Monday, July 31, 2017

Modeling international reserves composition: Armenian Economic Association workshop

International reserves composition: central banks, exchange rate targets and gold. Central Bank of Armenia, Dilijan, 11AM-1PM, August 2, 2017

This paper explores the composition of international reserves under an exchange rate target. The model allows for numerically calculating the shadow price – interpreted as the central bank’s sacrifice of policy precision given one more unit of portfolio variance – of the target exchange rate. The simulations indicate a two-regime demand for gold. The multiple equilibria results indicate that increasing the demand for gold from 0 to 21 percent shares of international reserves leads to a lower but unstable policy sacrifice. The next minimum sacrifice occurs approximately at around 40 to 60 percent of gold in the reserve portfolio. These results, therefore, indicate a wide range of possibilities for a central bank targeting the exchange rate to vary its demand for gold. Moreover, the results suggest that the ability to target the exchange rate is unaffected by the higher volatility of monthly returns on gold.

Location:  Central Bank of Armenia, Dilijan, Armenia

Duration: 1

Registration is required for non-CBA staff per security. Please register at the following link and indicate whether you like to carpool to Dilijan:

About presenter: Aleksandr V. Gevorkyan is assistant professor at St. John’s University, NY. His recent book (co-editor with Otaviano Canuto) Financial Deepening and Post-Crisis Development in Emerging Markets was published by Palgrave MacMillan in 2016.This research is co-authored with Tarron Khemraj of New College of Florida and Central Bank of Barbados.

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Modeling Wealth Distributions: Armenian Economic Association workshop

Modeling Wealth Distributions, Central Bank of Armenia, Dilijan, 2-4PM, August 3, 2017

Today there are six people in the world who have as much combined wealth as half the human population.  In 2010, that figure was 388, so we live in a world where wealth is rapidly concentrating. Understanding how and why this is happening, and what if anything needs to be done about it is an interdisciplinary problem that will ultimately involve mathematicians, economists, physicists, political scientists, and specialists in ethics, justice, and public policy.

In the 1990s, a number of physicists began to apply methods of statistical physics to the study of wealth and income distributions.  Particular progress was made with a class of agent-based models called "asset-exchange models."  These models represent an economy by a collection of economic agents who exchange wealth in pairwise transactions according to idealized rules.

In this talk, I shall describe recent results obtained using a very simple asset-exchange model with only three free parameters, all of which are motivated by particular features of the society's microeconomics.  The first feature is a measure of the level of redistribution present.  The second is the degree to which the society confers an advantage to wealthier agents.  The third is a measure of the extent to which there are negative-wealth or "underwater" agents in the economy.

In spite of the simplicity of this model -- no advanced mathematics will be used for its description in this presentation -- we will see that it has a number of interesting features:

  • It is capable of explaining the actual wealth distribution of the United States between 1989 and the present with remarkable accuracy.
  • It provides a natural explanation of the phenomenon of oligarchy, in which a finite fraction of a society's wealth is held by a vanishingly small fraction of its population.
  • It relates useful economic metrics, such as "upward mobility," to the underlying transactional model.

Finally, I shall relate the asset-exchange model described above to transactions between agents based on a stochastic version of General Equilibrium theory.  In doing so, I will explain the origin of the widespread belief that free-market economies are inherently stable, even in the absence of imposed redistribution.  I will also explain why this model strongly suggests that this belief is wrong.

Location: Central Bank of Armenia, Dilijan

Duration: 2-4PM

Registration is required for non-CBA staff per security. Please register at the following link and indicate whether you like to carpool to Dilijan:

About the presenter: Bruce Boghosian is a professor of mathematics at Tufts University, and President Emeritus of the American University of Armenia.  His research on wealth distributions has appeared in, inter alia, Physical Review E, the Journal of Statistical Physics, and Physica A.  For the convenience of CBA and AEA members, the most recent of these papers can be temporarily downloaded from the  following address

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