Fiscal Sustainability in a New Keynesian Model

Recent work on optimal monetary and fiscal policy in New Keynesian models suggests that it is optimal to allow steady-state debt to follow a random walk. Leith and Wren-Lewis (2012) consider the nature of the timeinconsistency involved in such a policy and its implication for discretionary policy-making. We show that governments are tempted, given inflationary expectations, to utilize their monetary and fiscal instruments in the initial period to change the ultimate debt burden they need to service. We demonstrate that this temptation is only eliminated if following shocks, the new steady-state debt is equal to the original (efficient) debt level even though there is no explicit debt target in the government’s objective function. Analytically and in a series of numerical simulations we show which instrument is used to stabilize the debt depends crucially on the degree of nominal inertia and the size of the debt-stock. We also show that the welfare consequences of introducing debt are negligible for precommitment policies, but can be significant for discretionary policy. Finally, we assess the credibility of commitment policy by considering a quasi-commitment policy which allows for different probabilities of reneging on past promises. This on-line Appendix extends the results of this paper.

On the time-varying relationship between EMU sovereign spreads and their determinants

We use a dynamic multipath general-to-specific algorithm to capture structural instability in the link between euro area sovereign bond yield spreads against Germany and their underlying determinants over the period January 1999 – August 2011. We offer new evidence suggesting a significant heterogeneity across countries, both in terms of the risk factors determining spreads over time as well as in terms of the magnitude of their impact on spreads. Our findings suggest that the relationship between euro area sovereign risk and the underlying fundamentals is strongly timevarying, turning from inactive to active since the onset of the global financial crisis and further intensifying during the sovereign debt crisis. As a general rule, the set of financial and macro spreads’ determinants in the euro area is rather unstable but generally becomes richer and stronger in significance as the crisis evolves.

Indexed versus nominal government debt under inflation and price-level targeting

This paper presents a DSGE model in which long run inflation risk matters for social welfare. Optimal indexation of long-term government debt is studied under two monetary policy regimes: inflation targeting (IT) and price-level targeting (PT). Under IT, full indexation is optimal because long run inflation risk is substantial due to base-level drift, making indexed bonds a much better store of value than nominal bonds. Under PT, where long run inflation risk is largely eliminated, optimal indexation is substantially lower because nominal bonds become a better store of value relative to indexed bonds. These results are robust to the PT target horizon, imperfect credibility of PT and model calibration, but the assumption that indexation is lagged is crucial. From a policy perspective, a key finding is that accounting for optimal indexation has important welfare implications for comparisons of IT and PT.

The Inflation Risk Premium on Government Debt in an Overlapping Generations Model

This paper presents a general equilibrium model in which nominal government debt pays an inflation risk premium. The model predicts that the inflation risk premium will be higher in economies which are exposed to unanticipated inflation through nominal asset holdings. In particular, the inflation risk premium is higher when government debt is primarily nominal, steady-state inflation is low, and when cash and nominal debt account for a large fraction of consumers' retirement portfolios. These channels do not appear to have been highlighted in previous models or tested empirically. Numerical results suggest that the inflation risk premium is comparable in magnitude to standard representative agent models. These findings have implications for management of government debt, since the inflation risk premium makes it more costly for governments to borrow using nominal rather than indexed debt. Simulations of an extended model with Epstein-Zin preferences suggest that increasing the share of indexed debt would enable governments to permanently lower taxes by an amount that is quantitatively non-trivial.

Disputes, Debt and Equity

We show how the prospect of disputes over firms’ revenue reports promotes debt financing over equity. These findings are presented within a costly state verification model with a risk averse entrepreneur. The prospect of disputes encourages incentive regimes which limit penalties and avoid stochastic monitoring, even when the lender can commit to stochastic enforcement strategies. Consequently, optimal contracts shift away from equity and toward standard debt. For a useful special case of the model, closed form solutions are presented for leverage and consumption allocations under efficient debt contracts.

Small firms, growth and financial constraints

This paper analyses the impact of different sources of finance on the growth of firms. Using panel data from Spanish manufacturing firms for the period 2000-2006, we investigate the effects of internal and external finances on firm growth. In particular, we examine three dimensions of these financial sources: a) the performance of the firms’ capital structure in accordance with firm size; b) the effects of internal and external financial sources on growth performance; c) the combined effect of equity, external debt and cash flow on firm growth. We find that low-growth firms are sensitive to cash flow and short-term bank debt, while high-growth firms are more sensitive to long-term debt. Furthermore, equity capital seems to reduce barriers to external finance. Our main conclusion is that during the start-up phase, firms are unable to increase their financial leverage and so their capital structure fails to promote correct investment strategies. However, as their equity capital increases, alternative financial mechanisms, in particular long-term debt, become available, which have a positive impact on firm growth.

