Econometric models of financial risks

The goal of this dissertation is to use statistical tools to analyze specific financial risks that have played dominant roles in the US financial crisis of 2008-2009. The first risk relates to the level of aggregate stress in the financial markets. I estimate the impact of financial stress on economic activity and monetary policy using structural VAR analysis. The second set of risks concerns the US housing market. There are in fact two prominent risks associated with a US mortgage, as borrowers can both prepay or default on a mortgage. I test the existence of unobservable heterogeneity in the borrower's decision to default or prepay on his mortgage by estimating a multinomial logit model with borrower-specific random coefficients.

Unconventional Monetary Policy and the Great Recession: Estimating the Macroeconomic Effects of a Spread Compression at the Zero Lower Bound

We explore the macroeconomic effects of a compression in the long-term bond yield spread within the context of the Great Recession of 2007–09 via a time-varying parameter structural VAR model. We identify a “pure” spread shock defined as a shock that leaves the policy rate unchanged, which allows us to characterize the macroeconomic consequences of a decline in the yield spread induced by central banks’ asset purchases within an environment in which the policy rate is constrained by the effective zero lower bound. Two key findings stand out. First, compressions in the long-term yield spread exert a powerful effect on both output growth and inflation. Second, conditional on available estimates of the impact of the Federal Reserve’s and the Bank of England’s asset purchase programs on long-term yield spreads, our counterfactual simulations suggest that U.S. and U.K. unconventional monetary policy actions have averted significant risks both of deflation and of output collapses comparable to those that took place during the Great Depression.

What Explains Real and Nominal Exchange Rate Fluctuations? Evidence from SVAR Analysis for India

This study empirically analyzes the sources of the exchange rate fluctuations in India by employing the structural VAR model. The VAR system consists of three variables, i.e., the nominal exchange rate, the real exchange rate, and the relative output of India and a foreign country. Consistent with most previous studies, the empirical evidence demonstrates that real shocks are the main drives of the fluctuations in real and nominal exchange rates, indicating that the central bank cannot maintain the real exchange rate at its desired level over time.

Sources of fluctuations in parallel exchange rates and policy reform in Myanmar

Myanmar maintained a multiple exchange rate system, and the parallel market exchange rate was left untamed. In the last two decades, the Myanmar kyat exchange rate of the parallel market has exhibited the sharpest fluctuations among Southeast Asian currencies in real terms. Since the move to a managed float regime in April 2012, the question arises of whether exchange rate policies will be effective in stabilizing the real exchange rate. This paper investigates the sources of fluctuations in the real effective exchange rate using Blanchard and Quah’s (1989) structural vector autoregression model. As nominal shocks can be created by exchange rate policies, a persistent impact of a nominal shock implies more room for exchange rate policies. Decomposition of the fluctuations into nominal and real shocks indicates that the impact of nominal shocks is small and quickly diminishes, implying that complementary sterilization is necessary for effective foreign exchange market interventions.

Effectiveness and transmission of the ECB’s balance sheet policies. National Bank of Belgium Working Paper No. 275, December 2014

We estimate the effects of exogenous innovations to the balance sheet of the ECB since the start of the financial crisis within a structural VAR framework. An expansionary balance sheet shock stimulates bank lending, stabilizes financial markets, and has a positive impact on economic activity and prices. The effects on bank lending and output turn out to be smaller in the member countries that have been more affected by the financial crisis, in particular those countries where the banking system is less well-capitalized.

Mastogloia smithii var lacustris Grun.: A Structural Engineer of Calcareous Mats in Karstic Subtropical Wetlands

Mastogloia smithii var. lacustris Grun. is the dominant diatom in periphyton mats of the calcareous, freshwater to brackish wetlands of Caribbean coasts. Despite oligotrophy, frequent desiccation, high irradiance and temperatures, and occasional fire, periphyton communities in these wetlands can produce over 2000 g m-2 of organic biomass, prompting studies that examine stress resistance and maintenance of algal mats under extreme conditions. The diatom flora inhabiting periphyton mats from over 500 sites in the Florida Everglades and similar wetlands in Belize, Jamaica and Mexico was examined, and M. smithii var. lacustris was a persistent component, present in 97% of samples and comprising up to 80% of a diverse diatom assemblage. Valves at various stages of division were observed encased in extracellular polysaccharide that exceeded the cell volume; SEM observations confirm issuance from mantle pores resulting in suspension of the cell in a matrix dominated by cyanobacterial filaments. Using corresponding biophysical data from the collection sites, we define the optima for M. smithii var. lacustris along salinity, pH, phosphorus, and water depth gradients. Experiments revealed a collapse of M. smithii var. lacustris populations in the presence of above-ambient phosphorus concentrations and a rapid resurgence upon reflooding of desiccated mats. This widespread diatom taxon appears to play a critical role similar to that of cyanobacteria in microbial mats, and its disappearance in the presence of enrichment threatens biodiversity and the natural function in these systems that are increasingly influenced by urbanization

The macroeconomic effects of (different) oil shocks: A VAR approach

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Economics from the NOVA – School of Business and Economics

Testing for sufficient information in structural VARs

We derive necessary and sufficient conditions under which a set of variables is informationally sufficient, i.e. it contains enough information to estimate the structural shocks with a VAR model. Based on such conditions, we suggest a procedure to test for informational sufficiency. Moreover, we show how to amend the VAR if informational sufficiency is rejected. We apply our procedure to a VAR including TFP, unemployment and per-capita hours worked. We find that the three variables are not informationally sufficient. When adding missing information, the effects of technology shocks change dramatically.

