Optimal Exchange Rate Policy in a Growing Semi-Open Economy

This paper considers an alternative perspective to China's exchange rate policy. It studies a semi-open economy where the private sector has no access to international capital markets but the central bank has full access. Moreover, it assumes limited financial development generating a large demand for saving instruments by the private sector. The paper analyzes the optimal exchange rate policy by modeling the central bank as a Ramsey planner. Its main result is that in a growth acceleration episode it is optimal to have an initial real depreciation of the currency combined with an accumulation of reserves, which is consistent with the Chinese experience. This depreciation is followed by an appreciation in the long run. The paper also shows that the optimal exchange rate path is close to the one that would result in an economy with full capital mobility and no central bank intervention.

Three essays in international finance

Executive Summary The first essay of this dissertation investigates whether greater exchange rate uncertainty (i.e., variation over time in the exchange rate) fosters or depresses the foreign investment of multinational firms. In addition to the direct capital financing it supplies, foreign investment can be a source of valuable technology and know-how, which can have substantial positive effects on a host country's economic growth. Thus, it is critically important for policy makers and central bankers, among others, to understand how multinationals base their investment decisions on the characteristics of foreign exchange markets. In this essay, I first develop a theoretical framework to improve our knowledge regarding how the aggregate level of foreign investment responds to exchange rate uncertainty when an economy consists of many firms, each of which is making decisions. The analysis predicts a U-shaped effect of exchange rate uncertainty on the total level of foreign investment of the economy. That is, the effect is negative for low levels of uncertainty and positive for higher levels of uncertainty. This pattern emerges because the relationship between exchange rate volatility and 'the probability of investment is negative for firms with low productivity at home (i.e., firms that find it profitable to invest abroad) and the relationship is positive for firms with high productivity at home (i.e., firms that prefer exporting their product). This finding stands in sharp contrast to predictions in the existing literature that consider a single firm's decision to invest in a unique project. The main contribution of this research is to show that the aggregation over many firms produces a U-shaped pattern between exchange rate uncertainty and the probability of investment. Using data from industrialized countries for the period of 1982-2002, this essay offers a comprehensive empirical analysis that provides evidence in support of the theoretical prediction. In the second essay, I aim to explain the time variation in sovereign credit risk, which captures the risk that a government may be unable to repay its debt. The importance of correctly evaluating such a risk is illustrated by the central role of sovereign debt in previous international lending crises. In addition, sovereign debt is the largest asset class in emerging markets. In this essay, I provide a pricing formula for the evaluation of sovereign credit risk in which the decision to default on sovereign debt is made by the government. The pricing formula explains the variation across time in daily credit spreads - a widely used measure of credit risk - to a degree not offered by existing theoretical and empirical models. I use information on a country's stock market to compute the prevailing sovereign credit spread in that country. The pricing formula explains a substantial fraction of the time variation in daily credit spread changes for Brazil, Mexico, Peru, and Russia for the 1998-2008 period, particularly during the recent subprime crisis. I also show that when a government incentive to default is allowed to depend on current economic conditions, one can best explain the level of credit spreads, especially during the recent period of financial distress. In the third essay, I show that the risk of sovereign default abroad can produce adverse consequences for the U.S. equity market through a decrease in returns and an increase in volatility. The risk of sovereign default, which is no longer limited to emerging economies, has recently become a major concern for financial markets. While sovereign debt plays an increasing role in today's financial environment, the effects of sovereign credit risk on the U.S. financial markets have been largely ignored in the literature. In this essay, I develop a theoretical framework that explores how the risk of sovereign default abroad helps explain the level and the volatility of U.S. equity returns. The intuition for this effect is that negative economic shocks deteriorate the fiscal situation of foreign governments, thereby increasing the risk of a sovereign default that would trigger a local contraction in economic growth. The increased risk of an economic slowdown abroad amplifies the direct effect of these shocks on the level and the volatility of equity returns in the U.S. through two channels. The first channel involves a decrease in the future earnings of U.S. exporters resulting from unfavorable adjustments to the exchange rate. The second channel involves investors' incentives to rebalance their portfolios toward safer assets, which depresses U.S. equity prices. An empirical estimation of the model with monthly data for the 1994-2008 period provides evidence that the risk of sovereign default abroad generates a strong leverage effect during economic downturns, which helps to substantially explain the level and the volatility of U.S. equity returns.

