Are central bank independence reforms necessary for achieving low and stable inflation?

Using data on the occurence of central bank independence (CBI) reforms in 131 countries during 1980-2005, we test whether they were important in reducing inflation and maintaining price stability. CBI reforms are found to have reduced inflation on average 3.31% when countries with historically high inflation rates are included. But countries with lower inflation have reduced it without institutional reforms granting central banks more independence, undermining the theoretical time-inconsistency case for CBI. There is furthermore no evidence that CBI reforms have helped reduce inflation variability.

Determinants and effects of central bank independence reforms

This thesis consists of four empirically oriented papers on central bank independence (CBI) reforms.    Paper [1] is an investigation of why politicians around the world have chosen to give up power to independent central banks, thereby reducing their ability to control the economy. A new data-set, including the possible occurrence of CBI-reforms in 132 countries during 1980-2005, was collected. Politicians in non-OECD countries were more likely to delegate power to independent central banks if their country had been characterized by high variability in inflation and if they faced a high probability of being replaced. No such effects were found for OECD countries.    Paper [2], using a difference-in-difference approach, studies whether CBI reform matters for inflation performance. The analysis is based on a dataset including the possible occurrence of CBI-reforms in 132 countries during the period of 1980-2005. CBI reform is found to have contributed to bringing down inflation in high-inflation countries, but it seems unrelated to inflation performance in low-inflation countries.    Paper [3] investigates whether CBI-reforms are important in reducing inflation and maintaining price stability, using a random-effects random-coefficients model to account for heterogeneity in the effects of CBI-reforms on inflation. CBI-reforms are found to have reduced inflation on average by 3.31 percent, but the effect is only present when countries with historically high inflation rates are included in the sample. Countries with more modest inflation rates have achieved low inflation without institutional reforms that grant central banks more independence, thus undermining the time-inconsistency theory case for CBI. There is furthermore no evidence that CBI-reforms have contributed to lower inflation variability    Paper [4] studies the relationship between CBI and a suggested trade-off between price variability and output variability using data on CBI-levels, and data the on implementation dates of CBI-reforms. The results question the existence of such a trade-off, but indicate that there may still be potential gains in stabilization policy from CBI-reforms.

Effects of central bank independence reforms on inflation in different parts of the world

The purpose of this study is to analyze the effect of CBI-reforms on inflation in different parts of the world from a theoretical and empirical perspective. Compared to previous studies, this study focuses on whether CBI-reforms have different effects on reducing inflation in different parts of the world. The study is based on a 132 country data-set from 1980 to 2005 compiled by Daunfeldt et al. (2008). The result indicates that the reduction in inflation due to the CBI-reforms varies between 2.2 and 12.32 percentage points in Asia, Europe, South America and Oceania, supporting the claim that implementing CBI-reforms can be successful in reducing inflation in most of the parts of the world.

Multiple equilibria and protectionism

In a nonnative approach, I analyze trade policies when the industrial sector genentes positive extemalities in production, and there are adjustments costs to changing production from one sector to the other. Protectionist trade policy can make workers intemalize the benetits from moving into the industrial sector, but it is a second best policy as it also causes consumption distortions. I show that if the govemment is able to fully commit to its tariff schedule for the future, the welfare maximizing policy is to maintain a positive tariff forever, even after all adjustment has already taken place . However, if the govemment is not able to commit at all, the only time consistent policy is zero tariff at any point in time. The time inconsistency of the full commitment policy is derived from the fact that in the model only production needs interference, and the production distortion is lagged one period with respect to the tariff wbile the consumption distortion is simultaneous to the tariff. In the intermediary case, i.e., when the government can commit for a limited period of time, the time consistent optimal tariff will be positive but lower than the "full commitment" tariff. This result indicates that some institutions that have always been considered pure sources of inefficiency, such as protectionist lobbying, may in fact be welfare improving in some cases!

A model of the rule of law

Economic development requires some limits on what those in power can do | the rule of law | but how can restraints be imposed on the powerful when there is no-one above them? This paper studies equilibrium rules allocating power and resources established by selfinterested incumbents under the threat of rebellions from inside and outside the group in power. Commitment to uphold individuals' rights can only be achieved if power is not as concentrated as incumbents would like it to be, ex post. Power sharing endogenously enables incumbents to commit to otherwise time-inconsistent laws by ensuring more people receive rents under the status quo, and thus want to defend it.

