... 69 ANDRÉS VELASCO Harvard University The author thanks this paper's discussants, Guiller... more ... 69 ANDRÉS VELASCO Harvard University The author thanks this paper's discussants, Guillermo Calvo and Olivier Jeanne, and edi-tors, Susan Collins and Dani Rodrik, for providing excellent comments and suggestions. The ...
Using an optimizing model we derive the optimal monetary and exchange rate policy for a small sto... more Using an optimizing model we derive the optimal monetary and exchange rate policy for a small stochastic open economy with imperfect competition and short run price rigidity. The optimal monetary policy has an exact closed-form solution and is obtained using the utility function of the representative home agent as welfare criterion. The optimal policy depends on the source of stochastic disturbances affecting the economy, much as in the literature pioneered by . Optimal monetary policy reacts to domestic and foreign disturbances. If the intertemporal elasticity of substitution in consumption is less than one, as is likely to be the case empirically, the optimal exchange rate policy implies a dirty float: interest rate shocks from abroad are met partially by adjusting home interest rates, and partially by allowing the exchange rate to move. This optimal pattern may help rationalize the observed fear of floating.
... The government budget constraint therefore is n (1) bt+i - Rbt+y-zt-^2да where у denotes exog... more ... The government budget constraint therefore is n (1) bt+i - Rbt+y-zt-^2да where у denotes exogenous non-tax government revenue (eg, income from state enter-prises or transfers from abroad)8and bt is the stock of the internationally traded bond held by the government at time ...
Since 1999, VOC's have been monitored at CENICA, located in the southeast of the Mexico City Metr... more Since 1999, VOC's have been monitored at CENICA, located in the southeast of the Mexico City Metropolitan Area (MCMA), in order to contribute to the understanding of ozone formation and the presence of toxic air pollutants. CENICA was also the supersite of the MCMA-2003 campaign. This work presents an analysis of the total and thirteen specific VOC's (compounds from C2-C9) measured over some days of the month of April from 2000-2004. Hourly measurements were made throughout the year on four minute samples using a humidifier and cryogenic trap. Samples were analyzed with gas chromatography and FID according to the EPA TO-15 method. The highest and second highest total and specific VOC concentrations were observed during the morning (7-9 am) and night period (9-11 pm), respectively. The highest VOC concentrations were observed for propane, n-butane, acetylene and toluene in both periods. Statistical analysis will be presented to determine if there are significant differences between the different years. Correlations among the 13 VOC's indicated common sources for specific compounds. Therefore, the Chemical Mass Balance Model was applied using samples from 8 am of each year respectively. Preliminary results imply that the GLP contribution increased during this five year period and that the vehicle exhaust contribution decreased in the same time.
rgentina has imploded, and among policy gurus and op-ed writers there is no shortage of simple re... more rgentina has imploded, and among policy gurus and op-ed writers there is no shortage of simple reasons why. Some blame the International Monetary Fund (IMF), others the neo-liberal model (whatever that may be), yet others a singularly corrupt and incompetent batch of politicians. The impli- cation is often clear: had Argentina just done this or that differently, the tragedy surely
We explore the incidence of sudden stops in capital flows on the incentives for building national... more We explore the incidence of sudden stops in capital flows on the incentives for building national institutions that secure property rights in a world where sovereign defaults are possible equilibrium outcomes. This paper builds upon the benchmark model of sovereign default and direct creditor sanctions by . In their model it is in the debtor country's interest to "tie its hands" and secure the property rights of lenders as much as possible because this enhances the credibility of the country's promise to repay and prevents default altogether. We incorporate two key features of today's international financial markets that are absent from the benchmark model: the possibility that lenders can trigger sudden stops in capital movements, and debt contracts in which lenders transfer resources to the country at the start of the period, which have to be repaid later. We show that under these conditions the advice "build institutions to secure repayment at all costs" may be very bad advice indeed. JEL Classification: F34; F36; F51
Exchange rate policies depend on portfolio choices, and portfolio choices depend on anticipated e... more Exchange rate policies depend on portfolio choices, and portfolio choices depend on anticipated exchange rate policies. This opens the door to multiple equilibria in policy regimes. We construct a model in which agents optimally choose to denominiate their assests and liabilites either in domestic or in foreign currency. The monetary authority optimally chooses to float or to fix the currency, after portfolios have been chosen. We identify conditions under which both fixing and floating are equilibrium policies: if agents expect fixing and arrange their portfolios accordingly, the monetary authority validates that expectation; the same happens if agents initially expect floating.
Exchange rate policies depend on portfolio choices, and portfolio choices depend on anticipated e... more Exchange rate policies depend on portfolio choices, and portfolio choices depend on anticipated exchange rate policies. This opens the door to multiple equilibria in policy regimes. We construct a model in which agents optimally choose to denominiate their assests and liabilites either in domestic or in foreign currency. The monetary authority optimally chooses to float or to fix the currency, after portfolios have been chosen. We identify conditions under which both fixing and floating are equilibrium policies: if agents expect fixing and arrange their portfolios accordingly, the monetary authority validates that expectation; the same happens if agents initially expect floating.
