Mapping sub-flows to p2mp LSPs

In previous work we proposed a multi-objective traffic engineering scheme (MHDB-S model) using different distribution trees to multicast several flows. In this paper, we propose a heuristic algorithm to create multiple point-to-multipoint (p2mp) LSPs based on the optimum sub-flow values obtained with our MHDB-S model. Moreover, a general problem for supporting multicasting in MPLS networks is the lack of labels. To reduce the number of labels used, a label space reduction algorithm solution is also considered

Tenseness of Riemannian flows

We show that any transversally complete Riemannian foliation &em&F&/em& of dimension one on any possibly non-compact manifold M is tense; namely, (M,&em&F&/em&) admits a Riemannian metric such that the mean curvature form of &em&F&/em& is basic. This is a partial generalization of a result of Domínguez, which says that any Riemannian foliation on any compact manifold is tense. Our proof is based on some results of Molino and Sergiescu, and it is simpler than the original proof by Domínguez. As an application, we generalize some well known results including Masa's characterization of tautness.

Free Flows, Limited Diversification: Explaining the Fall and Rise of Stock Market Correlations, 1890-2001

Using a new dataset on capital account openness, we investigate why equity return correlations changed over the last century. Based on a new, long-run dataset on capital account regulations in a group of 16 countries over the period 1890-2001, we show that correlations increase as financial markets are liberalized. These findings are robust to controlling for both the Forbes-Rigobon bias and global averages in equity return correlations. We test the robustness of our conclusions, and show that greater synchronization of fundamentals is not the main cause of increasing correlations. These results imply that the home bias puzzle may be smaller than traditionally claimed.

Importance of international linkages for local know-how flows. Some econometric evidence from Belgium

External knowledge is an important input for the innovation process of firms. Increasingly, this knowledge is likely to originate fromoutside of their national borders. This explains the preoccupationof policymakers with stimulating local technology transfers coming from international firms. We find that firms that have access to the international technology market are more likely to transfer technology to the local economy. In doing so, we qualify the traditional assertion that multinational firms are more likelyto transfer technology to the local economy. Once controlled for the superior access to the international technology market that multinationals enjoy, we find that these firms are not more likelyto transfer technology to the local economy compared to exportingor local firms that have access to the international technology market. In summary, the main result of this paper is that it isnot so much the international character of the firms, but rathertheir access to the international technology market that is important for generating external knowledge transfers to the local economy.

Bubbles and capital flows

This paper presents a stylized model of international trade and asset price bubbles. Its central insight is that bubbles tend to appear and expand in countries where productivity is low relative to the rest of the world. These bubbles absorb local savings, eliminating inefficient investments and liberating resources that are in part used to invest in high productivity countries. Through this channel, bubbles act as a substitute for international capital flows, improving the international allocation of investment and reducing rate-of-return differentials across countries. This view of asset price bubbles could eventually provide a simple account of some real world phenomenae that have been difficult to model before, such as the recurrence and depth of financial crises or their puzzling tendency to propagate across countries.

Endogeneizing know-how flows through the nature of R&D investments

In this paper we carefully link knowledge flows to and from a firm s innovation process with this firm s investment decisions. Three types of investments are considered: investments in applied research, investments in basic research, and investments in intellectual property protection. Only when basic research is performed, can the firm effectively access incoming knowledge flows and these incoming spillovers serve to increase the efficiency of own applied research. The firm can at the same time influence outgoing knowledge flows, improving appropriability of its innovations, by investing in protection. Our results indicate that firms with small budgets for innovation will not invest in basic research. This occurs in the short run, when the budget for know-how creation is restricted, or in the long-run, when market opportunities are low, when legal protection is not very important, or, when the pool of accessible and relevant external know-how is limited. The ratio of basic to applied research is non-decreasing in the size of the pool of accessible external know-how, the size and opportunity of the market, and, the effectiveness of intellectual property rights protection. This indicates the existence of economies of scale in basic research due to external market related factors. Empirical evidence from a sample of innovative manufacturing firms in Belgium confirms the economies of scale in basic research as a consequence of the firm s capacity to access external knowledge flows and to protectintellectual property, as well as the complementarity between legal and strategic investments.

Why are capital flows so much more volatile in emerging than in developed countries?

The standard deviations of capital flows to emerging countries are 80 percent higher than those to developed countries. First, we show that very little of this difference can be explained by more volatile fundamentals or by higher sensitivity to fundamentals. Second, we show that most of the difference in volatility can be accounted for by three characteristics of capital flows: (i) capital flows to emerging countries are more subject to occasional large negative shocks ( crises ) than those to developed countries, (ii) shocks are subject to contagion, and (iii) the most important one shocks to capital flows to emerging countries are more persistent than those to developed countries. Finally, we study a number of country characteristics to determine which are most associated with capital flow volatility. Our results suggest that underdevelopment of domestic financial markets, weak institutions, and low income per capita, are all associated with capital flow volatility.

How do very open economies adjust to large immigration flows? Recent evidence from Spanish regions

In recent years, Spain has received unprecedented immigration flows. Between 2001 and 2006 the fraction of the population born abroad more than doubled, increasing from4.8% to 10.8%. For Spanish provinces with above-median inflows (relative to population),immigration increased by 24% the number of high school dropouts while only increasingcollege graduates by 11%. We study different channels by which regional labor markets haveabsorbed the large increase in relative supply of low educated workers. We identify theexogenous supply shock using historical immigrant settlement patterns by country of origin.Using data from the Labor Force Survey and the decennial Census, we find a large expansion ofemployment in high immigration regions. Disaggregating by industry, the absorption operatedthrough large increases in the share of low-educated workers, compared to the same industry inlow-immigration regions. We do not find changes in sectoral specialization. Overall, andperhaps surprisingly, the pattern of absorption is very similar to the one found in the US.