Monetary policy misspecification in VAR models

We examine the effects of extracting monetary policy disturbances with semi-structural and structural VARs, using data generated bya limited participation model under partial accommodative and feedback rules. We find that, in general, misspecification is substantial: short run coefficients often have wrong signs; impulse responses and variance decompositions give misleadingrepresentations of the dynamics. Explanations for the results and suggestions for macroeconomic practice are provided.

Structural changes in the US economy: is there a role for monetary policy?

This paper investigates the contribution of monetary policy to the changes in outputgrowth and inflation dynamics in the US. We identify a policy shock and a policy rule ina time-varying coefficients VAR using robust sign restrictions. The transmission of policyshocks has been relatively stable. The variance of the policy shock has decreased over time,but policy shocks account for a small fraction of the level and of the variations in inflationand output growth volatility and persistence. We find little evidence of a significant increasein the long run response of the interest rate to inflation. A more aggressive inflation policyin the 1970s would have produced large output growth costs.

The structural dynamics of US output and inflation: What explains the changes?

We examine the dynamics of US output and inflation using a structural time varyingcoefficient VAR. We show that there are changes in the volatility of both variables andin the persistence of inflation. Technology shocks explain changes in output volatility,while a combination of technology, demand and monetary shocks explain variations inthe persistence and volatility of inflation. We detect changes over time in the transmission of technology shocks and in the variance of technology and of monetary policyshocks. Hours and labor productivity always increase in response to technology shocks.

The structural dynamics of output growth and inflation: some international evidence

We examine the dynamics of output growth and inflation in the US, Euro area and UK using a structural time varying coefficient VAR. There are important similarities in structural inflation dynamics across countries; output growth dynamics differ. Swings in the magnitude of inflation and output growth volatilities and persistences are accounted for by a combination of three structural shocks. Changes over time in the structure of the economy are limited and permanent variations largely absent. Changes in the volatilities of structural shocks matter.

Influence of LAR and VAR on Para-Aminopyridine Antimalarials Targetting Haematin in Chloroquine-Resistance

Antimalarial chloroquine (CQ) prevents haematin detoxication when CQ-base concentrates in the acidic digestive vacuole through protonation of its p-aminopyridine (pAP) basic aro- matic nitrogen and sidechain diethyl-N. CQ export through the variant vacuolar membrane export channel, PFCRT, causes CQ-resistance in Plasmodium falciparum but 3-methyl CQ (sontochin SC), des-ethyl amodiaquine (DAQ) and bis 4-aminoquinoline piperaquine (PQ) are still active. This is determined by changes in drug accumulation ratios in parasite lipid (LAR) and in vacuolar water (VAR). Higher LAR may facilitate drug binding to and blocking PFCRT and also aid haematin in lipid to bind drug. LAR for CQ is only 8.3; VAR is 143,482. More hydrophobic SC has LAR 143; VAR remains 68,523. Similarly DAQ with a phenol sub- stituent has LAR of 40.8, with VAR 89,366. In PQ, basicity of each pAP is reduced by distal piperazine N, allowing very high LAR of 973,492, retaining VAR of 104,378. In another bis quinoline, dichlorquinazine (DCQ), also active but clinically unsatisfactory, each pAP retains basicity, being insulated by a 2-carbon chain from a proximal nitrogen of the single linking piperazine. While LAR of 15,488 is still high, the lowest estimate of VAR approaches 4.9 million. DCQ may be expected to be very highly lysosomotropic and therefore potentially hepatotoxic. In 11 pAP antimalarials a quadratic relationship between logLAR and logRe- sistance Index (RI) was confirmed, while log (LAR/VAR) vs logRI for 12 was linear. Both might be used to predict the utility of structural modifications.

Lung Age Is Related To Carotid Structural Alterations In Hypertensive Subjects.

Hypertensive patients exhibit higher cardiovascular risk and reduced lung function compared with the general population. Whether this association stems from the coexistence of two highly prevalent diseases or from direct or indirect links of pathophysiological mechanisms is presently unclear. This study investigated the association between lung function and carotid features in non-smoking hypertensive subjects with supposed normal lung function. Hypertensive patients (n = 67) were cross-sectionally evaluated by clinical, hemodynamic, laboratory, and carotid ultrasound analysis. Forced vital capacity, forced expired volume in 1 second and in 6 seconds, and lung age were estimated by spirometry. Subjects with ventilatory abnormalities according to current guidelines were excluded. Regression analysis adjusted for age and prior smoking history showed that lung age and the percentage of predicted spirometric parameters associated with common carotid intima-media thickness, diameter, and stiffness. Further analyses, adjusted for additional potential confounders, revealed that lung age was the spirometric parameter exhibiting the most significant regression coefficients with carotid features. Conversely, plasma C-reactive protein and matrix-metalloproteinases-2/9 levels did not influence this relationship. The present findings point toward lung age as a potential marker of vascular remodeling and indicate that lung and vascular remodeling might share common pathophysiological mechanisms in hypertensive subjects.