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Financial bubbles are described as the deviation of the market values of financial assets from their core values. They are one of the main indicators for the financial crises by negatively affecting the markets due to the constant overvaluation of the assets. Therefore, investigating the presence of financial bubbles and determining the reasons are of great importance for investors, market regulators, and portfolio managers in terms of investment risk and price stability. In the study, the presence of bubbles in the foreign exchange market is investigated by considering the most traded currencies such as the US Dollar, Euro, Japanese Yen, British Pound, and Chinese Yuan. For this purpose, the daily price data for the period between 03.01.2005-20.11.2019 for the US Dollar/Turkish Lira, Euro/Turkish Lira, British Pound/Turkish Lira, and Chinese Yuan/Turkish Lira, and the daily price data belonging to 28.08.2013-20.11.2019 period for Japanese Yen/Turkish Lira are used. Supremum Augmented Dickey-Fuller (SADF) and Generalized Supremum Augmented Dickey-Fuller (GSADF) tests are used to determine the bubbles in aforementioned exchange rates. The results indicate findings regarding the formation of financial bubbles in the foreign exchange market in Turkey., Finansal varlıkların piyasa değerlerinin temel değerlerinden sapması olarak tanımlanan finansal balonlar, varlıkların piyasada sürekli aşırı değerlenmelerinden dolayı piyasaları olumsuz etkileyerek finansal krizlerin öncü göstergeleri olmaktadır. Böylece yatırımcılar, piyasa düzenleyiciler ve portföy yöneticileri açısından finansal balonların varlığının araştırılması ve nedenlerinin tespit edilmesi, yatırım riski ve fiyat istikrarı için büyük önem arz etmektedir. Bu çalışmada Amerikan Doları, Euro, Japon Yeni, İngiliz Sterlini ve Çin Yuanı olmak üzere en çok işlem gören para birimleri dikkate alınarak döviz piyasasındaki balonların varlığı araştırılmıştır. Bu amaç doğrultusunda çalışmada ABD Doları, Euro, İngiliz Sterlini ve Çin Yuanı için 03.01.2005-20.11.2019; Japon Yeni için de 28.08.2013-20.11.2019 dönemi günlük fiyat verileri kullanılmıştır. Söz konusu kurlardaki balonları belirlemek amacıyla Eküs-Genelleştirilmiş Dickey-Fuller (SADF) ve Genelleştirilmiş SADF (GSADF) testlerinden yararlanılmıştır. Çalışma sonucunda Türkiye döviz piyasasında finansal balonların oluşumuna yönelik bulgulara ulaşılmıştır.

Motivated by auctions for carbon emission permits, we examine the social welfare of multi-buyer sequential auctions for identical items. Assuming the buyers have weakly-decreasing incremental (concave) valuation functions, we study subgame perfect equilibria of a repeated second-price auction with n buyers and T time periods. We show that these auctions admit envy-free subgame-perfect equilibria that \((1-1/e)\)-approximate the optimal welfare. The equilibria we construct have a natural interpretation: each bidder guarantees for herself the best outcome she could obtain if all other bidders were non-strategic. Without the envy-freeness condition, the price of anarchy can be as bad as \(\varTheta (1/T)\) even when restricting to equilibria that satisfy a no-overbidding condition. We also consider the restricted class of envy-free subgame perfect equilibria that survive iterated deletion of weakly undominated strategies. For this class of equilibria we prove constant bounds on the price of anarchy for three settings with differing levels of market competitiveness, based on the number of buyers with oligopsony power (market power).

In August 2020, monetary policymakers articulated a new framework for conducting monetary policy. That framework reflected the conclusion, drawn from the recovery from the Great Recession, that monetary policy had erred in pursuing preemptive increases in the funds rate. Starting in December 2015, the Federal Open Market Committee (FOMC) had raised the funds rate off the zero lower bound and the inflation rate continued to run below the 2 percent target. Going forward, the FOMC will forgo preemptive increases to ensure an overshoot of its inflation target until the FOMC achieves the goal of “maximum employment.” What should policymakers have learned from the Great Recession recovery? It was a period of considerable nominal and real stability. In part, that stability was an artifact of an initial moderately contractionary monetary policy that limited the strength of the recovery. But that price stability provided the foundation for the significant decline in the unemployment rate during the recovery.

