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511. Ramsey Monetary Policy and International Relative Prices

Author:
Ester Faia and Tommaso Monacelli
Publication Date:
04-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We analyze welfare maximizing monetary policy in a dynamic two-country model with price stickiness and imperfect competition. In this context, a typical terms of trade externality affects policy interaction between independent monetary authorities. Unlike the existing literature, we remain consistent to a public finance approach by an explicit consideration of all the distortions that are relevant to the Ramsey planner. This strategy entails two main advantages. First, it allows an accurate characterization of optimal policy in an economy that evolves around a steady-state which is not necessarily efficient. Second, it allows to describe a full range of alternative dynamic equilibria when price setters in both countries are completely forward looking and households' preferences are not restricted. In this context, we study optimal policy both in the long-run and along a dynamic path, and we compare optimal commitment policy under Nash competition and under cooperation. By deriving a second order accurate solution to the policy functions, we also characterize the welfare gains from international policy cooperation.
Topic:
International Relations, Economics, and International Trade and Finance
Political Geography:
United States

512. Indeterminacy with Inflation-Forecast-Based Rules in a Two-Bloc Model

Author:
Nicoletta Batini, Paul Levine, and Joseph Pearlman
Publication Date:
04-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We examine the performance of forward-looking inflation-forecast-based rules in open economies. In a New Keynesian two-bloc model, a methodology first employed by Batini and Pearlman (2002) is used to obtain analytically the feedback parameters/horizon pairs associated with unique and stable equi-libria. Three key findings emerge: first, indeterminacy occurs for any value of the feedback parameter on inflation if the forecast horizon lies too far into the future. Second, the problem of indeterminacy is intrinsically more serious in the open economy. Third, the problem is compounded further in the open economy when central banks respond to expected consumer, rather than pro-ducer price inflation.
Topic:
International Relations, Economics, and International Trade and Finance
Political Geography:
United States

513. Price-level Determinacy, Lower Bounds on the Nominal Interest Rate, and Liquidity Traps

Author:
Dale W. Henderson and Ragna Alstadheim
Publication Date:
04-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We consider monetary-policy rules with inflation-rate targets and interest-rate or money-growth instruments using a flexible-price, perfect-foresight model. There is always a locally-unique target equilibrium. There may also be below-target equilibria (BTE) with inflation always below target and constant, asymptotically approaching or eventually reaching a below-target value, or oscillating. Liquidity traps are neither necessary nor sufficient for BTE which can arise if monetary policy keeps the interest rate above a lower bound. We construct monetary rules that preclude BTE when fiscal policy does not. Plausible fiscal policies preclude BTE for any monetary policy; those policies exclude surpluses and, possibly, balanced budgets.
Topic:
International Relations, Economics, and International Trade and Finance
Political Geography:
United States

514. Report of the Defense Science Board Task Force on Future Strategic Strike Forces

Publication Date:
02-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
The Defense Science Board Summer Study Task Force on Future Strategic Strike Forces looks to the 30-year future with the objective of providing the President with a broad range of strike options to Protect the United States and our forces abroad, Assure friends and allies of our future commitment, and Deal with future adversaries on terms favorable to the United States. The Task Force identified currently planned systems that will still be relevant and recommended new systems for development.
Topic:
International Relations and Defense Policy
Political Geography:
United States

515. America Passes the Religious Test

Author:
James Q. Wilson
Publication Date:
12-2004
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Contemporary concerns about the influence of religion in U.S. politics tend to ignore the significant contributions made by religion in shaping American democracy. Pluralism of sects explains why religion has been so important in U.S. history and continues to thrive in America.
Topic:
International Relations, Foreign Policy, Democratization, and Economics
Political Geography:
United States and America

516. Tear Down This Tyranny

Author:
Nicholas Eberstadt
Publication Date:
12-2004
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
The United States must develop a new approach to the North Korean nuclear crisis based on the dual realizations that we will not likely talk North Korea out of its nuclear weapons program or see much improvement under the regime of Kim Jong Il.
Topic:
International Relations, Foreign Policy, Democratization, and Economics
Political Geography:
United States and North Korea

517. A New Style for a New Mandate

Author:
David Frum
Publication Date:
11-2004
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Having won an electoral mandate, President George W. Bush now must restore bipartisanship to U.S. foreign policy in order to realize the goal of a Middle East transformed by freedom and democracy.
Topic:
International Relations, Foreign Policy, Democratization, and Economics
Political Geography:
United States and Middle East

518. Responding to Terrorism: Russia at a Crossroads

Author:
Leon Aron
Publication Date:
09-2004
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Wars have repeatedly had a decisive influence on Russia's political development, and the present global conflict against fundamentalist Islam is no exception. With the murder of hundreds of Russians at the hands of Chechen terrorists—most notably, the massacre of schoolchildren at Beslan earlier this month—President Vladimir Putin has announced a sweeping overhaul of Russia's political system that would further consolidate power in the Kremlin and damage the country's nascent democracy. The United States and its allies now confront the dual challenge of assisting Russia in its fight against terrorism while simultaneously resisting the erosion of freedom there.
Topic:
International Relations, Foreign Policy, Democratization, and Economics
Political Geography:
Russia and United States

519. Four Surprises in Global Demography

Author:
Nicholas Eberstadt
Publication Date:
08-2004
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Sub-replacement fertility rates are becoming the norm throughout much of the world. Specific nations—some poor, some wealthier—are experiencing unusually high mortality rates and unnatural gender imbalances. Almost alone among developed nations, the United States continues to grow.
Topic:
International Relations, Foreign Policy, Democratization, and Economics
Political Geography:
United States

520. It Wasn't Inevitable

Author:
Irving Kristol
Publication Date:
06-2004
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
President Ronald Reagan led the West to victory in the Cold War by defying establishment critics. Ignoring those who advocated détente with the Soviet Union, he rebuilt America's military. In spite of those who scoffed at his economic program, his policies reinvigorated the U.S. economy. Together, these restorations of American strength hastened the Soviet collapse.
Topic:
International Relations, Foreign Policy, Democratization, and Economics
Political Geography:
United States, America, and Soviet Union