Asset Price Instability and Policy Responses: The Legacy of Liberalisation

The debate about the dynamics and potential policy responses to asset inflation has intensified in recent years. Some analysts, notably Borio and Lowe, have called for 'subtle' changes to existing monetary targeting frameworks to try to deal with the problems of asset inflation and have attempted to developed indicators of financial vulnerability to aid this process. In contrast, this paper argues that the uncertainties involved in understanding financial market developments and their potential impact on the real economy are likely to remain too high to embolden policy makers. The political and institutional risks associated with policy errors are also significant. The fundamental premise that a liberalised financial system is based on 'efficient' market allocation cannot be overlooked. The corollary is that any serious attempt to stabilize financial market outcomes must involve at least a partial reversal of deregulation.

Asset Price Instability and Policy Responses: The Legacy of Liberalization

The problem of asset price bubbles, and more generally of instability in the financial system, has been a matter of concern since the 1980s but has only recently moved to the center of the macroeconomic policy debate. The main concern with bubbles arises when they burst, imposing losses on investors holding the bubble assets and potentially on the financial institutions that have extended credit to them. Asset price volatility is an inevitable consequence of financial market liberalization and, in extreme cases, generates asset price bubbles, the bursting of which can impose substantial economic and social costs. Policy responses within the existing liberalized financial system face daunting levels of uncertainty and risk. Given the pattern of increasing asset market volatility over recent decades and the policy issues highlighted in this paper, the future looks uncertain. Another significant cycle of asset price movements, especially in one of the major economies, could see a fundamental revision of thinking about the costs and benefits of liberalized financial systems.

Modulational Instability in Periodic Quadratic Nonlinear Materials

We investigate the modulational instability of plane waves in quadratic nonlinear materials with linear and nonlinear quasi-phase-matching gratings. Exact Floquet calculations, confirmed by numerical simulations, show that the periodicity can drastically alter the gain spectrum but never completely removes the instability. The low-frequency part of the gain spectrum is accurately predicted by an averaged theory and disappears for certain gratings. The high-frequency part is related to the inherent gain of the homogeneous non-phase-matched material and is a consistent spectral feature.

Microsatellite instability and loss of heterozygosity at DNA mismatch repair gene loci occurs during hepatic carcinogenesis

DNA mismatch repair is an important mechanism involved in maintaining the fidelity of genomic DNA. Defective DNA mismatch repair is implicated in a variety of gastrointestinal and other turners; however, its role in hepatocellular carcinoma (HCC) has not been assessed. Formalin-fixed, paraffin-embedded archival pathology tissues from 46 primary liver tumors were studied by microdissection and microsatellite analysis of extracted DNA to assess the degree of microsatellite instability, a marker of defective mismatch repair, and to determine the extent and timing of allelic loss of two DNA mismatch repair genes, human Mut S homologue-2 (hMSH2) and human Mut L homologue-1 (hMLH1), and the tumor suppressor genes adenomatous polyposis coli gene (APC), p53, and DPC4. Microsatellite instability was detected in 16 of the tumors (34.8%). Loss of heterozygosity at microsatellites linked to the DNA mismatch repair genes, hMSH2 and/or hMLH1, was found in 9 cases (19.6%), usually in association with microsatellite instability. Importantly, the pattern of allelic loss was uniform in 8 of these 9 tumors, suggesting that clonal loss had occurred. Moreover, loss at these loci also occurred in nonmalignant tissue adjacent to 4 of these tumors, where it was associated with marked allelic heterogeneity. There was relatively infrequent loss of APC, p53, or DPC4 loci that appeared unrelated to loss of hMSH2 or hMLH1 gene loci. Loss of heterozygosity at hMSH2 and/or hMLH1 gene loci, and the associated microsatellite instability in premalignant hepatic tissues suggests a possible causal role in hepatic carcinogenesis in a subset of hepatomas.