A low-dose stimulation protocol using highly purified follicle-stimulating hormone can lead to high pregnancy rates in in vitro fertilization patients with polycystic ovaries who are at risk of a high ovarian response to gonadotropins.

OBJECTIVE: To study the benefits of a low-dose stimulation (LDS) protocol with purified urinary follicle-stimulating hormone in patients with polycystic ovaries who have presented previously with a very high ovarian response to a standard hMG stimulation. DESIGN: Cohort study. SETTING: Fertility center in a university hospital. PATIENT(S): Sixty-one patients involved in an IVF/ICSI program from January 1995 to December 1996. INTERVENTION(S): The patients were first stimulated with a standard protocol using hMG and presented with a very high ovarian response. These patients were then stimulated a second time using a low-dose protocol. Cryopreserved embryos were transferred in later artificial or natural cycles until to December 1999. MAIN OUTCOME MEASURE(S): Number of gonadotropin ampules; estradiol level on the day of ovulation induction; follicles, oocytes, and cryopreserved zygotes; fertilization, implantation, and pregnancy rates; and number of ovarian hyperstimulation syndromes (OHSS). RESULT(S): The number of ampules used, the estradiol level reached, and the number of oocytes obtained were significantly lower under the LDS than the standard protocol. High implantation (21.8%) and clinical pregnancy (38.4%) rates were obtained after LDS. The cumulated deliveries per cycle started and per patient were, respectively, 41.6% and 52.5%. Five patients suffered OHSS with the standard protocol, and none with the LDS. CONCLUSION(S): The LDS protocol offers a safe and efficient treatment for patients who present with echographic polycystic ovaries and are at risk of an excessive ovarian response to standard IVF stimulation protocols.

Essays in general equilibrium asset pricing

ABSTRACT : Research in empirical asset pricing has pointed out several anomalies both in the cross section and time series of asset prices, as well as in investors' portfolio choice. This dissertation aims to discover the forces driving some of these "puzzling" asset pricing dynamics and portfolio decisions observed in the financial market. Through the dissertation I construct and study dynamic general equilibrium models of heterogeneous investors in the presence of frictions and evaluate quantitatively their implications for financial-market asset prices and portfolio choice. I also explore the potential roots of puzzles in international finance. Chapter 1 shows that, by introducing jointly endogenous no-default type of borrowing constraints and heterogeneous beliefs in a dynamic general-equilibrium economy, many empirical features of stock return volatility can be reproduced. While most of the research on stock return volatility is empirical, this paper provides a theoretical framework that is able to reproduce simultaneously the cross section and time series stylized facts concerning stock returns and their volatility. In contrast to the existing theoretical literature related to stock return volatility, I don't impose persistence or regimes in any of the exogenous state variables or in preferences. Volatility clustering, asymmetry in the stock return-volatility relationship, and pricing of multi-factor volatility components in the cross section all arise endogenously as a consequence of the feedback between the binding of no-default constraints and heterogeneous beliefs. Chapters 2 and 3 explore the implications of differences of opinion across investors in different countries for international asset pricing anomalies. Chapter 2 demonstrates that several international finance "puzzles" can be reproduced by a single risk factor which captures heterogeneous beliefs across international investors. These puzzles include: (i) home equity preference; (ii) the dependence of firm returns on local and foreign factors; (iii) the co-movement of returns and international capital flows; and (iv) abnormal returns around foreign firm cross-listing events in the local market. These are reproduced in a setup with symmetric information and in a perfectly integrated world with multiple countries and independent processes producing the same good. Chapter 3 shows that by extending this framework to multiple goods and correlated production processes; the "forward premium puzzle" arises naturally as a compensation for the heterogeneous expectations about the depreciation of the exchange rate held by international investors. Chapters 2 and 3 propose differences of opinion across international investors as the potential resolution of several international finance `puzzles'. In a globalized world where both capital and information flow freely across countries, this explanation seems more appealing than existing asymmetric information or segmented markets theories aiming to explain international finance puzzles.