Optimal latent period in a bacteriophage population model structured by infection-age

We study the lysis timing of a bacteriophage population by means of a continuously infection-age-structured population dynamics model. The features of the model are the infection process of bacteria, the natural death process, and the lysis process which means the replication of bacteriophage viruses inside bacteria and the destruction of them. We consider that the length of the lysis timing (or latent period) is distributed according to a general probability distribution function. We have carried out an optimization procedure and we have found the latent period corresponding to the maximal fitness (i.e. maximal growth rate) of the bacteriophage population.

Developmental critical period in gentic redox dysregulation: animal and human studies in schizophrenia

Converging evidence favors an abnormal susceptibility to oxidative stress in schizophrenia. Decreased levels of glutathione (GSH), the major cellular antioxidant and redox regulator, was observed in cerebrospinal-fluid and prefrontal cortex of patients. Importantly, abnormal GSH synthesis of genetic origin was observed: Two case-control studies showed an association with a GAG trinucleotide repeat (TNR) polymorphism in the GSH key synthesizing enzyme glutamate-cysteine-ligase (GCL) catalytic subunit (GCLC) gene. The most common TNR genotype 7/7 was more frequent in controls, whereas the rarest TNR genotype 8/8 was three times more frequent in patients. The disease associated genotypes (35% of patients) correlated with decreased GCLC protein, GCL activity and GSH content. Similar GSH system anomalies were observed in early psychosis patients. Such redox dysregulation combined with environmental stressors at specific developmental stages could underlie structural and functional connectivity anomalies. In pharmacological and knock-out (KO) models, GSH deficit induces anomalies analogous to those reported in patients. (a) morphology: spine density and GABA-parvalbumine immunoreactivity (PV-I) were decreased in anterior cingulate cortex. KO mice showed delayed cortical PV-I at PD10. This effect is exacerbated in mice with increased DA from PD5-10. KO mice exhibit cortical impairment in myelin and perineuronal net known to modulate PV connectivity. (b) physiology: In cultured neurons, NMDA response are depressed by D2 activation. In hippocampus, NMDA-dependent synaptic plasticity is impaired and kainate induced g-oscillations are reduced in parallel to PV-I. (c) cognition: low GSH models show increased sensitivity to stress, hyperactivity, abnormal object recognition, olfactory integration and social behavior. In a clinical study, GSH precursor N-acetyl cysteine (NAC) as add on therapy, improves the negative symptoms and decreases the side effects of antipsychotics. In an auditory oddball paradigm, NAC improves the mismatched negativity, an evoked potential related to pre-attention and to NMDA receptors function. In summary, clinical and experimental evidence converge to demonstrate that a genetically induced dysregulation of GSH synthesis combined with environmental insults in early development represent a major risk factor contributing to the development of schizophrenia Conclusion Based on these data, we proposed a model for PSIP1 promoter activity involving a complex interplay between yet undefined regulatory elements to modulate gene expression.

EU cohesion aid to Spain: a data set. Part I: 2000-06 planning period

In this paper we construct a data set on EU cohesion aid to Spain during the planning period 2000-06. The data are disaggregated by region, year and function and attempt to approximate the timing of actual executed expenditure on assisted projects.

Intratypic differentiation of polioviruses isolated from suspected cases of poliomyelitis in Brazil during the period of 1990 to 1993

This study analyzed 3129 fecal samples derived from 1626 patients with sudden onset acute flaccid paralysis clinically compatible with poliomyelitis. The samples were collected in the period ranging from January 1990 to September 1993 in all regions of Brazil. Among the 1626 cases studied, 196 had isolation of poliovirus. Nevertheless, it was observed that some factors influenced the isolation rate and the intratypic characterization of these polioviruses. No cases of acute flaccid paralysis has been found to be etiologically related with wild polioviruses.