This article assesses the communication of the European Central Bank (ECB) using Natural Language Processing (NLP) techniques. We show the evolution of discourse over time and capture the main themes of interest for the central bank that go beyond its traditional mandate of maintaining price stability, enlightening main concerns and themes of discussion among board members. We also built sentiment signals compatible with any form of language, both formal and informal, an important step as the ECB aims to enhance communication with non-expert audiences. In a second step, we measure the impact of the ECB’s communication on the EUR/USD exchange rate. We found that our quantitative series, both topics and sentiment, improve financial-linked models consistently in all periods analyzed (2.5% on average). Meaningful signals comprise a broad range of subjects and vary in time. This suggests that overall ECB’s talk matters for asset prices, including themes not directly related to monetary policy. This result is particularly important in a context in which the ECB, as well as other major central banks, are moving towards integrating issues closer to the society into their scope of action, implying that subjects, which were considered peripheral, may become central. This emphasizes the importance for markets to effectively track central banks’ communication to improve investment processes.

After the Global Financial Crisis, the role of uncertainty in driving optimal responses of consumers, firms and policymakers has garnered a renewed focus. In the face of uncertainty, economic agents awaiting information and clarity on future outcomes, may delay their economic decisions. Monetary policy aimed at business cycle stabilization may be rendered ineffective in such situations. We test this hypothesis for a large emerging market economy by analyzing the confidence channel of monetary transmission in India. Using a flexible, local projections-based framework, we find that uncertainty shocks resemble a negative supply shock, contrary to evidence from the developed world. This dominant supply-side effect of uncertainty is crucial in understanding the ineffectiveness of monetary policy transmission once macroeconomic uncertainty is accounted for. An unanticipated increase in uncertainty hinders private investment thereby eroding the productive capacity of the economy. This worsens the inflation-output tradeoff for monetary policy. The weaker monetary policy transmission is corroborated by a non-linear threshold model. Episodes of increased uncertainty may, therefore, require unconventional policy tools for effective management. Our findings are useful for monetary policy in an emerging economy given its objective to maintain price stability and optimize on economic growth.

Why do some countries appoint women to central bank boards and others not? Women held only 11% of seats on global central bank boards between 2000 and 2015, with much smaller representation in years prior and even lagging behind the meager 16 % world-wide average percent of women in national cabinets. We argue that the dearth of female central bankers stems from gender’s impact on central bankers’ ability to signal commitments to price stability. Governments that are concerned with inflation often seek central bankers that exude anti-inflationary bona fides. We argue that this trait is often heuristically informed by gender, such that women are especially under-represented where the need for individual bankers to project monetary conservatism is large. We hypothesize that the need is greatest and female central bankers scarcest in countries with histories of inflation, and with independent central banks and flexible exchange rates, both of which highlight central banker’s personal reputation for monetary stability. We test our theories using a new dataset on the gender composition of central bank boards in 114 countries for years 1998-2015 and find support for our theory. Notably, that support is strongest in the context of long-term trends rather than year-to-year changes. That is consistent with work on the long run political effects of memories of inflation and hyperinflation.

The HICPs were designed as a tool for the Maastricht criterion on entering the Economic and Monetary Union (EMU). So at the start of the harmonization project the most important use of the HICPs was in the application of the criterion of convergence for price stability in the context of the preparations for Stage 3 of EMU (the launch of the euro in electronic form). In line with this, the harmonization work during this early period focussed on measures to remove or reduce significant long-term effects (“non-comparabilities”), as these were most likely to distort the assessments of sustainable price stability.

Looking at the euro from a 20-year perspective, one sees many successes that are consistent with the principles of economic freedom: the emphasis on transparency, the goal of price stability, endorsement of market-based reforms, encouragement of sound budget policy, open capital markets, and improved communication. However, recent deviations from rules-based strategies may have delayed more classical liberal policies. One reason for the deviations may be special circumstances such as the lower bound on interest rates, but in this chapter, international influences are emphasized. While these have provided incentives to adopt policies conducive to economic freedom, they may have led to less rules-based policies and less classical liberalism. This is a reason for a rules-based reform of the international monetary system.

This paper analyzes a dynamic general equilibrium model of cryptographic utility tokens. The tokens are native to a proof-of-stake blockchain and serve a two-fold role. On the one hand, tokens are paid out to validators for consensus provision. On the other hand, tokens are required by blockchain users to access the services offered on the secured chain. Validators and users repeatedly interact in a spot market. There is an inefficiency at the extensive margin because users need to be given some rent in equilibrium, yet there no inefficiency at the intensive margin: given operation, the blockchain platform always chooses the socially optimal value of services. Further, I formulate a utility token trilemma. Any equilibrium features at most two of the following: (i) bonding of tokens used for service consumption, (ii) price stability, (iii) constant value of the provided services. The results have implications both for antitrust and for practical token market design.

Over the past few decades, policymakers in different countries have become increasingly aware of socio-economic costs of inflation leading central banks to adopt price stability as a goal of monetary policy.

