Is the Taylor Rule Really Different from the McCallum Rule?

When base velocity is a stable function of the Federal funds rate (FFR), the money base–nominal GDP targeting rule (McCallum rule) can be reparameterized and presented in terms of FFR as the policy instrument. Comparison of this McCallum modified policy rule with the popular Taylor rule suggests that these two rules and the FFR are actually closely related. Model-based evaluations of the two rules' stabilization properties indicate that the modified McCallum rule is similar to the Taylor rule. The key to this result is the degree of interest rate smoothing applied to the policy rules. (JEL E3 , E52 , E58 )     

Inflation, Price Level and Hybrid Rules under Inflation Uncertainty

The performance and robustness of optimised interest rate rules are analysed in a New Keynesian model estimated for the euro area economy. In particular, we examine the properties of rules responding to inflation, the price level, or a combination of the two (a hybrid rule). All the rules also respond to the output gap. The optimal hybrid rule is only marginally superior when there is no model uncertainty. When there is uncertainty about the degree of inflation persistence, the inflation rule is the most robust rule and the performance of the other two rules deteriorates. However, all the rules perform well if the true degree of inflation persistence turns out to be less than policymakers’ estimate.     

Cost monotonicity, consistency and minimum cost spanning tree games

We propose a new cost allocation rule for minimum cost spanning tree games. The new rule is a core selection and also satisfies cost monotonicity. We also give characterisation theorems for the new rule as well as the much-studied Bird allocation. We show that the principal difference between these two rules is in terms of their consistency properties.     

The Costs of Implementing the Majority Principle: The Golden Voting Rule

In a context of constitutional choice of a voting rule, this paper presents an economic analysis of scoring rules that identifies the golden voting rule under the impartial culture assumption. This golden rule depends on the weights β and (1−β) assigned to two types of costs: the cost of majority decisiveness (‘tyranny’) and the cost of the ‘erosion’ in the majority principle. Our first main result establishes that in voting contexts where the number of voters n is typically considerably larger than the number of candidates k, the golden voting rule is the inverse plurality rule for almost any positive β. Irrespective of n and k, the golden voting rule is the inverse plurality rule if β ≥ 1/2 .. This hitherto almost unnoticed rule outperforms any other scoring rule in eliminating majority decisiveness. The golden voting rule is, however, the plurality rule, the most widely used voting rule that does not allow even the slightest ‘erosion’ in the majority principle, when β=0. Our second main result establishes that for sufficiently “small size” voting bodies, the set of potential golden rules consists at most of just three rules: the plurality rule, the Borda rule and the inverse plurality rule. On the one hand, this finding provides a new rationalization to the central role the former two rules play in practice and in the voting theory literature. On the other hand, it provides further support to the inverse plurality rule; not only that it is the golden rule in voting contexts, it also belongs, together with the plurality rule and the Borda method of counts, to the “exclusive” set of potential golden voting rules in small committees. We are indebted to Jim Buchanan, Amichai Glazer, Noa Nitzan, Ken Shepsle, and an anonymous referee for their useful comments.     

Rawlsian equity and generalised utilitarianism with an infinite population

Summary This note provides axiomatizations of the discounting utilitarian rule and the Rawlsian infimum rule for an infinite setting. Contrary to the finite case, an objective function cannot at the same time satisfy anonymity and the strong Pareto principle. The Rawlsian rule is based on anonymity, and the discounting rule on the strong Pareto axiom. Furthermore, the infimum rule is compatible with an infinite version of ordinal level comparability, and the discounting rule with cardinal unit comparability.This text presents research results of the Belgian Programme of Interuniversity Poles of attraction initiated under the Science Policy Programmes of the Prime Minister's Office, Belgium. The scientific responsibility is assumed by its authors.I would like to thank two referees for their most helpful comments. I am grateful to Bart Capéau, Erik Schokkaert, John Sweeney, Dirk Van de gaer, and Luc Van Liedekerke for their remarks.     

Two characterizations of the uniform rule for division problems with single-peaked preferences

Summary The uniform rule is considered to be the most important rule for the problem of allocating an amount of a perfectly divisible good between agents who have single-peaked preferences. The uniform rule was studied extensively in the literature and several characterizations were provided. The aim of this paper is to provide two different formulations and corresponding axiomatizations of the uniform rule. These formulations resemble the Nash and the lexicographic egalitarian bargaining solutions; the corresponding axiomatizations are based on axioms of independence of irrelevant alternatives and restricted monotonicity.The authors are grateful to Jeffrey Banks, Steve Ching, Vincent Feltkamp, Bezalel Peleg, Sang-Young Sonn, William Thomson and an anonymous referee for helpful comments.     

