Indexed versus nominal government debt under inflation and price-level targeting

This paper presents a DSGE model in which long run inflation risk matters for social welfare. Optimal indexation of long-term government debt is studied under two monetary policy regimes: inflation targeting (IT) and price-level targeting (PT). Under IT, full indexation is optimal because long run inflation risk is substantial due to base-level drift, making indexed bonds a much better store of value than nominal bonds. Under PT, where long run inflation risk is largely eliminated, optimal indexation is substantially lower because nominal bonds become a better store of value relative to indexed bonds. These results are robust to the PT target horizon, imperfect credibility of PT and model calibration, but the assumption that indexation is lagged is crucial. From a policy perspective, a key finding is that accounting for optimal indexation has important welfare implications for comparisons of IT and PT.

The Inflation Risk Premium on Government Debt in an Overlapping Generations Model

This paper presents a general equilibrium model in which nominal government debt pays an inflation risk premium. The model predicts that the inflation risk premium will be higher in economies which are exposed to unanticipated inflation through nominal asset holdings. In particular, the inflation risk premium is higher when government debt is primarily nominal, steady-state inflation is low, and when cash and nominal debt account for a large fraction of consumers' retirement portfolios. These channels do not appear to have been highlighted in previous models or tested empirically. Numerical results suggest that the inflation risk premium is comparable in magnitude to standard representative agent models. These findings have implications for management of government debt, since the inflation risk premium makes it more costly for governments to borrow using nominal rather than indexed debt. Simulations of an extended model with Epstein-Zin preferences suggest that increasing the share of indexed debt would enable governments to permanently lower taxes by an amount that is quantitatively non-trivial.

Arch and Structural Breaks in United States Inflation

United States Phillips curves are routinely estimated without accounting for the shifts in mean inflation. As a result we may expect the standard estimates of Phillips curves to be biased and suffer from ARCH. We demonstrate this is indeed the case. We also demonstrate that once the shifts in mean inflation are accounted for the ARCH is largely eliminated in the estimated model and the model defining expected rate of inflation in the New Keynesian model plays no significant role in the dynamics of inflation.

The Inflation Bias under Calvo and Rotemberg Pricing.

New Keynesian models rely heavily on two workhorse models of nominal inertia - price contracts of random duration (Calvo, 1983) and price adjustment costs (Rotemberg, 1982) - to generate a meaningful role for monetary policy. These alternative descriptions of price stickiness are often used interchangeably since, to a first order of approximation they imply an isomorphic Phillips curve and, if the steady-state is efficient, identical objectives for the policy maker and as a result in an LQ framework, the same policy conclusions. In this paper we compute time-consistent optimal monetary policy in bench-mark New Keynesian models containing each form of price stickiness. Using global solution techniques we find that the inflation bias problem under Calvo contracts is significantly greater than under Rotemberg pricing, despite the fact that the former typically significant exhibits far greater welfare costs of inflation. The rates of inflation observed under this policy are non-trivial and suggest that the model can comfortably generate the rates of inflation at which the problematic issues highlighted in the trend inflation literature emerge, as well as the movements in trend inflation emphasized in empirical studies of the evolution of inflation. Finally, we consider the response to cost push shocks across both models and find these can also be significantly different. The choice of which form of nominal inertia to adopt is not innocuous.

The Monetary policy rules and the inflation process in open emerging

This paper has three objectives. First, it aims at revealing the logic of interest rate setting pursued by monetary authorities of 12 new EU members. Using estimation of an augmented Taylor rule, we find that this setting was not always consistent with the official monetary policy. Second, we seek to shed light on the inflation process of these countries. To this end, we carry out an estimation of an open economy Philips curve (PC). Our main finding is that inflation rates were not only driven by backward persistency but also held a forward-looking component. Finally, we assess the viability of existing monetary arrangements for price stability. The analysis of the conditional inflation variance obtained from GARCH estimation of PC is used for this purpose. We conclude that inflation targeting is preferable to an exchange rate peg because it allowed decreasing the inflation rate and anchored its volatility.