The use of macro-econometric modelling technique has become a norm for policy decisions in central banks and in particular, the Bank of Sierra Leone. This study has leveraged on the technicalities of scientific and artistic approaches of assessing risks around point / baseline forecast; this in general makes it more convincing for probability confidence bands to be used in explaining uncertainty that surround point forecast in particular. In the case of this study, the use of the Box-Jenkins ARIMAX model has made it possible to highlight the relevance of Composite Leading Indicator (CLI) like Exchange Rate in alerting signals about early turning point of inflation outcome, both in terms of the uncertainty and risks surrounding its projections. With the derived (scientific) probability distribution of risks (30%, 60% and 90%), it was possible for the study outcome to unearth vast amount of information from the Inflation Fan Chart, particularly with respect to the art of providing balanced assessment of policy framework needed to communicate the BSL’s price stability objective. While the use of Fan Chart is hailed as a very relevant tool, the paper also recommend the use of other model approaches like Scenario and Sensitivity analysis, also considered relevant in providing leading evidence of balancing risks surrounding macroeconomic outlook.

Inflation persistence or ‘inertia’ has important consequences for monetary policy. Inflation which does not get eliminated today tends to persist entailing higher costs in the future. In turn, a monetary regime can exert significant influence on inflation persistence by its credibility and responses in the face of inflationary shocks. In this study, we use a flexible, time-varying parameter approach to analyze inflation persistence in the United Kingdom and United States during 1880-2016. Our results indicate strong evidence for time-varying inflation persistence in conjunction with shifts in monetary policy regimes. Further, we show that credibility of the monetary regime significantly influences inflation persistence observed under the regime, such that higher (lower) regime credibility leads to lower (higher) inflation persistence. Finally, we argue that institutional framework such as adherence to a rule-based policy, provision of a nominal anchor, policy autonomy etc., and the actions of monetary authorities are vital for understanding the shifts in regime credibility and inflation persistence across time. Overall, our findings indicate that appropriate design and credible conduct of monetary policy is crucial for achieving and sustaining price stability.

Liquid democracy has a natural graphical representation, the delegation graph. Consequently, the strategic aspects of liquid democracy can be studied as a game over delegation graphs, called the liquid democracy game. Our main result is that this game has bicriteria approximation guarantees, in terms of both rationality and social welfare. Specifically, we prove the price of stability for \(\epsilon \)-Nash equilibria is exactly \(\epsilon \) in the liquid democracy game.

It is known that a cobweb model with heterogeneous expectations and evolutionary selection on beliefs is able to generate irregular and complex price dynamics. I show in this work that a necessary condition for such dynamics to emerge is the asymmetry in the set of available predictors over which evolutionary forces operate. If predictors are symmetric around the rational one, heterogeneous expectations aggregate up to rationality, and the unique rational expectations price is stable. If predictors are asymmetrically distributed, instead, the outcome depends on the side of the asymmetry: a prevalence of predictors that overshoot price changes leads to market stability, irrespective on any dynamics on beliefs, while a predominance of predictors anchored to past prices can be destabilizing. It is only in this last case that an evolutionary selection mechanism can give rise to complex dynamics in prices. As the distribution of beliefs depends on the set of heuristics allowed to compete in the market, the design of this set is shown to be crucial for the possible outcomes of the model.

This chapter explores the interaction of various monetary and macro-prudential tools and their effects on the macro-economy and the price stability mandate. We assess the different effects of the tightening in the banks’ required reserves (RR) ratio, an unexpected increase in excess liquid asset holdings (LAH) and the accumulation of foreign currency reserves on inflation expectations. The chapter also assesses whether these monetary and macro-prudential tools complement or propagate each other’s effects on inflation expectations. Evidence shows that positive RR ratio, excess LAH and forex reserves accumulation shocks lower inflation expectation across all maturities. Nonetheless, the decline is more pronounced in current inflation expectations compared to the one-year and two-year ahead inflation expectations. The R/US$ and the nominal effective exchange rates (NEER) play a significant role in transmitting the positive shocks to the RR ratio, excess LAH and forex reserves on inflation expectations. But inflation expectations decline more due to an unexpected increase in the RR ratio compared to a positive excess LAH shock. We conclude that all three shocks complement and propagate each other’s effects on inflation expectations in the same direction. But the RR ratio tightening shocks exert the most potent shock effects on current inflation expectations and the R/US$ exchange rate plays a meaningful role in propagating these tightening effects. This is because the RR ratio tightening shock dampens credit-demand-driven inflation shocks.