Essays in Health Economics

In the first chapter we develop a theoretical model investigating food consumption and body weight with a novel assumption regarding human caloric expenditure (i.e. metabolism), in order to investigate why individuals can be rationally trapped in an excessive weight equilibrium and why they struggle to lose weight even when offered incentives for weight-loss. This assumption allows the theoretical model to have multiple equilibria and to provide an explanation for why losing weight is so difficult even in the presence of incentives, without relying on rational addiction, time-inconsistency preferences or bounded rationality. In addition to this result we are able to characterize under which circumstances a temporary incentive can create a persistent weight loss. In the second chapter we investigate the possible contributions that social norms and peer effects had on the spread of obesity. In recent literature peer effects and social norms have been characterized as important pathways for the biological and behavioral spread of body weight, along with decreased food prices and physical activity. We add to this literature by proposing a novel concept of social norm related to what we define as social distortion in weight perception. The theoretical model shows that, in equilibrium, the effect of an increase in peers' weight on i's weight is unrelated to health concerns while it is mainly associated with social concerns. Using regional data from England we prove that such social component is significant in influencing individual weight. In the last chapter we investigate the relationship between body weight and employment probability. Using a semi-parametric regression we show that men and women employment probability do not follow a linear relationship with body mass index (BMI) but rather an inverted U-shaped one, peaking at a BMI way over the clinical threshold for overweight.

Does ‘better’ discounting lead to ‘worse’ outcomes in long-run decisions? The dilemma of hyperbolic discounting

The shortcomings of conventional discounting, especially in the context of long-run environmental problems, have been extensively discussed in the literature. Recently, hyperbolic discounting, i. e. discounting at declining instead of constant discount rates, has attracted a lot of interest among both scientists and politicians. Although there are compelling arguments for employing hyperbolic discounting, there are also pitfalls, which have to be pointed out. In this paper I show that the problem of time-inconsistency, an inherent characteristics of hyperbolic discounting, leads to a potential clash between economic efficiency and intergenerational equity. As an example, I refer to the weak progress in the controlling of greenhouse gas emissions under the Kyoto protocol. As the problem of time-inconsistency cannot be solved on economic grounds alone, there is a need for an intergenerational moral commitment.

Optimal Central Banker Contracts and Common Agency

This paper considers the contacting approach to central banking in the context of a simple common agency model. The recent literature on optimal contracts suggests that the political principal of the central bank can design the appropriate incentive schemes that remedy for time-inconsistency problems in monetary policy. The effectiveness of such contracts, however, requires a central banker that attaches a positive weight to the incentive scheme. As a result, delegating monetary policy under such circumstances gives rise to the possibility that the central banker may respond to incentive schemes offered by other potential principals. We introduce common agency considerations in the design of optimal central banker contracts. We introduce two principals - society (government) and an interest group, whose objectives conflict with society's and we examine under what circumstances the government-offered or the interest-group-offered contract dominates. Our results largely depend on the type of bias that the interest group contract incorporates. In particular, when the interest group contract incorporates an inflationary bias the outcome depends on the principals' relative concern of the incentive schemes' costs. When the interest group contract incorporates an expansionary bias, however, it always dominates the government contract. A corollary of our results is that central banker contracts aiming to remove the expansionary bias of policymakers should be written explicitly in terms of the perceived bias.

On ""Schwinger mechanism for gluon pair production in the presence of arbitrary time dependent chromo-electric field""

Recently the paper ""Schwinger mechanism for gluon pair production in the presence of arbitrary time dependent chromo-electric field"" by G. C. Nayak was published [Eur. Phys. J. C 59: 715, 2009; arXiv:0708.2430]. Its aim is to obtain an exact expression for the probability of non-perturbative gluon pair production per unit time per unit volume and per unit transverse momentum in an arbitrary time-dependent chromo-electric background field. We believe that the obtained expression is open to question. We demonstrate its inconsistency on some well-known examples. We think that this is a consequence of using the socalled ""shift theorem""[arXiv:hep-th/0609192] in deriving the expression for the probability. We make some critical comments on the theorem and its applicability to the problem in question.

