production function is estimated using a fixed-effects model to control for selection bias. Our results show that efficient farmers adopt Bacillus thuringiensis (Bt) cotton at a higher rate than their less efficient peers. This suggests that cross-sectional estimates of the yield effect of Bt cotton, which do not control for self-selection effects, are likely to be biased upwards. However, after controlling for selection bias, we still find that there is a significant positive yield effect from adoption of Bt cotton that more than offsets the additional cost of Bt seed.

Bias from farmer self-selection in genetically modified crop productivity estimates: Evidence from Indian data

In the continuing debate over the impact of genetically modified (GM) crops on farmers of developing countries, it is important to accurately measure magnitudes such as farm-level yield gains from GM crop adoption. Yet most farm-level studies in the literature do not control for farmer self-selection, a potentially important source of bias in such estimates. We use farm-level panel data from Indian cotton farmers to investigate the yield effect of GM insect-resistant cotton. We explicitly take into account the fact that the choice of crop variety is an endogenous variable which might lead to bias from self-selection. A production function is estimated using a fixed-effects model to control for selection bias. Our results show that efficient farmers adopt Bacillus thuringiensis (Bt) cotton at a higher rate than their less efficient peers. This suggests that cross-sectional estimates of the yield effect of Bt cotton, which do not control for self-selection effects, are likely to be biased upwards. However, after controlling for selection bias, we still find that there is a significant positive yield effect from adoption of Bt cotton that more than offsets the additional cost of Bt seed.

A General Framework for the Analysis of Animal Resource Selection from Telemetry Data

We propose a general framework for the analysis of animal telemetry data through the use of weighted distributions. It is shown that several interpretations of resource selection functions arise when constructed from the ratio of a use and availability distribution. Through the proposed general framework, several popular resource selection models are shown to be special cases of the general model by making assumptions about animal movement and behavior. The weighted distribution framework is shown to be easily extended to readily account for telemetry data that are highly auto-correlated; as is typical with use of new technology such as global positioning systems animal relocations. An analysis of simulated data using several models constructed within the proposed framework is also presented to illustrate the possible gains from the flexible modeling framework. The proposed model is applied to a brown bear data set from southeast Alaska.

How do free trade agreements change import prices? : firm-level evidence from China's imports from ASEAN

The literature has revealed the positive impacts of free trade agreements (FTAs) on export prices by employing product-level trade data. This paper empirically examines the impacts of FTAs on import prices at the firm level. We focus on firm-level imports in China from ASEAN countries by employing China’s firm-product-level trade data. As a result, controlling for firm characteristics and product characteristics, we could not find significantly positive impacts of an FTA’s entry into force on import prices of FTA eligible products. Instead, we found a significant increase in import quantities of FTA eligible products. Thus, at the firm level, the gains from FTAs for exporters may be the increase in export quantities rather than the rise in export prices.

Evaluation of NHMRC funded research completed in 1992, 1997 and 2003: gains in knowledge, health and wealth

Objective: To report on strategies for, and outcomes of, evaluation of knowledge (publications), health and wealth (commercial) gains from medical research funded by the Australian Government through the National Health and Medical Research Council (NHMRC). Design and methods: End-of-grant reports submitted by researchers within 6 months of completion of NHMRC funded project grants which terminated in 2003 were used to capture self-reported publication number, health and wealth gains. Self-reported gains were also examined in retrospective surveys of grants completed in 1992 and 1997 and awards primarily supporting people (“people awards”) held between 1992 and 2002. Results: The response rate for the 1992 sample was too low for meaningful analysis. The mean number of publications per grant in the basic biomedical, clinical and health services research areas was very similar in 1997 and 2003. The publication output for population health was somewhat higher in the 2003 than in the 1997 analysis. For grants completed in 1997, 24% (31/131) affected clinical practice; 14% (18/131) public health practice; 9% (12/131) health policy; and 41% (54/131) had commercial potential with 20% (26/131) resulting in patents. Most respondents (89%) agreed that NHMRC people awards improved their career prospects. Interpretation is limited by the relatively low response rates (50% or less). Conclusions: A mechanism has been developed for ongoing assessment of NHMRC funded research. This process will improve accountability to the community and to government, and refine current funding mechanisms to most efficiently deliver health and economic returns for Australia.