The 2020–2021 review of the ECB strategy will shape monetary policy in the Eurozone in the years to come. Crucially, it will also determine the scope and capabilities of the ECB within the ever-evolving architecture of the euro. As in the aftermath of the Global Financial Crisis and the subsequent Euro Crisis, Member States are discussing new mechanisms to enhance economic recovery and further integration which, one way or another, will involve the support of, or the coordination of fiscal policymakers with the ECB. The impact of the new ECB strategy in the current debate about the future direction of the single currency should not be overlooked. In this chapter, we offer a proposal for the reform of the ECB strategy incorporating the lessons learned in the recent crises. We discuss several options for the ECB and set up a rule-based strategy suitable to operate in an environment of persistently low inflation and near-zero interest rates. Under our proposal, monetary stability becomes the guiding principle for providing macroeconomic stability over the medium and long term, as well as for enhancing the transparency of the ECB communication policies.

In October 1979, Federal Reserve Chairman Paul Volcker persuaded his Federal Open Market Com­mittee (FOMC) colleagues to adopt a new policy framework that (i) accepted responsibility for controlling inflation and (ii) implemented new operating procedures to control the growth of monetary aggregates in an effort to restore price stability. These moves were strongly supported by monetarist-­oriented economists, including the leadership and staff of the Federal Reserve Bank of St. Louis. The next three years saw inflation peak and then fall sharply but also two recessions and considerable volatility in interest rates and money supply growth rates. This article reviews the episode through the lens of speeches and FOMC meeting statements of Volcker and St. Louis Fed president Lawrence Roos and articles by Roos's staff. The FOMC adopted monetarist principles to establish the Fed's anti-inflation credibility, but Volcker was willing to accept deviations of money growth from the FOMC's targets, unlike Roos, who viewed the targets as sacrosanct. The FOMC abandoned monetary aggregates in October 1982 but preserved the Fed's commitment to price stability. The episode illustrates how Volcker used a change in operating procedures to alter policy fundamentally and later adapt the procedures to changed circumstances without abandoning the foundational features of the policy.

The Eurosystem is mandated to safeguard price stability according to article 127 of the Treaty on the Functioning of the European Union (TFEU). Based on a theoretical and policy-oriented approach, this article sheds light on a second public good with enormous practical relevance both for financial markets and institutions as well as for the general public that the Eurosystem, and ultimately the European Central Bank (ECB), must safeguard according to article 128 TFEU: the availability of ideal monetary objects for the public. While monetary policy constitutes the instrument used to keep prices stable, the availability of ideal monetary objects is ensured through the issuance of ‘cash’ that serves as both money with selected properties and an anchor for other monies of the same currency, including sight deposits at commercial banks. Today, the role of ideal monetary objects is (still) primarily fulfilled by tangible banknotes. As the use of tangible banknotes declines, however, a digital equivalent and complement—a digital euro—becomes increasingly necessary. Accordingly, the article concludes that the ECB is both entitled and obliged de lege lata to issue a digital euro on the basis of article 128 TFEU. It further explains that neither tangible cash nor a digital euro can simultaneously be used as instruments in themselves to maintain price stability.

Firstly, Germany has a highly developed welfare state. Secondly, the free exchange of goods, all across Europe and indeed all around the world, is a key element of the German economic system. Thirdly, to the acclaim of voters, German policy is committed to the goal of price stability. Is the debt brake compatible with these three guiding principles of German economic policy? I doubt it. In the German discussion, public debt is only seen in a negative light—wrongly, as I will show.

Is there a case for the Public Investment Corporation (PIC) to increase its holdings of government debt securities? Yes, there is. We find that incremental positive shocks to the share (stock effects) and growth rate (flow effects) of government bonds in the PIC balance sheet result in a decline in the ten-year government bond yield. Large positive shocks to the share and growth rates of government bonds in the PIC balance sheet result in a larger decline in the ten-year government bond yield. The ten-year government bond yield declines in response to positive shocks to the South African Reserve Bank (SARB) assets growth rate and the PIC government bonds purchases growth rate channel amplifies these shock effects. In addition, persistent positive shocks to government bond purchases by the PIC on the ten-year government bond yields whether measured as a growth rate (flow) or as a share (stock) have a much larger downward effect compared to transitory (non-persistent) shocks. Thus, it is a worthwhile strategy to use the PIC balance sheet alongside the SARB balance sheet to achieve the national objectives of price stability, financial stability and macro-economic stability in a prudent manner. This is especially the case given that the effects of the bond purchases by the PIC can reinforce large-scale asset purchases by the SARB in the primary and secondary market, as the PIC can participate in both segments of the market. However, the effects will depend on the design of the PIC bond purchase programme by the policymakers involved, because it matters how a given stock of asset purchases is accumulated and composed.