Effect of a smoking ban on respiratory health in nonsmoking hospitality workers: a prospective cohort study

OBJECTIVE: The aim of this study was to examine the effect of a smoking ban on lung function, fractional exhaled nitric oxide, and respiratory symptoms in nonsmoking hospitality workers. METHODS: Secondhand smoke exposure at the workplace, spirometry, and fractional exhaled nitric oxide were measured in 92 nonsmoking hospitality workers before as well as twice after a smoking ban. RESULTS: At baseline, secondhand smoke-exposed hospitality workers had lung function values significantly below the population average. After the smoking ban, the covariate-adjusted odds ratio for cough was 0.59 (95% confidence interval, 0.36 to 0.93) and for chronic bronchitis 0.75 (95% confidence interval, 0.55 to 1.02) compared with the preban period. CONCLUSIONS: The below-average lung function before the smoking ban indicates chronic damages from long-term exposure. Respiratory symptoms such as cough decreased within 12 months after the ban.

Reproducibility of Fatmax and Fat Oxidation Rates during Exercise in Recreationally Trained Males.

Aerobic exercise training performed at the intensity eliciting maximal fat oxidation (Fatmax) has been shown to improve the metabolic profile of obese patients. However, limited information is available on the reproducibility of Fatmax and related physiological measures. The aim of this study was to assess the intra-individual variability of: a) Fatmax measurements determined using three different data analysis approaches and b) fat and carbohydrate oxidation rates at rest and at each stage of an individualized graded test. Fifteen healthy males [body mass index 23.1±0.6 kg/m2, maximal oxygen consumption ([Formula: see text]) 52.0±2.0 ml/kg/min] completed a maximal test and two identical submaximal incremental tests on ergocycle (30-min rest followed by 5-min stages with increments of 7.5% of the maximal power output). Fat and carbohydrate oxidation rates were determined using indirect calorimetry. Fatmax was determined with three approaches: the sine model (SIN), measured values (MV) and 3rd polynomial curve (P3). Intra-individual coefficients of variation (CVs) and limits of agreement were calculated. CV for Fatmax determined with SIN was 16.4% and tended to be lower than with P3 and MV (18.6% and 20.8%, respectively). Limits of agreement for Fatmax were -2±27% of [Formula: see text] with SIN, -4±32 with P3 and -4±28 with MV. CVs of oxygen uptake, carbon dioxide production and respiratory exchange rate were <10% at rest and <5% during exercise. Conversely, CVs of fat oxidation rates (20% at rest and 24-49% during exercise) and carbohydrate oxidation rates (33.5% at rest, 8.5-12.9% during exercise) were higher. The intra-individual variability of Fatmax and fat oxidation rates was high (CV>15%), regardless of the data analysis approach employed. Further research on the determinants of the variability of Fatmax and fat oxidation rates is required.

Assessment of metabolic fluxes in the mouse brain in vivo using 1H-[13C] NMR spectroscopy at 14.1 Tesla.

(13)C magnetic resonance spectroscopy (MRS) combined with the administration of (13)C labeled substrates uniquely allows to measure metabolic fluxes in vivo in the brain of humans and rats. The extension to mouse models may provide exclusive prospect for the investigation of models of human diseases. In the present study, the short-echo-time (TE) full-sensitivity (1)H-[(13)C] MRS sequence combined with high magnetic field (14.1 T) and infusion of [U-(13)C6] glucose was used to enhance the experimental sensitivity in vivo in the mouse brain and the (13)C turnover curves of glutamate C4, glutamine C4, glutamate+glutamine C3, aspartate C2, lactate C3, alanine C3, γ-aminobutyric acid C2, C3 and C4 were obtained. A one-compartment model was used to fit (13)C turnover curves and resulted in values of metabolic fluxes including the tricarboxylic acid (TCA) cycle flux VTCA (1.05 ± 0.04 μmol/g per minute), the exchange flux between 2-oxoglutarate and glutamate Vx (0.48 ± 0.02 μmol/g per minute), the glutamate-glutamine exchange rate V(gln) (0.20 ± 0.02 μmol/g per minute), the pyruvate dilution factor K(dil) (0.82 ± 0.01), and the ratio for the lactate conversion rate and the alanine conversion rate V(Lac)/V(Ala) (10 ± 2). This study opens the prospect of studying transgenic mouse models of brain pathologies.

