How tight should one's hands be tied? Fear of floating and credibility of exchange rate regimes

This paper analyzes the linkages between the credibility of a target zone regime, the volatility of the exchange rate, and the width of the band where the exchange rate is allowed to fluctuate. These three concepts should be related since the band width induces a trade-off between credibility and volatility. Narrower bands should give less scope for the exchange rate to fluctuate but may make agents perceive a larger probability of realignment which by itself should increase the volatility of the exchange rate. We build a model where this trade-off is made explicit. The model is used to understand the reduction in volatility experienced by most EMS countries after their target zones were widened on August 1993. As a natural extension, the model also rationalizes the existence of non-official, implicit target zones (or fear of floating), suggested by some authors.

Business Cycle Regimes in CEECs Production: A Threshold SURE Approach

We use a threshold seemingly unrelated regressions specification to assess whether the Central and East European countries (CEECs) are synchronized in their business cycles to the Euro-area. This specification is useful in two ways: First, it takes into account the common institutional factors and the similarities across CEECs in their process of economic transition. Second, it captures business cycle asymmetries by allowing for the presence of two distinct regimes for the CEECs. As the CEECs are strongly affected by the Euro-area these regimes may be associated with Euro-area expansions and contractions. We discuss representation, estimation by maximum likelihood and inference. The methodology is illustrated by using monthly industrial production in 8 CEECs. The results show that apart from Lithuania the rest of the CEECs experience “normal” growth when the Euro-area contracts and “high” growth when the Euro-area expands. Given that the CEECs are “catching up” with the Euro-area this result shows that most CEECs seem synchronized to the Euro-area cycle. Keywords: Threshold SURE; asymmetry; business cycles; CEECs. JEL classification: C33; C50; E32.

International regimes as knowledge syndicates? Energy and trends of global governance

El poder de l'Estat i la sobirania tradicional s'està deteriorant de manera constant, sobretot en termes de la provisió de certs béns públics fonamentals. Els Estats, en particular, són incapaços de manejar el coneixement i la informació que és essencial per mantenir la competitivitat i la sostenibilitat en una economia interdependent. Estructures fiables de la governança mundial i la cooperació internacional estan lluny de ser establertes. Energia com a problema a les agendes p dels governs, les empreses privades i la societat civil és un exemple manifest d'aquesta dinàmica.. L'actual sistema de governança mundial d'energia implica accions polítiques disperses per actors divers. L'Agència Internacional de l'Energia té un paper destacat, però està debilitat per la seva composició limitada i basada en el coneixement- epistèmic en lloc del material o executiu. Aquest treball sosté que ni la mida ni nombre de membres disponibles estan dificultant la governabilitat mundial d'energia. Més aviat, l'energia és una sèrie de béns públics que es troben als llimbs, on els estats no poden pagar la seva disposició, així com els diversos interessos impedir l'establiment d'una autoritat internacional. Després de la introducció de la teoria del règim internacional i el concepte de coneixement basats en les comunitats epistèmiques, l'article revisa l'estat actual de la governabilitat de l'energia mundia. A continuació es presenta una comparació d'aquesta estructura amb els règims de govern nacional i regional, d'una banda, i amb règims globals ambientals i de salut, de l'altra

Per-antenna rate and power control for MIMO layered architectures in the low- and high-power regimes

In a MIMO layered architecture, several codewordsare transmitted from a multiplicity of antennas. Although thespectral efficiency is maximized if the rates of these codewordsare separately controlled, the feedback rate within the linkadaptation loop is reduced if they are constrained to be identical.This poses a direct tradeoff between performance andfeedback overhead. This paper provides analytical expressionsthat quantify the difference in spectral efficiency between bothapproaches for arbitrary numbers of antennas. Specifically, thecharacterization takes place in the realm of the low- and highpowerregimes via expansions that are shown to have a widerange of validity.In addition, the possibility of adjusting the transmit powerof each codeword individually is considered as an alternative tothe separate control of their rates. Power allocation, however,turns out to be inferior to rate control within the context of thisproblem.

