DOES CALVO MEET ROTEMBERG AT THE ZERO LOWER BOUND?

This paper compares the conventional Calvo and Rotemberg price adjustments at the zero lower bound (ZLB) on nominal interest rates. Although the two pricing mechanisms are equivalent to a first-order approximation around the zero-inflation steady state, they produce very different results, based on a fully-nonlinear method. Specifically, the nominal interest rate hits the ZLB more frequently in the Calvo model than in the Rotemberg model. At the ZLB, deflation is larger and recessions are more severe in the Calvo model. The main reason for the difference in results is that price adjustment costs show up in the resource constraints in the Rotemberg. When they are rebated to the household, the two models behave similarly.

THE RISK OF HITTING THE ZERO LOWER BOUND AND THE OPTIMAL INFLATION TARGET

I examine the optimal inflation target in a dynamic stochastic New Keynesian model featuring an occasionally binding zero lower bound on nominal interest rate (ZLB). To this end, I first calibrate the shock needed to generate the risk of hitting the ZLB that matches the U.S. data, based on a fully nonlinear method. I then resolve the model with different inflation targets and find that the optimal target is 3.4%. In addition, the optimal inflation target is a nonlinear function of the risk of hitting the ZLB and inflation indexation. It is always greater than 2% if the risk is greater than 2.5% or if the inflation indexation is higher than 0.5. Finally, the linear–quadratic approach overestimates the true optimal inflation target. In particular, based on the benchmark calibration, it generates an optimal target of 5.5%, compared with 3.4% found by the fully nonlinear method.

The inverse water wave problem of bathymetry detection

The inverse water wave problem of bathymetry detection is the problem of deducing the bottom topography of the seabed from measurements of the water wave surface. In this paper, we present a fully nonlinear method to address this problem in the context of the Euler equations for inviscid irrotational fluid flow with no further approximation. Given the water wave height and its first two time derivatives, we demonstrate that the bottom topography may be reconstructed from the numerical solution of a set of two coupled non-local equations. Owing to the presence of growing hyperbolic functions in these equations, their numerical solution is increasingly difficult if the length scales involved are such that the water is sufficiently deep. This reflects the ill-posed nature of the inverse problem. A new method for the solution of the forward problem of determining the water wave surface at any time, given the bathymetry, is also presented.

A method for computing unsteady fully nonlinear interfacial waves

We derive a time-stepping method for unsteady fully nonlinear two-dimensional motion of a two-layer fluid. Essential parts of the method are: use of Taylor series expansions of the prognostic equations, application of spatial finite difference formulae of high order, and application of Cauchy's theorem to solve the Laplace equation, where the latter is found to be advantageous in avoiding instability. The method is computationally very efficient. The model is applied to investigate unsteady trans-critical two-layer flow over a bottom topography. We are able to simulate a set of laboratory experiments on this problem described by Melville & Helfrich (1987), finding a very good agreement between the fully nonlinear model and the experiments, where they reported bad agreement with weakly nonlinear Korteweg–de Vries theories for interfacial waves. The unsteady transcritical regime is identified. In this regime, we find that an upstream undular bore is generated when the speed of the body is less than a certain value, which somewhat exceeds the critical speed. In the remaining regime, a train of solitary waves is generated upstream. In both cases a corresponding constant level of the interface behind the body is developed. We also perform a detailed investigation of upstream generation of solitary waves by a moving body, finding that wave trains with amplitude comparable to the thickness of the thinner layer are generated. The results indicate that weakly nonlinear theories in many cases have quite limited applications in modelling unsteady transcritical two-layer flows, and that a fully nonlinear method in general is required.

Numerical Integration of the 3D Unsteady Euler Equations for Flutter Analysis of Axial Flow Compressors

In order to analyze axial-flow compressor flutter, methods are required that compute the unsteady flow through vibrating cascades. A 3D fully nonlinear method has been developed by numerically integrating the 3D unsteady Euler equations, in the time-domain. The equations are discretized in a moving grid, which conforms with the vibrating blades and are integrated using the explicit MacCormack scheme, in finite-difference formulation. The method assumes a traveling-wave assembly mode of vibration. In this manner, the flow is computed in a single channel by applying the corresponding chorochronical periodicity condition at the permeable pitchwise limits. The blade vibratory mode is an input to the method obtained by a standard finite element method structural analysis code. A number of results are presented, for a transonic fan rotor, illustrating the possibilities of the method, both in started and unstarted supersonic flow conditions.