Sovereign risk and secondary markets

Conventional wisdom views the problem of sovereign risk as one of insufficient penalties.Foreign creditors can only be repaid if the government enforces foreign debts. And this will onlyhappen if foreign creditors can effectively use the threat of imposing penalties to the country.Guided by this assessment of the problem, policy prescriptions to reduce sovereign risk havefocused on providing incentives for governments to enforce foreign debts. For instance, countriesmight want to favor increased trade ties and other forms of foreign dependence that make themvulnerable to foreign retaliation thereby increasing the costs of default penalties.

The sustainable debts of Philip II: A reconstruction of Castile's fiscal position, 1566-1596

The defaults of Philip II have attained mythical status as the origin of sovereigndebt crises. We reassess the fiscal position of Habsburg Castile, derivingcomprehensive estimates of revenue, debt, and expenditure from new archivaldata. The king s debts were sustainable. Primary surpluses were large and rising.Debt-to-revenue ratios remained broadly unchanged during Philip s reign.Castilian finances in the sixteenth century compare favorably with those of otherearly modern fiscal states at the height of their imperial ambitions, includingBritain. The defaults of Philip II therefore reflected short-term liquidity crises,and were not a sign of unsustainable debts.

Why do emerging economies borrow short term?

We argue that one reason why emerging economies borrow short term is that it is cheaperthan borrowing long term. This is especially the case during crises, as in these episodes therelative cost of long-term borrowing increases. We construct a unique database of sovereignbond prices, returns, and issuances at di¤erent maturities for 11 emerging economies from 1990to 2009 and present a set of new stylized facts. On average, these countries pay a higher riskpremium on long-term than on short-term bonds. During crises, the di¤erence between the tworisk premia increases and issuance shifts towards shorter maturities. To illustrate our argument,we present a simple model in which the maturity structure is the outcome of a risk sharingproblem between an emerging economy subject to rollover crises and risk averse internationalinvestors.

Estimadores compuestos en estadística regional: aplicación para la tasa de variación de la ocupación en la industria

This work is part of a project studying the performance of model basedestimators in a small area context. We have chosen a simple statisticalapplication in which we estimate the growth rate of accupation for severalregions of Spain. We compare three estimators: the direct one based onstraightforward results from the survey (which is unbiassed), and a thirdone which is based in a statistical model and that minimizes the mean squareerror.

Educational opportunity and the college premium

Since World War II, the United States government has made improved accessto higher education a priority. This e¤ort has substantially increasedthe number of people who complete college. We show that by reducing theeffective interest rate on borrowing for education, such policies canactually increase the gap in wages between those with a college educationand those without. The mechanism that drives our results is the signaling role of education first explored by Spence (1973). We argue that financialconstraints on education reduce the value of education as a signal. Wesolve for the reduced form relationship between the interest rate and thewage premium in the steady state of a dynamic asymmetric information model.In addition, we discuss evidence of decreases in borrowing costs for educationfinancing in the U.S.

The overhang hangover

We revisit the debt overhang question. We first use non-parametric techniques to isolate a panel of countries on the downward sloping section of a debt Laffer curve. In particular, overhang countries are ones where a threshold level of debt is reached in sample, beyond which (initial) debt ends up lowering (subsequent)growth. On average, significantly negative coefficients appear when debt face value reaches 60 percent of GDP or 200 percent of exports, and when its present value reaches 40 percent of GDP or 140 percent of exports. Second, we depart from reduced form growth regressions and perform direct tests of the theory on the thus selected sample of overhang countries. In the spirit of event studies, we ask whether, as overhang level of debt is reached: (i)investment falls precipitously as it should when it becomes optimal to default, (ii) economic policy deteriorates observably, as it should when debt contracts become unable to elicit effort on the part of the debtor, and (iii) the terms of borrowing worsen noticeably, as they should when it becomes optimal for creditors to pre-empt default and exact punitive interest rates. We find a systematic response of investment, particularly when property rights are weakly enforced, some worsening of the policy environment, and a fall in interest rates. This easing of borrowing conditions happens because lending by the private sector virtually disappears in overhang situations, and multilateral agencies step in with concessional rates. Thus, while debt relief is likely to improve economic policy (and especially investment) in overhang countries, it is doubtful that it would ease their terms of borrowing, or the burden of debt.