A Note on the New Rule for the Current Account

In this note, we show that the two main concerns against the new rule for the current account are flawed. The new rule states that the impact of a transitory income shock on the current account is given by the savings generated by the shock multiplied by the ratio of the net foreign asset position to domestic wealth. First, we adapt the new rule to distinguish between gross and net foreign asset positions. Second, we demonstrate that the results for the new rule are driven neither by an accounting‐based “approximate” regression nor a steady state.     

A Poole Analysis in the New Open Economy Macroeconomic Framework*

This paper evaluates simple monetary policy rules in the tradition of the Poole analysis within a general two‐country model for a large economy and a small open economy. The results for the large economy resemble those of the original Poole scenario and also extend to the welfare measure. In particular, an interest rate rule is preferable to a money supply rule when liquidity shocks dominate, whereas a money supply rule fares better with real shocks. For the small open economy, the stabilization properties of the large‐economy case continue to hold for domestic shocks, but a money supply rule performs better than an interest rate rule using the welfare measure. If shocks originate in the foreign economy, a money supply rule turns out to be superior both in terms of its stabilization properties as well as in terms of welfare.     

PARETO EFFICIENCY AND WEIGHTED MAJORITY RULES

We consider the design of decision rules in an environment with two alternatives, independent private values and no monetary transfers. The utilitarian rule subject to incentive compatibility constraints is a weighted majority rule, where agents' weights correspond to expected gains given that their favorite alternative is chosen. It is shown that a rule is interim incentive efficient if and only if it is a weighted majority rule, and we characterize those weighted majority rules that are ex ante incentive efficient. We also discuss efficiency in the class of anonymous mechanisms and the stability of weighted majority rules.     

Proposal power and majority rule in multilateral bargaining with costly recognition

This paper studies a sequential bargaining model in which agents expend efforts to be the proposer. In equilibrium, agents’ effort choices are influenced by the prize and cost effects. The (endogenous) prize is the difference between the residual surplus an agent obtains when he is the proposer and the payment he expects to receive when he is not. Main results include: (1) under the unanimity voting rule, two agents with equal marginal costs propose with equal probabilities, regardless of their time preferences; (2) under a nonunanimity rule, however, the more patient agent proposes with a greater probability; (3) while, under the unanimity rule, the social cost decreases in group heterogeneity, it can increase under a nonunanimity rule; and (4) when agents are identical, the unanimity rule is socially optimal.     

Real exchange rate dynamics: Relative importance of Taylor‐rule fundamentals,monetary policy shocks,and risk‐premium shocks

We first show that the solution to the real exchange rate under the Taylor rule with interest rate smoothing can have two alternative representations—one based on a first‐order difference equation and the other based on a second‐order difference equation. Then, by comparing error terms from these two alternative representations and analyzing their second moments, we evaluate the relative importance of Taylor‐rule fundamentals, monetary policy shocks, and risk‐premium shocks in the dynamics of the real exchange rate. Empirical results suggest that the risk‐premium shock is the largest contributor to real exchange rate movements for all the countries examined, with the Taylor‐rule fundamentals and monetary policy shocks playing a limited role. These results are robust to various alternative sets of parameter values considered for the Taylor rule with interest rate smoothing.     

POSITIVELY RESPONSIVE COLLECTIVE CHOICE RULES AND MAJORITY RULE: A GENERALIZATION OF MAY'S THEOREM TO MANY ALTERNATIVES

May's theorem shows that if the set of alternatives contains two members, an anonymous and neutral collective choice rule is positively responsive if and only if it is majority rule. We show that if the set of alternatives contains three or more alternatives only the rule that assigns to every problem its strict Condorcet winner satisfies the three conditions plus Nash's version of “independence of irrelevant alternatives” for the domain of problems that have strict Condorcet winners. We show also that no rule satisfies the four conditions for domains that are more than slightly larger.     

Coalition Formation and Potential Games

In this paper we study the formation of coalition structures in situations described by a cooperative game. Players choose independently which coalition they want to join. The payoffs to the players are determined by an allocation rule on the underlying game and the coalition structure that results from the strategies of the players according to some formation rule. We study two well-known coalition structure formation rules and show that for both formation rules there exists a unique component-efficient allocation rule that results in a potential game. Journal of Economic Literature Classification Numbers: C71, C72.     

