The NBER's 24th Annual International Seminar on Macroeconomics, organized by Jeffrey A. Frankel, NBER and Harvard University, and Francesco Giavazzi, NBER and Bocconi University, was held on June 8-9 at University College Dublin (Ireland). The following papers were discussed:
Anne Sibert, Birkbeck College, "Monetary Policy with Uncertain Central Bank Preferences" Discussants: Mervyn King, NBER and Bank of England, and Lars Svensson, NBER and Stockholm University
Arrt Kraay, World Bank, and Jaume Ventura, NBER and MIT, "The Role of Trade in International Transmission of Business Cycles" Discussants: Antonio Fatas, INSEAD, and James Stock, NBER and Harvad University Eduardo Loyo, Harvard University, "Imaginary Money"
Discussants: Zvi Eckstein, Tel Aviv University, and Frank Smets, European Central Bank
Raquel Fernandez, NBER and New York University, "Education, Segregation, and Marital Sorting: Theory and an Application to U.K. Data" Discussants: Alberto Alesina, NBER and Harvard University, and Gianluca Violante, University College London
Romain Wacziarg, Stanford University, "Structural Convergence" Discussants: Tito Boeri, Universita Bocconi, and Peter Neary, University College Dublin
Rodney Thom and Brendan Walsh, University College Dublin, "The Effect of a Common Currency on Trade: Ireland Before and After the Sterling Link"
Discussants: William A. Branson, NBER and Princeton University, and Andrew Rose, NBER and University of California at Berkeley
Susanto Basu, NBER and University of Michigan, and John Fernald, Federal Reserve Bank of Chicago, "Aggregate Productivity and Aggregate Technology"
Discussants: Robert J. Gordon, NBER and Northwestern University, and Jean Imbs, London Business School Philip lane, Trinity College Dublin, and Gian Maria Milesi-Ferretti, International Monetary Fund, "External Wealth, the Trade Balance, and the Real Exchange Rate"
Discussants: Barry Eichengreen, NBER and University of California at Berkeley, and Richard Fortes, NBER and London Business School
Sibert analyzes the effect of unobservable central bank preferences on the actions of the central bank and on inflation. In her basic model, central bankers serve two terms. The weight that they place on output, relative to inflation, is their private information (that is, unobservable). The model shows that all but the most dovish central bankers inflate less they otherwise would in their first period in office in order to differentiate themselves from less conservative central bankers. Surprisingly, in that first period central banks also respond more to shocks than they otherwise would. Central banks may socialize central bankers, making them more conservative over time. An extension of Sibert's basic model allows central bankers' preferences to change randomly overtime. If policymakers tend to become more conservative, this causes them to inflate more in their first term. Thus, the private information need not lead to lower inflation in the first period of office than in the second. A further extension o f her model allows for policymakers to serve three periods in office. If the probability of a change in preferences is small, then all but the most conservative central bankers inflate less in the first period than in the second.
In industrial countries, the service sector accounts for more than two-thirds of GDP, yet trade in service accounts for only 20 percent of international trade. To a large extent this bias in trade flows reflects both technological and policy-induced barriers to trade in services that are expected to decline substantially in the next decade or two. What will be the effects of such an increase in service trade on risk sharing? Kraay and Ventura develop a stylized model of international trade and risk sharing. Since countries have different factor abundance and industries have different factor intensities, there is an incentive to trade in goods and services in order to exploit the country's comparative advantage. …