Theory of modulational instability in Bragg gratings with quadratic nonlinearity

Modulational instability in optical Bragg gratings with a quadratic nonlinearity is studied. The electric field in such structures consists of forward and backward propagating components at the fundamental frequency and its second harmonic. Analytic continuous wave (CW) solutions are obtained, and the intricate complexity of their stability, due to the large number of equations and number of free parameters, is revealed. The stability boundaries are rich in structures and often cannot be described by a simple relationship. In most cases, the CW solutions are unstable. However, stable regions are found in the nonlinear Schrodinger equation limit, and also when the grating strength for the second harmonic is stronger than that of the first harmonic. Stable CW solutions usually require a low intensity. The analysis is confirmed by directly simulating the governing equations. The stable regions found have possible applications in second-harmonic generation and dark solitons, while the unstable regions maybe useful in the generation of ultrafast pulse trains at relatively low intensities. [S1063-651X(99)03005-6].

Theoretical and numerical analyses of convective instability in porous media with upward throughflow

Exact analytical solutions have been obtained for a hydrothermal system consisting of a horizontal porous layer with upward throughflow. The boundary conditions considered are constant temperature, constant pressure at the top, and constant vertical temperature gradient, constant Darcy velocity at the bottom of the layer. After deriving the exact analytical solutions, we examine the stability of the solutions using linear stability theory and the Galerkin method. It has been found that the exact solutions for such a hydrothermal system become unstable when the Rayleigh number of the system is equal to or greater than the corresponding critical Rayleigh number. For small and moderate Peclet numbers (Pe less than or equal to 6), an increase in upward throughflow destabilizes the convective flow in the horizontal layer. To confirm these findings, the finite element method with the progressive asymptotic approach procedure is used to compute the convective cells in such a hydrothermal system. Copyright (C) 1999 John Wiley & Sons, Ltd.

Chromosomal fragile site FRA16D and DNA instability in cancer

It has been proposed that common aphidicolin-inducible fragile sites, in general, predispose to specific chromosomal breakage associated with deletion, amplification, and/or translocation in certain forms of cancer. Although this appears to be the case for the fragile site FRA3B and may be the case for FRA7G, it is not Set clear whether this association is a general property of this class of fragile site. The major aim of the present study was to determine whether the FRA16D chromosomal fragile site locus has a role to play in predisposing DNA sequences within and adjacent to the fragile site to DNA instability (such as deletion or translocation), which could lead to or be associated with neoplasia. We report the localization of FRA16D within a contig of cloned DNA and demonstrate that this fragile site coincides with a region of homozygous deletion in a gastric adenocarcinoma cell line and is bracketed by translocation breakpoints in multiple myeloma, as reported previously (Chesi, M., et al., Blood, 91: 4457-4463, 1998), Therefore, given similar findings at the FRA3B and FRA7G fragile sites, it is likely that common aphidicolin-inducible fragile sites exhibit the general property of localized DNA instability in cancer cells.

Convective instability of 3-D fluid-saturated geological fault zones heated from below

We conduct a theoretical analysis to investigate the convective instability of 3-D fluid-saturated geological fault zones when they are heated uniformly from below. In particular, we have derived exact analytical solutions for the critical Rayleigh numbers of different convective flow structures. Using these critical Rayleigh numbers, three interesting convective flow structures have been identified in a geological fault zone system. It has been recognized that the critical Rayleigh numbers of the system have a minimum value only for the fault zone of infinite length, in which the corresponding convective flow structure is a 2-D slender-circle flow. However, if the length of the fault zone is finite, the convective flow in the system must be 3-D. Even if the length of the fault zone is infinite, since the minimum critical Rayleigh number for the 2-D slender-circle flow structure is so close to that for the 3-D convective flow structure, the system may have almost the same chance to pick up the 3-D convective flow structures. Also, because the convection modes are so close for the 3-D convective flow structures, the convective flow may evolve into the 3-D finger-like structures, especially for the case of the fault thickness to height ratio approaching zero. This understanding demonstrates the beautiful aspects of the present analytical solution for the convective instability of 3-D geological fault zones, because the present analytical solution is valid for any value of the ratio of the fault height to thickness. Using the present analytical solution, the conditions, under which different convective flow structures may take place, can be easily determined.