The aim of this study is to investigate the existence of financial connectedness (FC) between energy& commodity markets (EMsC it is important to stress that the reviewed empirical works do not analyze the volatility connectedness (spillovers) between the two markets. Hence, an analysis of the connectedness between those markets is the missing part in the literature. In this paper, the related contribution is made to the literature by implementing such an analysis. There is an asymmetric connectedness between energy&commodity markets. Hence, the relationship between the financialized EMs and CMs cannot be estimated by standard approaches. The connectedness between these two markets is an important source of impact, leading to the explosion of SR. It is a fact that financial stress leads to the SR, which can increase rapidly to significant size due to high spillover effects between financially connected submarkets. The determination of FC is essential for market players who invest in portfolio of assets to decide portfolio allocation, risk management, hedging and pricing strategies. Estimating the FC map of sub-markets provides valuable information for financial stability and energy price stability in the long run. Particularly, the submarket specific stress and its influence on other submarkets as well as FC in time can provide information for containing overall SR in the markets. This approach is essential to limit partial financial stress in the submarkets before it evolves into a SR and posing a severe threat to financial stability in the economy. In this study, it is revealed that there is a FC between the EMs&CMs depending on the analysis of these relations.

Monetary policy plays a fundamental role in price stability, which is a precondition for sustainable output growth and employment over the long run and is also a powerful tool in influencing economic activity in short term through several transmission channels.

Has the inflation target band impacted the natural rate of unemployment (NAIRU) in South Africa based on the accelerationist Philips curve? Furthermore, to what extent can the expansionary monetary policy impact the unemployment rate above the NAIRU when using the 4.5 per cent inflation threshold? Evidence in this chapter suggests that monetary policy has a role to play in dealing with the unemployment problem above the NAIRU. This is contrary to evidence put forward that there is little or nothing that monetary policymakers can do. We find that price stability measured by inflation bands of inflation below 6 per cent leads to a lower NAIRU compared to when the inflation bands are not considered. Expansionary monetary policy lowers the unemployment rate above the NAIRU. Evidence shows that expansionary monetary policy lowers the unemployment rate and these effects are amplified by high GDP growth, investment growth, credit growth, the exchange rate appreciation and unit labour costs below the trend growth (alternatively, positive labour productivity shocks). However, the impact of expansionary monetary policy on the unemployment rate above the NAIRU is hampered by the exchange rate depreciation and high unit labour costs above the trend growth. This evidence shows that studies which do not control for the influence of inflation bands miss an important aspect in the determination of the NAIRU in South Africa. Such findings can lead to policymakers dismissing certain important policy tools which are also potent in lowering the unemployment rate.

To understand the German attitude toward European integration, two aspects are essential. One is the collapse of the German economy and the annihilation of any sense of national and moral identity following WWII. The second are the emerging tensions between the Allies and the Soviet Union, which created an interest in her recovery. I will examine how the implementation of a market-friendly economic order transformed Germany into a leader in European integration up to the fall of the Berlin Wall. The focus is on the pivotal role of the Deutsche Mark and the Bundesbank in setting the course for monetary policy in Europe through the European Monetary System that eventually led to the establishment of the European Monetary Union.

In this paper, we study the mechanisms that govern price stability of MakerDAO's DAI token, the first decentralized stablecoin. DAI works through a set of autonomous smart contracts, in which users deposit cryptocurrency collateral, typically Ethereum, and borrow a fraction of their positions as DAI tokens. Using data on the universe of collateralized debt positions, we show that DAI price covaries negatively with returns to risky collateral. The peg-price volatility is related to collateral risk, while the stability rate has little ability to stabilize the coin. The introduction of safe collateral types has led to an increase in peg stability.

In hedonic games, coalitions are created as a result of the strategic interaction of independent players. In particular, in additively separable hedonic games, every player has valuations for all other ones, and the utility for belonging to a coalition is given by the sum of the valuations for all other players belonging to it. So far, non-cooperative hedonic games have been considered in the literature only with respect to totally selfish players. Starting from the fundamental class of additively separable hedonic games, we define and study a new model in which, given a social graph, players also care about the happiness of their friends: we call this class of games social context additively separable hedonic games (SCASHGs). We focus on the fundamental stability notion of Nash equilibrium, and study the existence, convergence and performance of stable outcomes (with respect to the classical notions of price of anarchy and price of stability) in SCASHGs. In particular, we show that SCASHGs are potential games, and therefore Nash equilibria always exist and can be reached after a sequence of Nash moves of the players. Finally, we provide tight or asymptotically tight bounds on the price of anarchy and the price of stability of SCASHGs.