Three Essays on International Trade and the Labor Market

The thesis is made of three independent chapters interested in the impact of globalization on workers in industrialized countries. The dissertation is especially focused on identifying the causal impact of international trade on workers' mobility, wages, and employment with both a short- and medium-term perspective. The first paper explores the relation between intra-industry trade (IIT) expansion and associated worker flows, taking the latter as an indicator of labor-market adjustment costs. Being the first study to combine theoretical simulations and a novel identification strategy, we find that both theoretical and empirical analyses are consistent with the "smooth adjustment hypothesis", according to which IIT expansion is less disruptive than inter-industry trade expansion. The study therefore lends support to the use of IIT indices as first-pass proxies for the adjustment effects of trade expansion. The second chapter contrasts the impact of increased import competition coming from China and the European Union (EU) on workers in the United Kingdom over a 15-year period. The most salient findings show that increased imports from China had significantly negative effects on workers' earnings, wages and employment. In contrast, larger imports from the EU are associated with positive worker-level outcomes, which is largely explained by the fact that increased imports from the EU were mostly offset by increased same-industry exports to the EU. Besides, we find that increased imports from China exert additional pressure on workers through spillovers to employment and wages in downstream industries. Finally, the last chapter is focused on the impact of exposure to trade and real exchange rate shocks on wages for Swiss manufacturing workers. A particular attention is made to consistently estimate the causal effect in using a two-step gravity-type identification strategy. The study shows that the impact of trade and exchange rate movements is concentrated among high-skilled workers almost exclusively.

Total exposure and exposure rate effects for alcohol and smoking and risk of head and neck cancer: a pooled analysis of case-control studies.

Although cigarette smoking and alcohol consumption increase risk for head and neck cancers, there have been few attempts to model risks quantitatively and to formally evaluate cancer site-specific risks. The authors pooled data from 15 case-control studies and modeled the excess odds ratio (EOR) to assess risk by total exposure (pack-years and drink-years) and its modification by exposure rate (cigarettes/day and drinks/day). The smoking analysis included 1,761 laryngeal, 2,453 pharyngeal, and 1,990 oral cavity cancers, and the alcohol analysis included 2,551 laryngeal, 3,693 pharyngeal, and 3,116 oval cavity cancers, with over 8,000 controls. Above 15 cigarettes/day, the EOR/pack-year decreased with increasing cigarettes/day, suggesting that greater cigarettes/day for a shorter duration was less deleterious than fewer cigarettes/day for a longer duration. Estimates of EOR/pack-year were homogeneous across sites, while the effects of cigarettes/day varied, indicating that the greater laryngeal cancer risk derived from differential cigarettes/day effects and not pack-years. EOR/drink-year estimates increased through 10 drinks/day, suggesting that greater drinks/day for a shorter duration was more deleterious than fewer drinks/day for a longer duration. Above 10 drinks/day, data were limited. EOR/drink-year estimates varied by site, while drinks/day effects were homogeneous, indicating that the greater pharyngeal/oral cavity cancer risk with alcohol consumption derived from the differential effects of drink-years and not drinks/day.

Resting heart rate and the risk of heart failure in healthy adults: the rotterdam study.

