The Abstract: The Morning After ... an Inflation Target

A roundup of recent noteworthy research:

Inflation Targeting and Monetary Policy Activism
Toshitaka Sekine and Yuki Teranishi, Bank of Japan
"We estimate monetary policy activism, defined as responsiveness of the policy interest rate to inflation, among five inflation-targeting countries (the UK, Canada, Sweden, Australia and New Zealand) plus the G3 (the US, Japan and Germany)...We find that activism of inflation-targeting countries tends to have increased before (not after) the adoption of the inflation-targeting policy framework and that these countries have experienced a decline in activism in recent years, albeit to different degrees.

A theoretical model, which explicitly takes into account an inflation target range, suggests that the decline in monetary policy activism is in fact because of the successful inflation records of these central banks rather than a genuine change in their preference for inflation stability. The conjecture goes as follows: because of their success in keeping inflation within the target ranges, their credibility has improved and inflation expectations have become well contained."

City Business Cycles and Crime
Thomas Garrett and Lesli Ott, Federal Reserve Bank of St. Louis
"We explore the influence of city-level business cycle fluctuations on crime in 20 large cities in the United States. Our monthly time series analysis considers seven crimes over an approximately 20-year period: murder, rape, assault, robbery, burglary, larceny, and motor vehicle theft. Short-run changes in economic conditions, as measured by changes in unemployment and wages, are found to have little effect on city crime across many cities, but property crimes were more likely to be influenced by changes in economic conditions than were more violent crimes. Contrary to the deterrence hypothesis, we find strong evidence that in many cities more arrests follow from an increase in crime rather than arrests leading to a decrease in crime. This is true especially for the more visible crimes of robbery and vehicle theft and suggests that city officials desire to remove these crimes from the public's view."

The Contribution of Economic Geography to GDP Per Capita
Herve Boulhol, Alain De Serres, and Margit Molnar, OECD
"This paper examines how much of the dispersion in economic performance across OECD countries can be accounted for by economic geography factors. More specifically, two aspects of economic geography are examined, namely the proximity to areas of dense economic activity and endowments in natural resources...Three measures of distance to markets are found to have a statistically significant effect on GDP per capita: the sum of bilateral distances, market potential and the weighted sum of market access and supplier access. And the estimated economic impact is far from negligible. The reduced access to markets relative to the OECD average could contribute negatively to GDP per capita by as much as 10% in Australia and New Zealand. Conversely, a favourable impact of around 6-7% of GDP is found in the case of two centrally-located countries: Belgium and the Netherlands. Endowments in natural resources are also found to have a significant positive effect on GDP per capita, suggesting that OECD countries have, on average, escaped the natural resource curse or severe forms of the Dutch disease. The paper provides also some tentative evidence that spending on R&D and human capital might have a stronger effect on GDP per capita in countries with a higher degree of urban concentration."

Add Your Comment

Report Abuse

Archive

Categories

Links