Three-dimensional aspects of fluid flows in channels. II. Effects of meniscus and thin film regimes on viscous fingers

We perform a three-dimensional study of steady state viscous fingers that develop in linear channels. By means of a three-dimensional lattice-Boltzmann scheme that mimics the full macroscopic equations of motion of the fluid momentum and order parameter, we study the effect of the thickness of the channel in two cases. First, for total displacement of the fluids in the channel thickness direction, we find that the steady state finger is effectively two-dimensional and that previous two-dimensional results can be recovered by taking into account the effect of a curved meniscus across the channel thickness as a contribution to surface stresses. Second, when a thin film develops in the channel thickness direction, the finger narrows with increasing channel aspect ratio in agreement with experimental results. The effect of the thin film renders the problem three-dimensional and results deviate from the two-dimensional prediction.

Three-dimensional aspects of fluid flows in channels. I. Meniscus and thin film regimes

We study the forced displacement of a fluid-fluid interface in a three-dimensional channel formed by two parallel solid plates. Using a lattice-Boltzmann method, we study situations in which a slip velocity arises from diffusion effects near the contact line. The difference between the slip and channel velocities determines whether the interface advances as a meniscus or a thin film of fluid is left adhered to the plates. We find that this effect is controlled by the capillary and Péclet numbers. We estimate the crossover from a meniscus to a thin film and find good agreement with numerical results. The penetration regime is examined in the steady state. We find that the occupation fraction of the advancing finger relative to the channel thickness is controlled by the capillary number and the viscosity contrast between the fluids. For high viscosity contrast, lattice-Boltzmann results agree with previous results. For zero viscosity contrast, we observe remarkably narrow fingers. The shape of the finger is found to be universal.

Three-dimensional aspects of fluid flows in channels. II. Effects of meniscus and thin film regimes on viscous fingers

We perform a three-dimensional study of steady state viscous fingers that develop in linear channels. By means of a three-dimensional lattice-Boltzmann scheme that mimics the full macroscopic equations of motion of the fluid momentum and order parameter, we study the effect of the thickness of the channel in two cases. First, for total displacement of the fluids in the channel thickness direction, we find that the steady state finger is effectively two-dimensional and that previous two-dimensional results can be recovered by taking into account the effect of a curved meniscus across the channel thickness as a contribution to surface stresses. Second, when a thin film develops in the channel thickness direction, the finger narrows with increasing channel aspect ratio in agreement with experimental results. The effect of the thin film renders the problem three-dimensional and results deviate from the two-dimensional prediction.

Three-dimensional aspects of fluid flows in channels. I. Meniscus and thin film regimes

We study the forced displacement of a fluid-fluid interface in a three-dimensional channel formed by two parallel solid plates. Using a lattice-Boltzmann method, we study situations in which a slip velocity arises from diffusion effects near the contact line. The difference between the slip and channel velocities determines whether the interface advances as a meniscus or a thin film of fluid is left adhered to the plates. We find that this effect is controlled by the capillary and Péclet numbers. We estimate the crossover from a meniscus to a thin film and find good agreement with numerical results. The penetration regime is examined in the steady state. We find that the occupation fraction of the advancing finger relative to the channel thickness is controlled by the capillary number and the viscosity contrast between the fluids. For high viscosity contrast, lattice-Boltzmann results agree with previous results. For zero viscosity contrast, we observe remarkably narrow fingers. The shape of the finger is found to be universal.

A novel approach to analysing the regimes of temporary streams in relation to their controls on the composition and structure of aquatic biota

Temporary streams are those water courses that undergo the recurrent cessation of flow or the complete drying of their channel. The structure and composition of biological communities in temporary stream reaches are strongly dependent on the temporal changes of the aquatic habitats determined by the hydrological conditions. Therefore, the structural and functional characteristics of aquatic fauna to assess the ecological quality of a temporary stream reach cannot be used without taking into account the controls imposed by the hydrological regime. This paper develops methods for analysing temporary streams' aquatic regimes, based on the definition of six aquatic states that summarize the transient sets of mesohabitats occurring on a given reach at a particular moment, depending on the hydrological conditions: Hyperrheic, Eurheic, Oligorheic, Arheic, Hyporheic and Edaphic. When the hydrological conditions lead to a change in the aquatic state, the structure and composition of the aquatic community changes according to the new set of available habitats. We used the water discharge records from gauging stations or simulations with rainfall-runoff models to infer the temporal patterns of occurrence of these states in the Aquatic States Frequency Graph we developed. The visual analysis of this graph is complemented by the development of two metrics which describe the permanence of flow and the seasonal predictability of zero flow periods. Finally, a classification of temporary streams in four aquatic regimes in terms of their influence over the development of aquatic life is updated from the existing classifications, with stream aquatic regimes defined as Permanent, Temporary-pools, Temporary-dry and Episodic. While aquatic regimes describe the long-term overall variability of the hydrological conditions of the river section and have been used for many years by hydrologists and ecologists, aquatic states describe the availability of mesohabitats in given periods that determine the presence of different biotic assemblages. This novel concept links hydrological and ecological conditions in a unique way. All these methods were implemented with data from eight temporary streams around the Mediterranean within the MIRAGE project. Their application was a precondition to assessing the ecological quality of these streams.