This chapter assesses whether household debt growth regimes lead to subsequent lower output growth and higher unemployment. Mian et al. (2015) establish that household debt is a source of instability and lower economic growth. First, we establish that on a bilateral basis, household debt growth explains 60 per cent of changes in GDP growth. Second, the household debt growth threshold that exerts non-linear shock effects on output growth occurs around 9.62 per cent. Third, the household debt growth threshold matters for output growth, inflation and the monetary policy response to inflation shocks. The results show that the policy rate is tightened in the high household debt growth regime due to positive inflationary pressures. Furthermore, loose labour market conditions amplify the repo rate tightening in response to inflationary pressures in the high household debt growth regime. This means that household debt growth regimes transmit positive inflation shocks to the policy rate. Loose labour market conditions, household debt growth regimes and inflationary pressures interact and have an influence on the monetary policy settings. The amplification size by household debt growth in the high debt regime is nearly double that in the low debt regime. The policy implication is that the level of household debt (household debt regimes) as one of the indictors of household financial standing and financial stability plays a meaningful role in the price stability mandate and the responses of the policy rate. There is a strong link between the price and financial stability objectives of the central bank via the household debt channel.

Under the influence of major random events such as US-China trade dispute and the coronavirus (COVID-19) outbreak, the uncertainty of macroeconomic regulation has also risen significantly. Then, what role economic policy level shocks and uncertainty shocks play in industrial regulation need to be clarified urgently. This study constructs a large-scale benchmark VAR model including fiscal and monetary policy and three-industry output and inflation, makes a detailed distinction between policy level shocks and uncertainty shocks, and describes the industrial control mechanism of economic policy from a new perspective. The main conclusions are as follows: firstly, compared with the ordinary VAR model, the benchmark VAR model has significant advantages in modeling efficiency, system stability and explanatory power, making it more suitable for describing the transmission mechanism of economic policy. Secondly, in terms of the role of policy uncertainty, its influence sometimes even exceeds the level impact, but in most cases, it is manifested as suppressing the output of the three industries, and the impact on industrial inflation is also dual at the same time. It shows that policy uncertainty is prone to adverse effects, and policy authorities should be more cautious in its use. Finally, from perspective of the adjustment of the three industries, tax and fee reduction are a relatively dominant means to optimize the output of the three industries, while in terms of maintaining price stability, the steady interest rate regulation is more efficient.

We consider the problem in which n items arrive to a market sequentially over time, where two agents compete to choose the best possible item. When an agent selects an item, he leaves the market and obtains a payoff given by the value of the item, which is represented by a random variable following a known distribution with support contained in [0,1]. We consider two different settings for this problem. In the first one, namely competitive selection problem with no recall, agents observe the value of each item upon its arrival and decide whether to accept or reject it, in which case they will not select it in future. In the second setting, called competitive selection problem with recall, agents are allowed to select any of the available items arrived so far. For each of these problems, we describe the game induced by the selection problem as a sequential game with imperfect information and study the set of subgame-perfect Nash equilibrium payoffs. We also study the efficiency of the game equilibria. More specifically, we address the question of how much better is to have the power of getting any available item against the take-it-or-leave-it fashion. To this end, we define and study the price of anarchy and price of stability of a game instance as the ratio between the maximal sum of payoffs obtained by players under any feasible strategy and the sum of payoffs for the worst and best subgame-perfect Nash equilibrium, respectively. For the no recall case, we prove that if there are two agents and two items arriving sequentially over time, both the price of anarchy and price of stability are upper bounded by the constant 4/3 for any value distribution. Even more, we show that this bound is tight.

The present University notes contain a brief presentation and analysis of the legal framework governing the single monetary policy in the euro area, as this developed from the establishment of the Eurosystem until today. It is structured in four Sections: Section A deals with the definition of the single monetary policy in the Eurosystem after a brief presentation of the notions of monetary system and (conventional and unconventional) monetary policy. Particular emphasis is given to the definition of price stability in the euro area. The legal framework governing the implementation of the single monetary policy is discussed in Section B. In this respect, the instruments for the implementation of monetary policy (i.e., open market operations, standing facilities and minimum reserves), the eligible counterparties and the assets eligible as collateral in the Eurosystem are discussed in turn. The focus in Section C is on the implementation of the single monetary policy following the recent (2007-2009) global financial crisis (GFC) and the subsequent fiscal crisis in the euro area, discussing in detail the ECB asset purchase programmes (APPs) and the programme for targeted longer-term refinancing operations (TLTROs). Section D reviews then the developments relating to the implementation of the single monetary policy since the outbreak of the current pandemic crisis, discussing, inter alia, the pandemic emergency longer-term refinancing operations (PELTROs), the Pandemic Emergency Purchase Programme (PEPP) and the amendments introduced to other APPs. Finally, the Excursus at the end of the notes briefly presents the newly introduced euro short-term rate (€STR). It is noted that Tables 5 and 6 present (respectively) the evolution of the Eurosystem’s consolidated balance sheet during the period 2007-2017, to highlight the impact of the measures taken after the 2007-2009 GFC and the subsequent euro area fiscal crisis, as well as during the period December 2019 – March 2021 to show the impact of the measures taken amidst the pandemic crisis.

