Habit Formation and the Persistence of Monetary Shocks

This paper studies the persistent effects of monetary shocks on output. Previous empirical literature documents this persistence, but standard general equilibrium models with sticky prices fail to generate output responses beyond the duration of nominal contracts. This paper constructs and estimates a general equilibrium model with price rigidities, habit formation, and costly capital adjustment. The model is estimated via Maximum Likelihood using US data on output, the real money stock, and the nominal interest rate. Econometric results suggest that habit formation and adjustment costs to capital play an important role in explaining the output effects of monetary policy. In particular, impulse response analysis indicates that the model generates persistent, hump-shaped output responses to monetary shocks.

Formation and differentiation of multiple mesenchymal lineages during lung development is regulated by {beta}-catenin signaling.

BACKGROUND: The role of ss-catenin signaling in mesodermal lineage formation and differentiation has been elusive. METHODOLOGY: To define the role of ss-catenin signaling in these processes, we used a Dermo1(Twist2)(Cre/+) line to target a floxed beta-catenin allele, throughout the embryonic mesenchyme. Strikingly, the Dermo1(Cre/+); beta-catenin(f/-) conditional Knock Out embryos largely phenocopy Pitx1(-/-)/Pitx2(-/-) double knockout embryos, suggesting that ss-catenin signaling in the mesenchyme depends mostly on the PITX family of transcription factors. We have dissected this relationship further in the developing lungs and find that mesenchymal deletion of beta-catenin differentially affects two major mesenchymal lineages. The amplification but not differentiation of Fgf10-expressing parabronchial smooth muscle progenitor cells is drastically reduced. In the angioblast-endothelial lineage, however, only differentiation into mature endothelial cells is impaired. CONCLUSION: Taken together these findings reveal a hierarchy of gene activity involving ss-catenin and PITX, as important regulators of mesenchymal cell proliferation and differentiation.