Small-area estimation with spatial similarity

A class of composite estimators of small area quantities that exploit spatial (distancerelated)similarity is derived. It is based on a distribution-free model for the areas, but theestimators are aimed to have optimal design-based properties. Composition is applied alsoto estimate some of the global parameters on which the small area estimators depend.It is shown that the commonly adopted assumption of random effects is not necessaryfor exploiting the similarity of the districts (borrowing strength across the districts). Themethods are applied in the estimation of the mean household sizes and the proportions ofsingle-member households in the counties (comarcas) of Catalonia. The simplest version ofthe estimators is more efficient than the established alternatives, even though the extentof spatial similarity is quite modest.

Firm investment in imperfect capital markets: A structural estimation

We set up a dynamic model of firm investment in which liquidity constraintsenter explicity into the firm's maximization problem. The optimal policyrules are incorporated into a maximum likelihood procedure which estimatesthe structural parameters of the model. Investment is positively related tothe firm's internal financial position when the firm is relatively poor. This relationship disappears for wealthy firms, which can reach theirdesired level of investment. Borrowing is an increasing function of financial position for poor firms. This relationship is reversed as a firm's financial position improves, and large firms hold little debt.Liquidity constrained firms may be unused credits lines and the capacity toinvest further if they desire. However the fear that liquidity constraintswill become binding in the future induces them to invest only when internalresources increase.We estimate the structural parameters of the model and use them to quantifythe importance of liquidity constraints on firms' investment. We find thatliquidity constraints matter significantly for the investment decisions of firms. If firms can finance investment by issuing fresh equity, rather than with internal funds or debt, average capital stock is almost 35% higher overa period of 20 years. Transitory shocks to internal funds have a sustained effect on the capital stock. This effect lasts for several periods and ismore persistent for small firms than for large firms. A 10% negative shock to firm fundamentals reduces the capital stock of firms which face liquidityconstraints by almost 8% over a period as opposed to only 3.5% for firms which do not face these constraints.

Moral hazard and non-exclusive contracts

This paper studies equilibria for economies characterized by moral hazard(hidden action), in which the set of contracts marketed in equilibrium isdetermined by the interaction of financial intermediaries.The crucial aspect of the environment that we study is thatintermediaries are restricted to trade non-exclusive contracts: theagents' contractual relationships with competing intermediaries cannot bemonitored (or are not contractible upon). We fully characterize equilibrium allocations and contracts. In thisset-up equilibrium allocations are clearly incentive constrainedinefficient. A robust property of equilibria with non-exclusivity isthat the contracts issued in equilibrium do not implement the optimalaction. Moreover we prove that, whenever equilibrium contracts doimplement the optimal action, intermediaries make positive profits andequilibrium allocations are third best inefficient (where the definitionof third best efficiency accounts for constraints which capture thenon-exclusivity of contracts).

Lending to the borrower from hell: Debt and default in the age of Philip II, 1556-1598

What sustained borrowing without third-party enforcement, in the early days of sovereignlending? Philip II of Spain accumulated towering debts while stopping all payments tohis lenders four times. How could the sovereign borrow much and default often? Weargue that bankers ability to cut off Philip II s access to smoothing services was key. Aform of syndicated lending created cohesion among his Genoese bankers. As a result,lending moratoria were sustained through a cheat the cheater mechanism (Kletzer andWright, 2000). Our paper thus lends empirical support to a recent literature emphasizingthe role of bankers incentives for continued sovereign borrowing.