Background- An elevated resting heart rate is associated with rehospitalization for heart failure and is a modifiable risk factor in heart failure patients. We aimed to examine the association between resting heart rate and incident heart failure in a population-based cohort study of healthy adults without pre-existing overt heart disease. Methods and Results- We studied 4768 men and women aged ≥55 years from the population-based Rotterdam Study. We excluded participants with prevalent heart failure, coronary heart disease, pacemaker, atrial fibrillation, atrioventricular block, and those using β-blockers or calcium channel blockers. We used extended Cox models allowing for time-dependent variation of resting heart rate along follow-up. During a median of 14.6 years of follow-up, 656 participants developed heart failure. The risk of heart failure was higher in men with higher resting heart rate. For each increment of 10 beats per minute, the multivariable adjusted hazard ratios in men were 1.16 (95% confidence interval, 1.05-1.28; P=0.005) in the time-fixed heart rate model and 1.13 (95% confidence interval, 1.02-1.25; P=0.017) in the time-dependent heart rate model. The association could not be demonstrated in women (P for interaction=0.004). Censoring participants for incident coronary heart disease or using time-dependent models to account for the use of β-blockers or calcium channel blockers during follow-up did not alter the results. Conclusions- Baseline or persistent higher resting heart rate is an independent risk factor for the development of heart failure in healthy older men in the general population.

Usefulness of heart rate to predict cardiac events in treated patients with high-risk systemic hypertension.

A high heart rate (HR) predicts future cardiovascular events. We explored the predictive value of HR in patients with high-risk hypertension and examined whether blood pressure reduction modifies this association. The participants were 15,193 patients with hypertension enrolled in the Valsartan Antihypertensive Long-term Use Evaluation (VALUE) trial and followed up for 5 years. The HR was assessed from electrocardiographic recordings obtained annually throughout the study period. The primary end point was the interval to cardiac events. After adjustment for confounders, the hazard ratio of the composite cardiac primary end point for a 10-beats/min of the baseline HR increment was 1.16 (95% confidence interval 1.12 to 1.20). Compared to the lowest HR quintile, the adjusted hazard ratio in the highest quintile was 1.73 (95% confidence interval 1.46 to 2.04). Compared to the pooled lower quintiles of baseline HR, the annual incidence of primary end point in the top baseline quintile was greater in each of the 5 study years (all p <0.05). The adjusted hazard ratio for the primary end point in the highest in-trial HR heart rate quintile versus the lowest quintile was 1.53 (95% confidence interval 1.26 to 1.85). The incidence of primary end points in the highest in-trial HR group compared to the pooled 4 lower quintiles was 53% greater in patients with well-controlled blood pressure (p <0.001) and 34% greater in those with uncontrolled blood pressure (p = 0.002). In conclusion, an increased HR is a long-term predictor of cardiovascular events in patients with high-risk hypertension. This effect was not modified by good blood pressure control. It is not yet known whether a therapeutic reduction of HR would improve cardiovascular prognosis.

Association of urethral toxicity with dose exposure in combined high-dose-rate brachytherapy and intensity-modulated radiation therapy in intermediate- and high-risk prostate cancer.

INTRODUCTION: To report acute and late toxicities in patients with intermediate- and high-risk prostate cancer treated with combined high-dose-rate brachytherapy (HDR-B) and intensity-modulated radiation therapy (IMRT). MATERIALS AND METHODS: From March 2003 to September 2005, 64 men were treated with a single implant HDR-B with 21 Gy given in three fractions, followed by 50 Gy IMRT along with organ tracking. Median age was 66.1 years, and risk of recurrence was intermediate in 47% of the patients or high in 53% of the patients. Androgen deprivation therapy was received by 69% of the patients. Toxicity was scored according to the CTCAE version 3.0. Median follow-up was 3.1 years. RESULTS: Acute grade 3 genitourinary (GU) toxicity was observed in 7.8% of the patients, and late grades 3 and 4 GU toxicity was observed in 10.9% and 1.6% of the patients. Acute grade 3 gastrointestinal (GI) toxicity was experienced by 1.6% of the patients, and late grade 3 GI toxicity was absent. The urethral V(120) (urethral volume receiving &gt; or =120% of the prescribed HDR-B dose) was associated with acute (P=.047) and late &gt; or = grade 2 GU toxicities (P=.049). CONCLUSIONS: Late grades 3 and 4GU toxicity occurred in 10.9% and 1.6% of the patients after HDR-B followed by IMRT in association with the irradiated urethral volume. The impact of V(120) on GU toxicity should be validated in further studies.

Impact of preoperative risk factors on morbidity after esophagectomy: is there room for improvement?

