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.

An analysis of inflation rates in the European Union using wavelets : strong evidence against unit roots

In this paper we assume inflation rates in European Union countries may in fact be fractionally integrated. Given this assumption, we obtain estimations of the order of integration by means a method based on wavelets coefficients. Finally, results obtained allow reject the unit root hypothesis on inflation rates. It means that a random shock on the rate of inflation in these countries has transitory effects that gradually diminish with the passage of time, that this, said shock hasn¿t a permanent effect on future values of inflation rates

An analysis of inflation rates in the European Union using wavelets : strong evidence against unit roots

In this paper we assume inflation rates in European Union countries may in fact be fractionally integrated. Given this assumption, we obtain estimations of the order of integration by means a method based on wavelets coefficients. Finally, results obtained allow reject the unit root hypothesis on inflation rates. It means that a random shock on the rate of inflation in these countries has transitory effects that gradually diminish with the passage of time, that this, said shock hasn¿t a permanent effect on future values of inflation rates

Classical anisotropies in models of open inflation

In the simplest model of open inflation there are two inflaton fields decoupled from each other. One of them, the tunneling field, produces a first stage of inflation which prepares the ground for the nucleation of a highly symmetric bubble. The other, a free field, drives a second period of slow-roll inflation inside the bubble. However, the second field also evolves during the first stage of inflation, which to some extent breaks the needed symmetry. We show that this generates large supercurvature anisotropies which, together with the results of Tanaka and Sasaki, rule out this class of simple models (unless, of course, Omega0 is sufficiently close to 1). The problem does not arise in modified models where the second field does not evolve in the first stage of inflation.

Open inflation and the singulary boundary

The singularity in the Hawking-Turok model of open inflation has some appealing properties, such as the fact that its action is integrable. Also, if one thinks of the singularity as the boundary of spacetime, then the Gibbons-Hawking term is nonvanishing and finite. Here, we consider a model where the gravitational and scalar fields are coupled to a dynamical membrane. The singular instanton can then be obtained as the limit of a family of no-boundary solutions where both the geometry and the scalar field are regular. Using this procedure, the contribution of the singularity to the Euclidean action is just 1/3 of the Gibbons-Hawking term. Unrelated to this issue, we also point out that the singularity acts as a reflecting boundary for scalar perturbations and gravity waves. Therefore, the quantization of cosmological perturbations seems to be well posed in this background.

Independent Central Banks: Low inflation at no cost?: A model with fiscal policy

In this article we extend the rational partisan model of Alesina and Gatti (1995) to include a second policy, fiscal policy, besides monetary policy. It is shown that, with this extension, the politically induced variance of output is not always eliminated nor reduced by delegating monetary policy to an independent and conservative central bank. Further, in flation and output stabilisation will be affected by the degree of conservativeness of the central bank and by the probability of the less in flation averse party gaining power. Keywords: rational partisan theory; fiscal policy; independent central bank JEL Classi fication: E58, E63.

Issue review : university revenue growth adjusted for inflation and enrollment change.

An examination of the historical revenues for Regents universities' general education budgets considering enrollment changes and inflation.

Reactive rise in blood pressure upon cuff inflation: cuff inflation at the arm causes a greater rise in pressure than at the wrist in hypertensive patients.

OBJECTIVE: Cuff inflation at the arm is known to cause an instantaneous rise in blood pressure, which might be due to the discomfort of the procedure and might interfere with the precision of the blood pressure measurement. In this study, we compared the reactive rise in blood pressure induced by cuff inflation when the cuff was placed at the upper arm level and at the wrist. PARTICIPANTS AND METHODS: The reactive rise in systolic and diastolic blood pressure to cuff inflation was measured in 34 normotensive participants and 34 hypertensive patients. Each participant was equipped with two cuffs, one around the right upper arm (OMRON HEM-CR19, 22-32 cm) and one around the right wrist (OMRON HEM-CS 19, 17-22 cm; Omron Health Care Europe BV, Hoofddorp, The Netherlands). The cuffs were inflated in a double random order (maximal cuff pressure and position of the cuff) with two maximal cuff pressures: 180 and 240 mmHg. The cuffs were linked to an oscillometric device (OMRON HEM 907; Omron Health Care). Simultaneously, blood pressure was measured continuously at the middle finger of the left hand using photoplethysmography. Three measurements were made at each level of blood pressure at the arm and at the wrist, and the sequence of measurements was randomized. RESULTS: In normotensive participants, no significant difference was observed in the reactive rise in blood pressure when the cuff was inflated either at the arm or at the wrist irrespective of the level of cuff inflation. Inflating a cuff at the arm, however, induced a significantly greater rise in blood pressure than inflating it at the wrist in hypertensive participants for both systolic and diastolic pressures (P<0.01), and at both levels of cuff inflation. The blood pressure response to cuff inflation was independent of baseline blood pressure. CONCLUSIONS: The results show that in hypertensive patients, cuff inflation at the wrist produces a smaller reactive rise in blood pressure. The difference between the arm and the wrist is independent of the patient's level of blood pressure.

Three essays on short-term macroeconomics : business fluctuations, large devaluations and inflation dynamics

Résumé: At least since the Great Depression, explaining why there are business fluctuations has been one of the biggest challenges that the science of economics has had to face. The hope is that if we could better understand recessions, then we could also be more successful in overcoming them. This dissertation consists of three papers that are part of the general endeavor of economists to understand these fluctuations. The first paper discusses, for a particular model, whether a result related to fluctuations would still hold if time were modeled as continuous rather than discrete. The two other papers focus on price stickiness. The second paper discusses why, after a large devaluation, prices of non-tradables may change by only a small amount in comparison to the magnitude of the devaluation. The third paper examines price adjustment in a model in which information is imperfect and it is costly to change prices.

Three essays on the determinants of output, inflation and interest rates

Résumé: Output, inflation and interest rates are key macroeconomic variables, in particular for monetary policy. In modern macroeconomic models they are driven by random shocks which feed through the economy in various ways. Models differ in the nature of shocks and their transmission mechanisms. This is the common theme underlying the three essays of this thesis. Each essay takes a different perspective on the subject: First, the thesis shows empirically how different shocks lead to different behavior of interest rates over the business cycle. For commonly analyzed shocks (technology and monetary policy errors), the patterns square with standard models. The big unknown are sources of inflation persistence. Then the thesis presents a theory of monetary policy, when the central bank can better observe structural shocks than the public. The public will then seek to infer the bank's extra knowledge from its policy actions and expectation management becomes a key factor of optimal policy. In a simple New Keynesian model, monetary policy becomes more concerned with inflation persistence than otherwise. Finally, the thesis points to the huge uncertainties involved in estimating the responses to structural shocks with permanent effects.