Previous scholarship on central bank accountability has generally focused on monetary authorities’ deeds and words while largely ignoring the other side of the accountability relationship, namely politicians’ voice on monetary policy. This raises a fundamental question: what are central banks held accountable for by elected officials? To answer this question, we employ structural topic models on a new dataset of the Monetary Dialogues between the Members of the European Parliament (MEPs) and the President of the European Central Bank (ECB) from 1999 to 2019. Our findings are twofold. First, we uncover differences in how MEPs keep the ECB accountable for its primary, price stability objective. We show that European politicians also attempt to keep the central bank accountable for a broader set of issues that are connected with, but distinct from, the central bank’s primary goal. Second, we show that unemployment is a key explanatory variable for the political voice articulated by individual MEPs in accountability settings. In particular, higher rates of domestic unemployment lead MEPs to devote less voice on issues related to the ECB’s primary mission. These findings reveal the existence of a “political” Phillips curve reaction function, which enriches our understanding of the principal–agent accountability relationship between politicians and central bankers.

Much of the Jewish legal tradition deals with business ethics. This paper focuses on an overlooked precept: ensuring price stability. There is a tendency to trivialize the law mandating that prices be kept low and affordable, but in the wake of the 2020 world pandemic, these laws are more important than ever. Indeed, very few people are aware that the ninth blessing of the ancient Amida (also known as shemoneh esrei) prayer, established by the 120 members of the Great Assembly in the 5th century BCE, is a prayer for divine protection against individuals who would raise prices unjustly. This paper illustrates the importance of this law and provides interesting stories and examples of individuals who protected the public against hoarders. Ethical leaders have an obligation not to take advantage of vulnerable members of the public by price gouging.

We consider the problem of the existence of natural improvement dynamics leading to approximate pure Nash equilibria, with a reasonable small approximation, and the problem of bounding the efficiency of such equilibria in the fundamental framework of weighted congestion game with polynomial latencies of degree at most $\d \geq 1$.\\ In this work, by exploiting a simple technique, we firstly show that the game always admits a $\d$-approximate potential function. This implies that every sequence of $\d$-approximate improvement moves by the players always leads the game to a $\d$-approximate pure Nash equilibrium. As a corollary, we also obtain that, under mild assumptions on the structure of the players' strategies, the game always admits a constant approximate potential function. Secondly, by using a simple potential function argument, we are able to show that in the game there always exists a $(\d+\delta)$-approximate pure Nash equilibrium, with $\delta\in [0,1]$, whose cost is $2/(1+\delta)$ times the cost of any optimal state.

An increasing number of emerging and developing countries have adopted or are transitioning towards full-fledged inflation targeting (FFIT) as the main monetary policy framework to anchor inflation. In this paper, we explore the FFIT regime as a means for Mauritius to achieve stable inflation, anchor inflationary expectations and establish credibility in committing monetary policy towards price stability as its primary goal. This paper reviews and highlights issues experienced with the current monetary policy framework and the challenges in transitioning towards FFIT. Given that forecasting is central to FFIT, we develop a practical model-based forecasting and policy analysis system (FPAS) to support transition to FFIT, taking into account structural features and shocks that are specific to the Mauritius economy.

The Great Inflation was America's most recent bout of permanent excessive price level growth. I review the literature on the subject and construct a model of inflation during the period synthesized from the Phillips Curve and Quantity Theory of Money. I then run regressions to evaluate the relationship between money and inflation during the period. I then test my model, finding money growth to be the most explanatory factor of inflation during the period, or that expansion killed the price stability. Lastly, I conclude with recommendations for future research.

In this chapter we review the function of the central bank as lender of last resort (LOLR), starting from the understanding of financial crises developed in the previous chapter. We recall long-established LOLR principles: proactive lending, inertia of the central bank risk control framework, and risk endogeneity. Because of its systemic role, a central bank should not tighten its collateral framework in a crisis, as restrictive policies are likely to not only increase the overall damage done by a crisis to society, but to even increase central bank losses. We explain in more detail the main reasons why a central bank should act as LOLR: prevent negative externalities from fire sales; its unique status as institution with unlimited liquidity; its status as a risk-free counterparty making others accept to deliver collateral to it even at high haircuts; and its mandate to preserve price stability. We distinguish three different forms of LOLR: elements built into the regular operational framework; readiness to relax parameters in a crisis; and provision of emergency liquidity assistance to individual firms. We then discuss what could be the optimal propensity of a central bank to engage in LOLR activities and outline possible trade-offs. Last but not least, we develop a bank-run model which highlights the role of asset liquidity and central bank eligible collateral. We calculate through a model variant with binary asset liquidity and uniform central bank collateral haircut, but then also introduce a model variant with continuous asset liquidity and haircuts.