Surface states in template synthesized tin oxide nanoparticles

Tin-oxide nanoparticles with controlled narrow size distributions are synthesized while physically encapsulated inside silica mesoporous templates. By means of ultraviolet-visible spectroscopy, a redshift of the optical absorbance edge is observed. Photoluminescence measurements corroborate the existence of an optical transition at 3.2 eV. The associated band of states in the semiconductor gap is present even on template-synthesized nanopowders calcined at 800°C, which contrasts with the evolution of the gap states measured on materials obtained by other methods. The gap states are thus considered to be surface localized, disappearing with surface faceting or being hidden by the surface-to-bulk ratio decrease.

(K)over-bar* mesons in dense matter

We study the properties of (K) over bar* mesons in nuclear matter using a unitary approach in coupled channels within the framework of the local hidden gauge formalism and incorporating the (K) over bar pi decay channel in matter. The in-medium (K) over bar *N interaction accounts for Pauli blocking effects and incorporates the (K) over bar* self-energy in a self-consistent manner. We also obtain the (K) over bar* (off-shell) spectral function and analyze its behavior at finite density and momentum. At a normal nuclear matter density, the (K) over bar* meson feels a moderately attractive potential, while the (K) over bar* width becomes five times larger than in free space. We estimate the transparency ratio of the gamma A -> K+K*(-) A` reaction, which we propose as a feasible scenario at the present facilities to detect changes in the properties of the (K) over bar* meson in nuclear medium.

Ordered structures in rotating ultracold Bose gases

Two-dimentional systems of trapped samples of few cold bosonic atoms submitted to strong rotation around the perpendicular axis may be realized in optical lattices and microtraps. We investigate theoretically the evolution of ground state structures of such systems as the rotational frequency Omega increases. Various kinds of ordered structures are observed. In some cases, hidden interference patterns exhibit themselves only in the pair correlation function; in some other cases explicit broken-symmetry structures appear that modulate the density. For N < 10 atoms, the standard scenario, valid for large sytems is absent, and is only gradually recovered as N increases. On the one hand, the Laughlin state in the strong rotational regime contains ordered structures much more similar to a Wigner molecule than to a fermionic quantum liquid. On the other hand, in the weak rotational regime, the possibility to obtain equilibrium states, whose density reveals an array of vortices, is restricted to the vicinity of some critical values of the rotational frequency Omega.

Towards and ab initio description of magnetism in ionic solids

The physical contributions to the KNiF3 magnetic exchange coupling integral have been obtained from specially designed ab initio cluster model calculations. Three important mechanisms have been identified. These are the delocalization of the magnetic orbitals into the anion p band, the variational contribution of the second-order interactions, and the many-body terms hidden in the two-body operator and the Heisenberg Hamiltonian.

Neck pounding during sinus rhythm: a new clinical manifestation of dual atrioventricular nodal pathways

Objective To determine the clinical and electrophysiological characteristics of patients with paroxysmal palpitations and neck pounding during sinus rhythm. Methods Clinical, electrocardiographic, and electrophysiological characteristics of six patients with paroxysmal palpitations and neck pounding during sinus rhythm were studied in basal conditions and when symptomatic. Response to treatment was observed. Results Baseline ECGs were normal (four patients) or had first degree atrioventricular block with intermittent PR shortening. During symptoms, narrow QRS rhythms were seen without visible P waves (three patients) or with P waves partially hidden in the QRS complex (three patients). Dual atrioventricular nodal pathways were found in all five patients who had electrophysiological studies. In these patients the slow pathway conduction time was long enough (mean (SD), 425 (121)¿ms) for ventricular activation after slow pathway conduction during sinus rhythm to coincide with the next atrial depolarisation, causing neck pounding during exercise (four patients) or at rest (two patients). Tachycardia was not induced in any patient. Medical treatment aggravated symptoms in three patients. A pacemaker was successfully used in two. Conclusions Neck pounding during sinus rhythm is a clinical manifestation of dual atrioventricular nodal pathways. Medical treatment may aggravate symptoms but a pacemaker may offer definitive relief.