Inexpensive solution for real-time video and image stitching

Image stitching is the process of joining several images to obtain a bigger view of a scene. It is used, for example, in tourism to transmit to the viewer the sensation of being in another place. I am presenting an inexpensive solution for automatic real time video and image stitching with two web cameras as the video/image sources. The proposed solution relies on the usage of several markers in the scene as reference points for the stitching algorithm. The implemented algorithm is divided in four main steps, the marker detection, camera pose determination (in reference to the markers), video/image size and 3d transformation, and image translation. Wii remote controllers are used to support several steps in the process. The built‐in IR camera provides clean marker detection, which facilitates the camera pose determination. The only restriction in the algorithm is that markers have to be in the field of view when capturing the scene. Several tests where made to evaluate the final algorithm. The algorithm is able to perform video stitching with a frame rate between 8 and 13 fps. The joining of the two videos/images is good with minor misalignments in objects at the same depth of the marker,misalignments in the background and foreground are bigger. The capture process is simple enough so anyone can perform a stitching with a very short explanation. Although real‐time video stitching can be achieved by this affordable approach, there are few shortcomings in current version. For example, contrast inconsistency along the stitching line could be reduced by applying a color correction algorithm to every source videos. In addition, the misalignments in stitched images due to camera lens distortion could be eased by optical correction algorithm. The work was developed in Apple’s Quartz Composer, a visual programming environment. A library of extended functions was developed using Xcode tools also from Apple.

An inconsistency control system based on incomplete pairwise comparison matrices

Incomplete pairwise comparison matrix was introduced by Harker in 1987 for the case in which the decision maker does not fill in the whole matrix completely due to, e.g., time limitations. However, incomplete matrices occur in a natural way even if the decision maker provides a completely filled in matrix in the end. In each step of the total n(n–1)/2, an incomplete pairwise comparison is given, except for the last one where the matrix turns into complete. Recent results on incomplete matrices make it possible to estimate inconsistency indices CR and CM by the computation of tight lower bounds in each step of the filling in process. Additional information on ordinal inconsistency is also provided. Results can be applied in any decision support system based on pairwise comparison matrices. The decision maker gets an immediate feedback in case of mistypes, possibly causing a high level of inconsistency.

Assessment of the cortisol awakening response: Real-time analysis and curvilinear effects of sample timing inaccuracy

The cortisol awakening response (CAR) is typically measured in the domestic setting. Moderate sample timing inaccuracy has been shown to result in erroneous CAR estimates and such inaccuracy has been shown partially to explain inconsistency in the CAR literature. The need for more reliable measurement of the CAR has recently been highlighted in expert consensus guidelines where it was pointed out that less than 6% of published studies provided electronic-monitoring of saliva sampling time in the post-awakening period. Analyses of a merged data-set of published studies from our laboratory are presented. To qualify for selection, both time of awakening and collection of the first sample must have been verified by electronic-monitoring and sampling commenced within 15 min of awakening. Participants (n = 128) were young (median age of 20 years) and healthy. Cortisol values were determined in the 45 min post-awakening period on 215 sampling days. On 127 days, delay between verified awakening and collection of the first sample was less than 3 min (‘no delay’ group); on 45 days there was a delay of 4–6 min (‘short delay’ group); on 43 days the delay was 7–15 min (‘moderate delay’ group). Cortisol values for verified sampling times accurately mapped on to the typical post-awakening cortisol growth curve, regardless of whether sampling deviated from desired protocol timings. This provides support for incorporating rather than excluding delayed data (up to 15 min) in CAR analyses. For this population the fitted cortisol growth curve equation predicted a mean cortisol awakening level of 6 nmols/l (±1 for 95% CI) and a mean CAR rise of 6 nmols/l (±2 for 95% CI). We also modelled the relationship between real delay and CAR magnitude, when the CAR is calculated erroneously by incorrectly assuming adherence to protocol time. Findings supported a curvilinear hypothesis in relation to effects of sample delay on the CAR. Short delays of 4–6 min between awakening and commencement of saliva sampling resulted an overestimated CAR. Moderate delays of 7–15 min were associated with an underestimated CAR. Findings emphasize the need to employ electronic-monitoring of sampling accuracy when measuring the CAR in the domestic setting.

Detailed analysis of a conservative difference approximation for the time fractional diffusion equation

Diffusion equations that use time fractional derivatives are attractive because they describe a wealth of problems involving non-Markovian Random walks. The time fractional diffusion equation (TFDE) is obtained from the standard diffusion equation by replacing the first-order time derivative with a fractional derivative of order α ∈ (0, 1). Developing numerical methods for solving fractional partial differential equations is a new research field and the theoretical analysis of the numerical methods associated with them is not fully developed. In this paper an explicit conservative difference approximation (ECDA) for TFDE is proposed. We give a detailed analysis for this ECDA and generate discrete models of random walk suitable for simulating random variables whose spatial probability density evolves in time according to this fractional diffusion equation. The stability and convergence of the ECDA for TFDE in a bounded domain are discussed. Finally, some numerical examples are presented to show the application of the present technique.