Economic Theory - Research from Kobe University in the area of economic theory published
2009 DEC 25 - (VerticalNews.com) -- "The ''fiscal theory of currency crises'' (Daniel 2001; Corsetti and Mackowiak 2005, 2006) claims that with long-term nominal debt, a government can delay the timing of an inevitable currency crisis that results from a fiscal shock. The present paper shows that, in contrast, long-term nominal debt might have destabilizing effects when a government introduces an inflation stabilization policy," scientists in Kobe, Japan report ...read more
Economic Theory - Study results from C.K. Nielsen et al provide new insights into economic theory
2009 DEC 25 - (VerticalNews.com) -- "We study the optimal choice of exchange rate regime when agents have beliefs that are mutually inconsistent. A general framework for identifying optimal policies in such situations is proposed and then used to compare fixed and floating exchange rate regimes," scientists writing in the International Journal of Economic Theory report.
"Agents are assumed to have diverse rational beliefs (rather than rational expectations), implying the prevalence of (rational) overconfidence. We argue that in such a situation, in comparing economic institutions, one should employ the concept of ex-post optimality rather than that of Pareto optimality," wrote C.K. Nielsen and colleagues ...read more
Economic Theory - Studies from J.P. Benassy et al have provided new data on economic theory
2009 DEC 25 - (VerticalNews.com) -- According to a study from Paris, France, "A well-known determinacy condition on interest rate rules is the ''Taylor principle,'' which states that nominal interest rates should respond more than 100 percent to inflation."
"Unfortunately, notably because interest rates must be positive, the Taylor principle cannot be satisfied for all interest rates, and as a consequence global determinacy may not prevail even though there exists a locally determinate equilibrium. We propose here a simple alternative to the Taylor principle, which takes the form of a new condition on interest rate rules that ensures global determinacy," wrote J.P. Benassy and colleagues ...read more
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