From Bretton Woods to inflation targeting: financial change and monetary policy evolution in Europe

Different ‘monetary architectures’ are distinguished, as a background to a discussion of the change in developed country monetary policy frameworks from fixed exchange rates under the Bretton Woods international monetary system to, ultimately, formal or informal inflation targeting. The introduction and experience of monetary targets in the 1970s is considered, followed by an analysis of the changes in countries’ monetary architectures, with particular reference to money and bond markets and to France and Italy, in the 1980s. Exchange rate targeting in Europe in the 1980s and 1990s is examined, followed by the changes in central bank independence in the 1990s. This leads to a discussion of the introduction of inflation targeting, and the issues raised for inflation targeting by the financial crisis of the late 2000s.

Quantile forecasts of inflation under model uncertainty

Bayesian model averaging (BMA) methods are regularly used to deal with model uncertainty in regression models. This paper shows how to introduce Bayesian model averaging methods in quantile regressions, and allow for different predictors to affect different quantiles of the dependent variable. I show that quantile regression BMA methods can help reduce uncertainty regarding outcomes of future inflation by providing superior predictive densities compared to mean regression models with and without BMA.

'Modern' Phillips Curves and the Implications For The Statistical Process of Inflation

'Modern' theories of the Phillips curve imply that inflation is an integrated, or near integrated process. This paper explains this implication and why these 'modern' theories are logically inconsistent with what is commonly known about the statistical process of inflation.

Two alternate mechanisms contribute to the persistence of interdependent lineages in Pogonomyrmex harvester ants.

Some populations of Pogonomyrmex harvester ants comprise pairs of highly differentiated lineages with queens mating at random with several males of their own and of the alternate lineage. These queens produce two types of diploid offspring, those fertilized by males of the queens' lineage which develop into new queens and those fertilized by males of the other lineage which mostly develop into functionally sterile workers. This unusual mode of genetic caste determination has been found in 26 populations and a total of four lineage pairs (F(1)-F(2), G(1)-G(2), H(1)-H(2) and J(1)-J(2)) have been described in these populations. Despite the fact that a few interlineage queens are produced, previous studies revealed that there is a complete lack of genetic introgression between lineages. Here we quantify the proportion of interlineage queens produced in each of the four lineage pairs and determine the fate of these queens. In the F(1)-F(2), G(1)-G(2) and H(1)-H(2) lineage pairs, interlineage queens were produced by a minority of colonies. These colonies exclusively produced interlineage queens and workers, suggesting that interlineage eggs can develop into queens in these three pairs of lineages in the absence of competition with pure-lineage brood. An analysis of three key stages of the colony life cycle revealed that colonies headed by interlineage queens failed to grow sufficiently to produce reproductive individuals. In laboratory comparisons, interlineage queens produced fewer viable eggs, with the effect that they raised fewer workers and lost more weight per worker produced than pure-lineage queens. In the J(1)-J(2) lineage pair, we did not find a single interlineage queen, raising the possibility that interlineage eggs have completely lost the ability to develop into queens in this lineage pair. Hence, two distinct mechanisms seem to account for the complete lack of between-lineage gene flow in the F(1)-F(2), G(1)-G(2), H(1)-H(2) and J(1)-J(2) lineage pairs.

Analyzing aggregate real exchange rate persistence through the lens of sectoral data

In this paper we analyze the persistence of aggregate real exchange rates (RERs) for a group of EU-15 countries by using sectoral data. The tight relation between aggregate and sectoral persistence recently investigated by Mayoral (2008) allows us to decompose aggregate RER persistence into the persistence of its different subcomponents. We show that the distribution of sectoral persistence is highly heterogeneous and very skewed to the right, and that a limited number of sectors are responsible for the high levels of persistence observed at the aggregate level. We use quantile regression to investigate whether the traditional theories proposed to account for the slow reversion to parity (lack of arbitrage due to nontradibilities or imperfect competition and price stickiness) are able to explain the behavior of the upper quantiles of sectoral persistence. We conclude that pricing to market in the intermediate goods sector together with price stickiness have more explanatory power than variables related to the tradability of the goods or their inputs.

Persistence of EBV Antigen-Specific CD8 T Cell Clonotypes during Homeostatic Immune Reconstitution in Cancer Patients.

