VIENNA JOINT ECONOMICS SEMINAR	INVITATION
The University of Vienna and the Institute for Advanced Studies cordially invite you to the following Vienna Joint Economics Seminar Thursday, April 14, 2016 University of Vienna, Oskar-Morgenstern-Platz 1, 1090 Vienna, HS 15, 2nd floor 4:00 pm Giancarlo Corsetti and                        Christoph Kuzmics University of Cambridge University of Graz Capital flows and monetary policy trade-offs (Giancarlo Corsetti) Abstract: In response to inefficient capital flows that cause real appreciation and external deficits monetary authorities face a trade-off between stabilising inflation, or addressing competitive losses by leaning against the appreciating exchange rate. We provide an analytical characterisation of this trade-off using the workhorse model of modern monetary analysis in open economy. Under incomplete markets, independently of nominal distortions, expectation-driven capital flows can move the natural rate allocation away from the first best. Based on a quadratic approximation to the utility-based global policy loss function, we show that the optimal monetary response under cooperation will be either more or less contractionary, depending on sensitivity of export/import demand to the real exchange rate, which in turn is a function of the degree of exchange rate pass-through (ERPT) as well as the substitutability of domestic and imported goods. In general, a high level of pass-through warrants policies that leans against exchange rate over-valuation and competitiveness losses, even at the cost of inflation. and Cognitive Empathy in Conflict Situations (Christoph Kuzmics) Abstract: Two individuals are involved in a conflict situation in which preferences are ex ante uncertain. While they eventually learn their own preferences, they have to pay a small cost if they want to learn their opponent’s preferences. We show that, for sufficiently small positive costs of information acquisition, in any Bayesian Nash equilibrium of the resulting game of incomplete information the probability of getting informed about the opponent’s preferences is bounded away from zero and one. (paper jointly with Florian Gauer) We are looking forward to seeing you! Institute for Advanced Studies Josefstädter Straße 39, 1080 Vienna, Austria Tel.: +43 1 599 91 145 e-Mail: economics@ihs.ac.at http://www.ihs.ac.at		LINKS DIRECTIONS TO UNIVERSITY OF VIENNA on Google maps VIENNA JOINT ECONOMICS SEMINAR on Google calendar ECONOMICS SEMINARS IN VIENNA on Google calendar
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