Immature stages of mosquitoes (Diptera: Culicidae) Collected during the autumn-winter period in Cordoba Province, Argentina

Eggs, immature mosquito collections were made at Cosquin, La Calera ( Chaco phytogeographic region), Villa Allende and Villa del Rosario (Espinal phytogeographic region) during April/September of two consecutive years 1989, 1990. Specific immature habitats in each locality were identified and sampled monthly. Eggs and/or immatures of Aedes albifasciatus, Ae. fluviatilis, Anopheles albitarsis, culex acharistus, Cx. apicinus, Cx. bidens, Cx. coronator, Cx. chidesteri, Cx. dolosus, Cx. maxi, Cx. quinquefasciatus, Cx. saltanensis, Psorophora ciliata and Uranotaenia lowii were collected. Three species (Cx. acharistus, Cx. dolosus and Cx. quinquefasciatus) were collected during the sampling period for all developmental stages. This suggests that immature of these species do not overwinter but continue to develop throughout the cold autumn and winter seasons.

Thermogenic effect of amrinone in healthy men.

OBJECTIVES: The thermogenic effect of amrinone is unknown and its utilization in patients with severe cardiac failure could potentially increase oxygen requirements and therefore aggravate oxygen debt. Consequently, the present study was undertaken to assess the thermogenic response to amrinone at three different plasma concentrations under controlled conditions and to analyze amrinone's effects on various biochemical variables. DESIGN: A prospective, unblinded, controlled study. The initial control period was followed by three sequential, experimental treatments. SUBJECTS: Ten young, healthy, male volunteers with normal body weight. INTERVENTIONS: Three experimental periods. Amrinone was administered intravenously in progressive doses: a) 0.5 mg/kg followed by 5 micrograms/kg/min; b) 0.5 mg/kg followed by 10 micrograms/kg/min; and c) 1.0 mg/kg followed by 10 micrograms/kg/min. MEASUREMENTS AND MAIN RESULTS: Oxygen consumption (VO2) and CO2 production were continuously measured by means of a computerized indirect calorimeter. At the highest dose, amrinone produced a slight and significant (p < .01) increase in VO2 and in resting metabolic rate (+4.5% and +3.7%, respectively), while no change in CO2 production or in respiratory quotient occurred throughout the study. At the medium and high doses, amrinone increased plasma free fatty acid concentrations by 38% and 53%, respectively (p < .05). No variation in plasma glucose, lactate, insulin, norepinephrine, or epinephrine concentrations was observed during the study. CONCLUSIONS: Amrinone administered intravenously at therapeutic doses has minimal thermogenic and metabolic effects in humans without cardiac failure.

Onchocerciasis in Ecuador: changes in prevalence of ocular lesions in Onchocerca volvulus infected individuals over the period 1980-1990

Trends in prevalence rates of onchocercal ocular lesions were examined over the period 1980 to 1990 using data from two cross-sectional surveys. There was evidence for increasing prevalence of anterior chamber microfilariae, iridocyclitis, optic atrophy, and chorioretinopathy. Large increases in prevalence, in particular, were seen for posterior segment lesions: optic atrophy increased from 2.7% to 6.4% and chorioretinopathy from 8.8% to 35.6%. Greatest increases in these lesions were seen in the Chachi which was attributed to the large increases in prevalence of microfilariae in the anterior chamber particularly in those aged 30 years or greater. The study findings suggest that ocular onchocerciasis is evolving in parallel with the well documented parasitological changes.

Age-period-cohort analysis of oral cancer mortality in Europe: the end of an epidemic?

Over the last decade, mortality from oral and pharyngeal cancer has been declining in most European countries, but it had been increasing substantially in Hungary, Slovakia and a few other countries of central Europe, reaching rates comparable to those of lung cancer in several western European countries in males. To update trends in oral cancer mortality and further analyse the recent epidemic in central Europe, official death certifications for oral and pharyngeal cancer for 37 European countries were derived over the period 1970-2007, and an age-period-cohort model was fitted for selected countries. Male oral cancer mortality continued to decline in most European countries, including the Russian Federation, and, more importantly, it also started to decline in some of the countries with the highest male rates, i.e. Hungary and Slovakia; persisting rises were, however, observed in Belarus, Bulgaria and Romania. Oral cancer mortality rates for women were lower than in men and showed no appreciable trend over recent periods in the EU overall. Estimates from the age-period-cohort analysis for most selected countries showed a fall in effects for the cohorts born after the 1950s. For the period effect displayed a rise for the earlier periods, an inversion in the 1990s and a continuous fall up to the last studied period. Only some former non-market economy countries, like Romania, Ukraine and Lithuania, had rising cohort effect trends up to most recent generations. The major finding of this updated analysis of oral cancer mortality is the leveling of the epidemic for men in most European countries, including Hungary and other central European countries, where mortality from this cancer was exceedingly high. These trends essentially reflect the changes in alcohol and tobacco consumption in various populations.