Does economic policy uncertainty impact real money demand in South Africa? Evidence reveals that elevated economic policy uncertainty lowers real money demand and that the credit conditions channel and inflation regimes matter for the transmission of such shocks. The results show that inflation declines due to positive economic policy uncertainty shocks when inflation is below 6 per cent and especially when it is below 4.5 per cent. Inflation also declines when considering the effects of the nominal effective exchange rate depreciation shocks, suggesting that the exchange rate pass-through to inflation is weaker in low-inflation regimes. In addition, positive policy uncertainty shocks tighten credit conditions and lower GDP growth, and these effects assist in attaining price stability especially when inflation is below 6 per cent. Hence, inflation regimes matter for the transmission of economic policy uncertainty shocks to money demand.

The German debt brake is not compatible with the long-term stability of the euro. “New thinking” requires that public debt and price stability are no longer opponents, but rather allies in the Keynes world of persistently low interest rates. The proposed balanced account agreement is made more concrete here: An appropriate target (real) interest rate on the global capital market is between one and 1.5% per year lower than the growth rate of the OECD plus China region. If the actual interest rate is below the target rate, the countries with current account surpluses undertake to increase their public debt periodD gradually according to a definite formula. In symmetrical fashion, if the real interest rate is “too high,” countries with current account deficits have the duty to reduce their public debt period. The rules of the balanced account agreement replace the debt brake. They are the instruments of soundfiscal policy.

The paper introduces a study about the possibility of application of negative interest rates by central banks of developed countries as an instrument of monetary policy. This article highlights the importance and effectiveness of this method in terms of overcoming the crisis in the economy, stimulating market rates, maintaining exchange rate stability, and promoting economic growth. Despite the limited number of scientific works, here summarized provisions of world economists and best practices on the Negative Interest Rate Policy. This policy was introduced in Sweden, England, Switzerland, Denmark, Japan, Austria, Finland and Germany. The authors indicated that implementation of the Negative Interest Rate Policy method gave positive trends: better quality of loans; an increased volume of intermediation; flexible financial conditions that support demand and price stability. The paper describes negative impact of Negative Interest Rate Policy as well. Mostly it concerns net interest margin and banks profitability, focused on retail deposits and other economic processes. The ethical and psychological aspect of the Negative Interest Rate Policy indirectly affects the level of confidence in the banking system as a whole. Especially in case of the introduction of negative interest rates on deposits by commercial banks. The paper defines a range of perspective measures necessary for Ukraine to stimulate monetary influence. The existing imbalances in the economy shows that traditional instruments of monetary regulation are not sufficiently effective for Ukraine. Negative Interest Rate Policy actions will help to reduce the cost of credit resources, increase their availability. Structural adjustment of cash flows for the process of implementation will improve economic activity.

Presently, animal food commodity prices have fluctuated in recent years. These fluctuations generally occur on the eve of a holiday or other feast day. Fluctuations are caused by market dynamics that can change supply and demand, resulting in market prices (animal food commodities) becoming unstable. Meanwhile, the availability of animal food commodities should always be monitored to maintain price stability and economic stability in a macro-region. Therefore, a system that can monitor and predict the changes of animal food commodities prices in the domestic market is indispensable. This paper aims to convey a system that works in the form of an application called I-VEE (Intelligent Livestock Commodity Prices Forecasting System). I-VEE is a system that implements the Autoregressive Integrated Moving Average (ARIMA) model as its working principle. I-VEE serves to monitor the market and provide early warning through analysis of price movements. This analysis aims to provide early warning, predict prices in the short term and provide scientific decision references to local governments during fluctuations occurrence, in hopes of stabilizing prices in the region. This research was conducted to design and construct frameworks on I-VEE. The research uses qualitative writing methods, namely by surveying and studying literature through books, journals, and news. This research implements observation-applied research methods (practical problem solving). The expected research is a system that can be implemented in case studies in the field directly. Thus, if market price stabilization can be done then people (consumers) and producers can benefit.

Pigou's problem has many applications in real life scenarios like traffic networks, graph theory, data transfer in internet networks, etc. The two player classical Pigou's network has an unique Nash equilibrium with the Price of Stability and Price of Anarchy agreeing with each other. The situation changes for the $k-$person classical Pigou's network with $n$ being the total number of people. If we fix the behaviour of $(n-2)$ people and assume that $k-$persons take path $P_2$ where $k, Comment: 12 pages, 5 figures, 8 tables, accepted for publication in Physica A: Statistical Mechanics and its Applications