BACKGROUND: Despite progress in multidisciplinary treatment of esophageal cancer, oncologic esophagectomy is still the cornerstone of therapeutic strategies. Several scoring systems are used to predict postoperative morbidity, but in most cases they identify nonmodifiable parameters. The aim of this study was to identify potentially modifiable risk factors associated with complications after oncologic esophagectomy. METHODS: All consecutive patients with complete data sets undergoing oncologic esophagectomy in our department during 2001-2011 were included in this study. As potentially modifiable risk factors we assessed nutritional status depicted by body mass index (BMI) and preoperative serum albumin levels, excessive alcohol consumption, and active smoking. Postoperative complications were graded according to a validated 5-grade system. Univariate and multivariate analyses were used to identify preoperative risk factors associated with the occurrence and severity of complications. RESULTS: Our series included 93 patients. Overall morbidity rate was 81 % (n = 75), with 56 % (n = 52) minor complications and 18 % (n = 17) major complications. Active smoking and excessive alcohol consumption were associated with the occurrence of severe complications, whereas BMI and low preoperative albumin levels were not. The simultaneous presence of two or more of these risk factors significantly increased the risk of postoperative complications. CONCLUSIONS: A combination of malnutrition, active smoking and alcohol consumption were found to have a negative impact on postoperative morbidity rates. Therefore, preoperative smoking and alcohol cessation counseling and monitoring and improving the nutritional status are strongly recommended.

Biomedical risk assessment as an aid for smoking cessation.

BACKGROUND: A possible strategy for increasing smoking cessation rates could be to provide smokers who have contact with healthcare systems with feedback on the biomedical or potential future effects of smoking, e.g. measurement of exhaled carbon monoxide (CO), lung function, or genetic susceptibility to lung cancer. OBJECTIVES: To determine the efficacy of biomedical risk assessment provided in addition to various levels of counselling, as a contributing aid to smoking cessation. SEARCH STRATEGY: We systematically searched the Cochrane Collaboration Tobacco Addiction Group Specialized Register, Cochrane Central Register of Controlled Trials 2008 Issue 4, MEDLINE (1966 to January 2009), and EMBASE (1980 to January 2009). We combined methodological terms with terms related to smoking cessation counselling and biomedical measurements. SELECTION CRITERIA: Inclusion criteria were: a randomized controlled trial design; subjects participating in smoking cessation interventions; interventions based on a biomedical test to increase motivation to quit; control groups receiving all other components of intervention; an outcome of smoking cessation rate at least six months after the start of the intervention. DATA COLLECTION AND ANALYSIS: Two assessors independently conducted data extraction on each paper, with disagreements resolved by consensus. Results were expressed as a relative risk (RR) for smoking cessation with 95% confidence intervals (CI). Where appropriate a pooled effect was estimated using a Mantel-Haenszel fixed effect method. MAIN RESULTS: We included eleven trials using a variety of biomedical tests. Two pairs of trials had sufficiently similar recruitment, setting and interventions to calculate a pooled effect; there was no evidence that CO measurement in primary care (RR 1.06, 95% CI 0.85 to 1.32) or spirometry in primary care (RR 1.18, 95% CI 0.77 to 1.81) increased cessation rates. We did not pool the other seven trials. One trial in primary care detected a significant benefit of lung age feedback after spirometry (RR 2.12; 95% CI 1.24 to 3.62). One trial that used ultrasonography of carotid and femoral arteries and photographs of plaques detected a benefit (RR 2.77; 95% CI 1.04 to 7.41) but enrolled a population of light smokers. Five trials failed to detect evidence of a significant effect. One of these tested CO feedback alone and CO + genetic susceptibility as two different intervention; none of the three possible comparisons detected significant effects. Three others used a combination of CO and spirometry feedback in different settings, and one tested for a genetic marker. AUTHORS' CONCLUSIONS: There is little evidence about the effects of most types of biomedical tests for risk assessment. Spirometry combined with an interpretation of the results in terms of 'lung age' had a significant effect in a single good quality trial. Mixed quality evidence does not support the hypothesis that other types of biomedical risk assessment increase smoking cessation in comparison to standard treatment. Only two pairs of studies were similar enough in term of recruitment, setting, and intervention to allow meta-analysis.