Gross capital flows: Dynamics and crises

This paper analyzes the behavior of international capital flows by foreign and domestic agents,dubbed gross capital flows, over the business cycle and during financial crises. We show thatgross capital flows are very large and volatile, especially relative to net capital flows. Whenforeigners invest in a country, domestic agents invest abroad, and vice versa. Gross capital flowsare also pro-cyclical. During expansions, foreigners invest more domestically and domesticagents invest more abroad. During crises, total gross flows collapse and there is a retrenchmentin both inflows by foreigners and outflows by domestic agents. These patterns hold for differenttypes of capital flows and crises. This evidence sheds light on the sources of fluctuations drivingcapital flows and helps discriminate among existing theories. Our findings seem consistent withcrises affecting domestic and foreign agents asymmetrically, as would be the case under thepresence of sovereign risk or asymmetric information.

International capital flows and credit market imperfections: A tale of two frictions

The financial crisis of 2007-08 has underscored the importance of adverse selection in financialmarkets. This friction has been mostly neglected by macroeconomic models of financialimperfections, however, which have focused almost exclusively on the effects of limited pledgeability.In this paper, we fill this gap by developing a standard growth model with adverseselection. Our main results are that, by fostering unproductive investment, adverse selection:(i) leads to an increase in the economy s equilibrium interest rate, and; (ii) it generates a negativewedge between the marginal return to investment and the equilibrium interest rate. Underfinancial integration, we show how this translates into excessive capital inflows and endogenouscycles. We also extend our model to the more general case in which adverse selection and limitedpledgeability coexist. We conclude that both frictions complement one another and show thatlimited pledgeability exacerbates the effects of adverse selection.

Sovereign debt markets in turbulent times: Creditor discrimination and crowding-out effects

In 2007, countries in the Euro periphery were enjoying stable growth, low deficits, and lowspreads. Then the financial crisis erupted and pushed them into deep recessions, raising theirdeficits and debt levels. By 2010, they were facing severe debt problems. Spreads increased and,surprisingly, so did the share of the debt held by domestic creditors. Credit was reallocatedfrom the private to the public sectors, reducing investment and deepening the recessions evenfurther. To account for these facts, we propose a simple model of sovereign risk in which debtcan be traded in secondary markets. The model has two key ingredients: creditor discriminationand crowding-out effects. Creditor discrimination arises because, in turbulent times, sovereigndebt offers a higher expected return to domestic creditors than to foreign ones. This providesincentives for domestic purchases of debt. Crowding-out effects arise because private borrowingis limited by financial frictions. This implies that domestic debt purchases displace productiveinvestment. The model shows that these purchases reduce growth and welfare, and may lead toself-fulfilling crises. It also shows how crowding-out effects can be transmitted to other countriesin the Eurozone, and how they may be addressed by policies at the European level.

Anomalous roughening of Hele-Shaw flows with quenched disorder

The kinetic roughening of a stable oil-air interface moving in a Hele-Shaw cell that contains a quenched columnar disorder (tracks) has been studied. A capillary effect is responsible for the dynamic evolution of the resulting rough interface, which exhibits anomalous scaling. The three independent exponents needed to characterize the anomalous scaling are determined experimentally. The anomalous scaling is explained in terms of the initial acceleration and subsequent deceleration of the interface tips in the tracks coupled by mass conservation. A phenomenological model that reproduces the measured global and local exponents is introduced.

Systematic weakly nonlinear analysis of interfacial instabilities in Hele-Shaw flows

We develop a systematic method to derive all orders of mode couplings in a weakly nonlinear approach to the dynamics of the interface between two immiscible viscous fluids in a Hele-Shaw cell. The method is completely general: it applies to arbitrary geometry and driving. Here we apply it to the channel geometry driven by gravity and pressure. The finite radius of convergence of the mode-coupling expansion is found. Calculation up to third-order couplings is done, which is necessary to account for the time-dependent Saffman-Taylor finger solution and the case of zero viscosity contrast. The explicit results provide relevant analytical information about the role that the viscosity contrast and the surface tension play in the dynamics of the system. We finally check the quantitative validity of different orders of approximation and a resummation scheme against a physically relevant, exact time-dependent solution. The agreement between the low-order approximations and the exact solution is excellent within the radius of convergence, and is even reasonably good beyond this radius.

Diffusion in spatially and temporarily inhomogeneous media: Effects of turbulent mixing

We consider diffusion of a passive substance C in a phase-separating nonmiscible binary alloy under turbulent mixing. The substance is assumed to have different diffusion coefficients in the pure phases A and B, leading to a spatially and temporarily dependent diffusion ¿coefficient¿ in the diffusion equation plus convective term. In this paper we consider especially the effects of a turbulent flow field coupled to both the Cahn-Hilliard type evolution equation of the medium and the diffusion equation (both, therefore, supplemented by a convective term). It is shown that the formerly observed prolonged anomalous diffusion [H. Lehr, F. Sagués, and J.M. Sancho, Phys. Rev. E 54, 5028 (1996)] is no longer seen if a flow of sufficient intensity is supplied.