... 69 ANDRÉS VELASCO Harvard University The author thanks this paper's discussants, Guiller... more ... 69 ANDRÉS VELASCO Harvard University The author thanks this paper's discussants, Guillermo Calvo and Olivier Jeanne, and edi-tors, Susan Collins and Dani Rodrik, for providing excellent comments and suggestions. The ...
Using an optimizing model we derive the optimal monetary and exchange rate policy for a small sto... more Using an optimizing model we derive the optimal monetary and exchange rate policy for a small stochastic open economy with imperfect competition and short run price rigidity. The optimal monetary policy has an exact closed-form solution and is obtained using the utility function of the representative home agent as welfare criterion. The optimal policy depends on the source of stochastic disturbances affecting the economy, much as in the literature pioneered by . Optimal monetary policy reacts to domestic and foreign disturbances. If the intertemporal elasticity of substitution in consumption is less than one, as is likely to be the case empirically, the optimal exchange rate policy implies a dirty float: interest rate shocks from abroad are met partially by adjusting home interest rates, and partially by allowing the exchange rate to move. This optimal pattern may help rationalize the observed fear of floating.
... The government budget constraint therefore is n (1) bt+i - Rbt+y-zt-^2да where у denotes exog... more ... The government budget constraint therefore is n (1) bt+i - Rbt+y-zt-^2да where у denotes exogenous non-tax government revenue (eg, income from state enter-prises or transfers from abroad)8and bt is the stock of the internationally traded bond held by the government at time ...
Since 1999, VOC's have been monitored at CENICA, located in the southeast of the Mexico City Metr... more Since 1999, VOC's have been monitored at CENICA, located in the southeast of the Mexico City Metropolitan Area (MCMA), in order to contribute to the understanding of ozone formation and the presence of toxic air pollutants. CENICA was also the supersite of the MCMA-2003 campaign. This work presents an analysis of the total and thirteen specific VOC's (compounds from C2-C9) measured over some days of the month of April from 2000-2004. Hourly measurements were made throughout the year on four minute samples using a humidifier and cryogenic trap. Samples were analyzed with gas chromatography and FID according to the EPA TO-15 method. The highest and second highest total and specific VOC concentrations were observed during the morning (7-9 am) and night period (9-11 pm), respectively. The highest VOC concentrations were observed for propane, n-butane, acetylene and toluene in both periods. Statistical analysis will be presented to determine if there are significant differences between the different years. Correlations among the 13 VOC's indicated common sources for specific compounds. Therefore, the Chemical Mass Balance Model was applied using samples from 8 am of each year respectively. Preliminary results imply that the GLP contribution increased during this five year period and that the vehicle exhaust contribution decreased in the same time.
rgentina has imploded, and among policy gurus and op-ed writers there is no shortage of simple re... more rgentina has imploded, and among policy gurus and op-ed writers there is no shortage of simple reasons why. Some blame the International Monetary Fund (IMF), others the neo-liberal model (whatever that may be), yet others a singularly corrupt and incompetent batch of politicians. The impli- cation is often clear: had Argentina just done this or that differently, the tragedy surely
We explore the incidence of sudden stops in capital flows on the incentives for building national... more We explore the incidence of sudden stops in capital flows on the incentives for building national institutions that secure property rights in a world where sovereign defaults are possible equilibrium outcomes. This paper builds upon the benchmark model of sovereign default and direct creditor sanctions by . In their model it is in the debtor country's interest to "tie its hands" and secure the property rights of lenders as much as possible because this enhances the credibility of the country's promise to repay and prevents default altogether. We incorporate two key features of today's international financial markets that are absent from the benchmark model: the possibility that lenders can trigger sudden stops in capital movements, and debt contracts in which lenders transfer resources to the country at the start of the period, which have to be repaid later. We show that under these conditions the advice "build institutions to secure repayment at all costs" may be very bad advice indeed. JEL Classification: F34; F36; F51
Exchange rate policies depend on portfolio choices, and portfolio choices depend on anticipated e... more Exchange rate policies depend on portfolio choices, and portfolio choices depend on anticipated exchange rate policies. This opens the door to multiple equilibria in policy regimes. We construct a model in which agents optimally choose to denominiate their assests and liabilites either in domestic or in foreign currency. The monetary authority optimally chooses to float or to fix the currency, after portfolios have been chosen. We identify conditions under which both fixing and floating are equilibrium policies: if agents expect fixing and arrange their portfolios accordingly, the monetary authority validates that expectation; the same happens if agents initially expect floating.
Exchange rate policies depend on portfolio choices, and portfolio choices depend on anticipated e... more Exchange rate policies depend on portfolio choices, and portfolio choices depend on anticipated exchange rate policies. This opens the door to multiple equilibria in policy regimes. We construct a model in which agents optimally choose to denominiate their assests and liabilites either in domestic or in foreign currency. The monetary authority optimally chooses to float or to fix the currency, after portfolios have been chosen. We identify conditions under which both fixing and floating are equilibrium policies: if agents expect fixing and arrange their portfolios accordingly, the monetary authority validates that expectation; the same happens if agents initially expect floating.
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