Persistent viruses are kept in check by specific lymphocytes. The clonal T cell receptor (TCR) repertoire against Epstein-Barr virus (EBV), once established following primary infection, exhibits a robust stability over time. However, the determinants contributing to this long-term persistence are still poorly characterized. Taking advantage of an in vivo clinical setting where lymphocyte homeostasis was transiently perturbed, we studied EBV antigen-specific CD8 T cells before and after non-myeloablative lympho-depleting chemotherapy of melanoma patients. Despite more advanced T cell differentiation, patients T cells showed clonal composition comparable to healthy individuals, sharing a preference for TRBV20 and TRBV29 gene segment usage and several co-dominant public TCR clonotypes. Moreover, our data revealed the presence of relatively few dominant EBV antigen-specific T cell clonotypes, which mostly persisted following transient lympho-depletion (TLD) and lymphocyte recovery, likely related to absence of EBV reactivation and de novo T cell priming in these patients. Interestingly, persisting clonotypes frequently co-expressed memory/homing-associated genes (CD27, IL7R, EOMES, CD62L/SELL and CCR5) supporting the notion that they are particularly important for long-lasting CD8 T cell responses. Nevertheless, the clonal composition of EBV-specific CD8 T cells was preserved over time with the presence of the same dominant clonotypes after non-myeloablative chemotherapy. The observed clonotype persistence demonstrates high robustness of CD8 T cell homeostasis and reconstitution.

'Next generation' biogeography: towards understanding the drivers of species diversification and persistence

The drivers of species diversification and persistence are of great interest to current biogeography, especially in those global biodiversity hotspots' harbouring most of Earth's animal and plant life. Classical multispecies biogeographical work has yielded fascinating insights into broad-scale patterns of diversification, and DNA-based intraspecific phylogeographical studies have started to complement this picture at much finer temporal and spatial scales. The advent of novel next-generation sequencing (NGS) technologies provides the opportunity to greatly scale up the numbers of individuals, populations and species sampled, potentially merging intraspecific and interspecific approaches to biogeographical inference. Here, we outline these prospects and issues by using the example of an undisputed hotspot, the Cape of southern Africa. We outline the current state of knowledge on the biogeography of species diversification within the Cape, review the literature for phylogeographical evidence of its likely drivers and mechanisms, and suggest possible ways forward based on NGS approaches. We demonstrate the potential of these methods and current bioinformatic issues with the help of restriction-site-associated DNA (RAD) sequencing data for three highly divergent species of the Restionaceae, an important plant radiation in the Cape. A thorough understanding of the mechanisms that facilitate species diversification and persistence in spatially structured, species-rich environments will require the adoption of novel genomic and bioinformatic tools in biogeographical studies.

Opposite effect of counterions on the persistence length of nicked and non-nicked DNA.

Using cryo-electron microscopy we reconstructed the three-dimensional trajectories adopted in cryovitrified solutions by double-stranded DNA molecules in which the backbone of one strand lacked a phosphate at regular intervals of 20 nucleotides. The shape of such nicked DNA molecules was compared with that of DNA molecules with exactly the same sequence but without any single-stranded scissions. Upon changing the salt concentration we observed opposite effects of charge neutralization on nicked and non-nicked DNA. In low salt solutions (10 mM Tris-HCl, 10 mM NaCl) the applied dense nicking caused ca 3.5-fold reduction of the DNA persistence length as compared with non-nicked DNA. Upon increasing the salt concentration (to 150 mM NaCl and 10 mM MgCl2) the persistence length of non-nicked DNA appreciably decreased while that of nicked DNA molecules increased by a factor of 2.

Persistence of a Gastrocutaneous Fistula after gastrostomy removal in children: Incidence and predictive factors

Background/Purpose: The aims of this study were to determine the incidence of persistent gastrocutaneous fistulas (GCF) after gastrostomy removal and to identify associated risk factors. Methods: This retrospective study included 75 children from the Centre Hospitalier Universitaire Vaudois, Lausanne, Switzerland who had a gastrostomy performed between 1988 and 2010. The records of the children were reviewed for sex, age at the time of gastrostomy removal, underlying disease, type of gastrostomy placement and length of use, and then analyzed in order to find a correlation between the GCF and these parameters. Results: The gastrostomy orifice did not close spontaneously within the first month in 33 of the patients (44%), and 15 subsequently underwent surgical closure. The mean duration of gastrostomy use was significantly longer in children who developed a persistent GCF (30 vs. 19 months, P = 0.03). The other parameters studied did not show any significant association with the persistence of a GCF. Conclusions: The only predictive factor determining the persistence of a GCF was found to be the timespan between the placement and removal of the gastrostomy appliance. Elective surgical closure of the gastrostomy orifice should be considered after 1 month of persistent GCF.