Rhizodeposition of organic carbon by plants with contrasting traits for resource acquisition: responses to different fertility regimes

Background and aims Rhizodeposition plays an important role in mediating soil nutrient availability in ecosystems. However, owing to methodological difficulties (i.e., narrow zone of soil around roots, rapid assimilation by soil microbes) fertility-induced changes in rhizodeposition remain mostly unknown. Methods We developed a novel long-term continuous 13C labelling method to address the effects of two levels of nitrogen (N) fertilization on rhizodeposited carbon (C) by species with different nutrient acquisition strategies. Results Fertility-induced changes in rhizodeposition were modulated by root responses to N availability rather than by changes in soil microbial biomass. Differences among species were mostly related to plant biomass: species with higher total leaf and root biomass also had higher total rhizodeposited C, whereas species with lower root biomass had higher specific rhizodeposited C (per gram root mass). Experimental controls demonstrated that most of the biases commonly associated with this type of experiment (i.e., long-term steady-state labelling) were avoided using our methodological approach. Conclusions These results suggest that the amount of rhizodeposited C from plants grown under different levels of N were driven mainly by plant biomass and root morphology rather than microbial biomass. They also underline the importance of plant characteristics (i.e., biomass allocation) as opposed to traits associated with plant resource acquisition strategies in predicting total C rhizodeposition.

On dictatorship, economic development and stability

This paper aims to account for varying economic performances and political stability under dictatorship. We argue that economic welfare and social order are the contemporary relevant factors of political regimes' stability. Societies with low natural level of social order tend to tolerate predatory behavior from dictators in exchange of a provision of civil peace. The fear of anarchy may explain why populations are locked in the worst dictatorships. In contrast, in societies enjoying a relative natural civil peace, dictatorship is less likely to be predatory because low economic welfare may destabilize it.

On the choice of an exchange rate regime: target zones revisited

From the classical gold standard up to the current ERM2 arrangement of the European Union, target zones have been a widely used exchange regime in contemporary history. This paper presents a benchmark model that rationalizes the choice of target zones over the rest of regimes: the fixed rate, the free float and the managed float. It is shown that the monetary authority may gain efficiency by reducing volatility of both the exchange rate and the interest rate at the same time. Furthermore, the model is consistent with some known stylized facts in the empirical literature that previous models were not able to produce, namely, the positive relation between the exchange rate and the interest rate differential, the degree of non-linearity of the function linking the exchage rate to fundamentals and the shape of the exchange rate stochastic distribution.

A nonlinear threshold model for the dependence of extremes of stationary sequences

One of the main implications of the efficient market hypothesis (EMH) is that expected future returns on financial assets are not predictable if investors are risk neutral. In this paper we argue that financial time series offer more information than that this hypothesis seems to supply. In particular we postulate that runs of very large returns can be predictable for small time periods. In order to prove this we propose a TAR(3,1)-GARCH(1,1) model that is able to describe two different types of extreme events: a first type generated by large uncertainty regimes where runs of extremes are not predictable and a second type where extremes come from isolated dread/joy events. This model is new in the literature in nonlinear processes. Its novelty resides on two features of the model that make it different from previous TAR methodologies. The regimes are motivated by the occurrence of extreme values and the threshold variable is defined by the shock affecting the process in the preceding period. In this way this model is able to uncover dependence and clustering of extremes in high as well as in low volatility periods. This model is tested with data from General Motors stocks prices corresponding to two crises that had a substantial impact in financial markets worldwide; the Black Monday of October 1987 and September 11th, 2001. By analyzing the periods around these crises we find evidence of statistical significance of our model and thereby of predictability of extremes for September 11th but not for Black Monday. These findings support the hypotheses of a big negative event producing runs of negative returns in the first case, and of the burst of a worldwide stock market bubble in the second example. JEL classification: C12; C15; C22; C51 Keywords and Phrases: asymmetries, crises, extreme values, hypothesis testing, leverage effect, nonlinearities, threshold models