Fiscal policy and interest rates: the role of financial and economic integration

It is commonly believed that a fiscal expansion raises interest rates. However, these crowding out effects of deficits have been found to be small or non-existent. One explanation is that financial integration offsets interest rate differentials on globalised bond markets. This paper measures the degree of integration of government bond markets, using spatial modelling techniques to take this spillover on financial markets into account. Our main finding is that the crowding out effect on domestic interest rates is significant, but is reduced by spillover across borders. This spillover is important in major crises or in periods of coordinated policy actions. This result is generally robust to various measures of cross-country linkages. We find spillover to be much stronger among EU countries.

Financial stress transmission in EMU sovereign bond market volatility: a connectedness analysis

This paper measures the connectedness in EMU sovereign market volatility between April 1999 and January 2014, in order to monitor stress transmission and to identify episodes of intensive spillovers from one country to the others. To this end, we first perform a static and dynamic analysis to measure the total volatility connectedness in the entire period (the system-wide approach) using a framework recently proposed by Diebold and Yılmaz (2014). Second, we make use of a dynamic analysis to evaluate the net directional connectedness for each country and apply panel model techniques to investigate its determinants. Finally, to gain further insights, we examine the timevarying behaviour of net pair-wise directional connectedness at different stages of the recent sovereign debt crisis.

Model for interevent times with long tails and multifractality in human communications: An application to financial trading

Social, technological, and economic time series are divided by events which are usually assumed to be random, albeit with some hierarchical structure. It is well known that the interevent statistics observed in these contexts differs from the Poissonian profile by being long-tailed distributed with resting and active periods interwoven. Understanding mechanisms generating consistent statistics has therefore become a central issue. The approach we present is taken from the continuous-time random-walk formalism and represents an analytical alternative to models of nontrivial priority that have been recently proposed. Our analysis also goes one step further by looking at the multifractal structure of the interevent times of human decisions. We here analyze the intertransaction time intervals of several financial markets. We observe that empirical data describe a subtle multifractal behavior. Our model explains this structure by taking the pausing-time density in the form of a superstatistics where the integral kernel quantifies the heterogeneous nature of the executed tasks. A stretched exponential kernel provides a multifractal profile valid for a certain limited range. A suggested heuristic analytical profile is capable of covering a broader region.

Counteracting incentive sensitization in severe alcohol dependence using deep brain stimulation of the nucleus accumbens: clinical and basic science aspects

The ventral striatum / nucleus accumbens has been implicated in the craving for drugs and alcohol which is a major reason for relapse of addicted people. Craving might be induced by drug-related cues. This suggests that disruption of craving-related neural activity in the nucleus accumbens may significantly reduce craving in alcohol-dependent patients. Here we report on preliminary clinical and neurophysiological evidence in three male patients who were treated with high frequency deep brain stimulation of the nucleus accumbens bilaterally. All three had been alcohol dependent for many years, unable to abstain from drinking, and had experienced repeated relapses prior to the stimulation. After the operation, craving was greatly reduced and all three patients were able to abstain from drinking for extended periods of time. Immediately after the operation but prior to connection of the stimulation electrodes to the stimulator, local field potentials were obtained from the externalized cables in two patients while they performed cognitive tasks addressing action monitoring and incentive salience of drug related cues. LFPs in the action monitoring task provided further evidence for a role of the nucleus accumbens in goal-directed behaviors. Importantly, alcohol related cue stimuli in the incentive salience task modulated LFPs even though these cues were presented outside of the attentional focus. This implies that cue-related craving involves the nucleus accumbens and is highly automatic.