Optimal card payment systems

This paper presents a model of a card payment system to address the pricing and rules that govern such systems. It evaluates the social optimality of privately set interchange fees and the adoption of a rule by payment systems to prevent merchants surcharging for card transactions using two extremes of merchant pricing—monopolistic pricing and perfect competition. Both types of merchant pricing constrain the ability of card schemes to use interchange fees and the no-surcharge rule in anticompetitive ways, although for quite different reasons. The positive role of the no-surcharge rule in preventing excessive merchant surcharging is also highlighted.     

Access to an Essential Facility: Efficient Component Pricing Rule or Unrestricted Private Property Rights?

In this paper, we compare the access to an essential facility in two different property rights regimes. In the first, the owner of the facility has an unrestricted private property right of the essential facility. In the second, access is regulated according to the efficient component pricing rule. Proponents of the second regime claim that this rule is efficient, for it forecloses the complementary market only to inefficient producers. We prove that, as far as entry is concerned, the two legal frameworks are equivalent if we do not consider the possibility of the transfer of the property right, and that if this is allowed the efficient component pricing rule might exclude efficient suppliers.     

A Macroeconomic Perspective on Reserve Accumulation

This paper nests the buffer stock model within a standard open-economy model to capture two motives for international reserves accumulation—the insurance motive and the export-led growth motive. The model is solved for two exchange-rate policies, discretion and a rule with escape clause. It illustrates the behavior of international reserves and other macroeconomic variables when the policymaker pursues output and inflation stabilization and recognizes the supply of reserves can constrain the choice of exchange rate and the choice of exchange rate affects the supply of reserves. When output is below potential, it is optimal under both discretion and the rule to adopt a weak currency and promote export-led growth to achieve output and inflation stabilization. This policy leads to reserve accumulation and is consistent with the behavior of China. When reserves are low initially, welfare is higher when the policymaker follows a rule.     

On the value of participation: endogenous emergence of social norms in a three-player ultimatum game experiment

We report results from two different settings of a three-player ultimatum game. Under the “Monocratic” rule, a player is randomly selected to make an offer to two receivers. Under the “Democratic” rule, all three players make a proposal, and one proposal is then randomly selected. A majority vote is required to implement the proposal in either setting. Although the two rules are strategically equivalent, different patterns of behaviour emerge as the number of interactions increase. Under the “Monocratic” rule, proposers seem to be entitled to claim a larger share of the pie, and receivers are more likely to accept, than in the “Democratic” rule. We speculate that institutions allowing more participation in the process of collective choice lead to a more socially responsible behaviour in individuals.     

Endogenous fluctuations under evolutionary pressure in Cournot competition

An evolutionary game theoretic model of Cournot competition is investigated. Individuals choose from a finite set of different behavioral rules. Each rule specifies the quantity to be produced in the current period as a function of past quantities. Using more sophisticated rules may require extra information costs. Based upon realized payoffs, the fractions of the population choosing a certain behavioral rule are updated according to the replicator equation with noise. The long-run behavior of the evolutionary system consisting of the population dynamics coupled with the quantity dynamics of the Cournot game may be complicated and endogenous fluctuations may arise. We consider a typical example where firms can choose between two rules: the Nash rule and the best-reply rule. We show that a homoclinic tangency between the stable and unstable manifold of the equilibrium occurs as evolutionary pressure increases, implying bifurcation routes to complicated dynamics and strange attractors.     

A simple characterization of majority rule

Summary. Assuming an odd number of voters, E. S. Maskin recently provided a characterization of majority rule based on full transitivity. This paper characterizes majority rule with a set of axioms that includes two of Maskin's, dispenses with another, and contains weak versions of his other two axioms. It allows the number of voters to be odd or even. Received: December 23, 1998; revised version: May 10, 1999     

对《中共中央关于全面推进依法治国若干重大问题的决定》的几点思考

党的十八届四中全会通过的《中共中央关于全面推进依法治国若干重大问题的决定》就依法治国提出许多新的思想观点,从实现中华民族伟大复兴中国梦的高度阐述依法治国的重大意义,把习近平总书记的系列重要讲话精神首次作为依法治国的指导思想,从依据宪法法律治国理政和依据党内法规管党治党两方面阐明了党依法执政的新内涵,提出了"人民是依法治国的主体和力量源泉"的新论点,全面阐述了依法治国的重大任务。