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.

Expectations Traps and Coordination Failures with Discretionary Policymaking

Discretionary policymakers cannot manage private-sector expectations and cannot coordinate the actions of future policymakers. As a consequence, expectations traps and coordination failures can occur and multiple equilibria can arise. To utilize the explanatory power of models with multiple equilibria it is first necessary to understand how an economy arrives to a particular equilibrium. In this paper we employ notions of learnability and self-enforceability to motivate and identify equilibria of particular interest. Central among these criteria are whether the equilibrium is learnable by private agents and jointly learnable by private agents and the policymaker. We use two New Keynesian policy models to identify the strategic interactions that give rise to multiple equilibria and to illustrate our methods for identifying equilibria of interest. Importantly, unless the Pareto-preferred equilibrium is learnable by private agents, we find little reason to expect coordination on that equilibrium.

Overtime Working and Contract Efficiency

We present a wage-hours contract designed to minimize costly turnover given investments in specific training combined with firm and worker information asymmetries. It may be optimal for the parties to work ‘long hours’ remunerated at premium rates for guaranteed overtime hours. Based on British plant and machine operatives, we test three predictions. First, trained workers with longer tenure are more likely to work overtime. Second, hourly overtime pay exceeds the value of marginal product while the basic hourly wage is less than the value of marginal product. Third, the basic hourly wage is negatively related to the overtime premium.

An Empirical Assessment of Optimal Monetary Policy Delegation in the Euro Area

We estimate a New Keynesian DSGE model for the Euro area under alternative descriptions of monetary policy (discretion, commitment or a simple rule) after allowing for Markov switching in policy maker preferences and shock volatilities. This reveals that there have been several changes in Euro area policy making, with a strengthening of the anti-inflation stance in the early years of the ERM, which was then lost around the time of German reunification and only recovered following the turnoil in the ERM in 1992. The ECB does not appear to have been as conservative as aggregate Euro-area policy was under Bundesbank leadership, and its response to the financial crisis has been muted. The estimates also suggest that the most appropriate description of policy is that of discretion, with no evidence of commitment in the Euro-area. As a result although both ‘good luck’ and ‘good policy’ played a role in the moderation of inflation and output volatility in the Euro-area, the welfare gains would have been substantially higher had policy makers been able to commit. We consider a range of delegation schemes as devices to improve upon the discretionary outcome, and conclude that price level targeting would have achieved welfare levels close to those attained under commitment, even after accounting for the existence of the Zero Lower Bound on nominal interest rates.

An Empirical Assessment of Optimal Monetary Policy Delegation in the Euro Area

We estimate a New Keynesian DSGE model for the Euro area under alternative descriptions of monetary policy (discretion, commitment or a simple rule) after allowing for Markov switching in policy maker preferences and shock volatilities. This reveals that there have been several changes in Euro area policy making, with a strengthening of the anti-inflation stance in the early years of the ERM, which was then lost around the time of German reunification and only recovered following the turnoil in the ERM in 1992. The ECB does not appear to have been as conservative as aggregate Euro-area policy was under Bundesbank leadership, and its response to the financial crisis has been muted. The estimates also suggest that the most appropriate description of policy is that of discretion, with no evidence of commitment in the Euro-area. As a result although both ‘good luck’ and ‘good policy’ played a role in the moderation of inflation and output volatility in the Euro-area, the welfare gains would have been substantially higher had policy makers been able to commit. We consider a range of delegation schemes as devices to improve upon the discretionary outcome, and conclude that price level targeting would have achieved welfare levels close to those attained under commitment, even after accounting for the existence of the Zero Lower Bound on nominal interest rates.

Perceptions of Europe in political and economic elites: a geographical compared analysis of Germany, Spain and Poland

Elite perceptions about Europe are a very important point in order to understand the current European integration process, as well as the future perspectives for the continent. This study makes a comparison between the perceptions which political and economical elites in some European countries have about the European Union process and its mechanisms. The main goal is to identify the differences in positions of each type of elites, as well as the variations among three key countries. The database built thanks to the INTUNE (Integrated and United? A quest for Citizenship in an ¨ever closer Europe¨) Project Survey on European Elites and Masses, funded by the Sixth Framework Programme of the EU [Contract CIT 3-CT-2005-513421] have being used. The questionnaire was applied between February and May 2007, in a total of 18 European countries. The national teams got a total of almost 2000 valid responses at European level. In the analysis we have showed some general descriptive statistics about the perception of Europe taking as a reference two dimensions of the INTUNE project: identity (attachment to the national level, the meaning of being a truly national, and the threats from Turkey that EU is facing at this moment) and representation (trust in European and national institutions, preferences for a national or an European army). The results are presented distinguishing between political (national MP’s in low chambers) and economical elites (presidents of corporations, general managers…) and, at the same time, among three countries: Germany as an original member of the European Union; Spain, incorporated in 1986; and a new member, Poland, joining the EU in 2004.

Modelling dependence in a ratemaking procedure with multivariate Poisson regression models

When actuaries face with the problem of pricing an insurance contract that contains different types of coverage, such as a motor insurance or homeowner's insurance policy, they usually assume that types of claim are independent. However, this assumption may not be realistic: several studies have shown that there is a positive correlation between types of claim. Here we introduce different regression models in order to relax the independence assumption, including zero-inflated models to account for excess of zeros and overdispersion. These models have been largely ignored to multivariate Poisson date, mainly because of their computational di±culties. Bayesian inference based on MCMC helps to solve this problem (and also lets us derive, for several quantities of interest, posterior summaries to account for uncertainty). Finally, these models are applied to an automobile insurance claims database with three different types of claims. We analyse the consequences for pure and loaded premiums when the independence assumption is relaxed by using different multivariate Poisson regression models and their zero-inflated versions.

The Part-time pay penalty in a segmented labor market

This paper is the first to examine the implications of switching to PT work for women's subsequent earnings trajectories, distinguishing by their type of contract: permanent or fixedterm. Using a rich longitudinal Spanish data set from Social Security records of over 76,000 prime-aged women strongly attached to the Spanish labor market, we find that PT work aggravates the segmentation of the labor market insofar there is a PT pay penalty and this penalty is larger and more persistent in the case of women with fixed-term contracts. The paper discusses problems arising in empirical estimation (including a problem not discussed in the literature up to now: the differential measurement error of the LHS variable by PT status), and how to address them. It concludes with policy implications relevant for Continental Europe and its dual structure of employment protection.

Cronyism in Business, Public Sector and Politics

This paper contrasts the incentives for cronyism in business, the public sector and politics within an agency problem model with moral hazard. The analysis is focused on the institutional differences between private, public and political organizations. In business, when facing a residual claimant contract, a chief manager ends up with a relatively moderate …rst-best level of cronyism within a …firm. The institutional framework of the public sector does not allow explicit contracting, which leads to a more severe cronyism problem within public organizations. Finally, it is shown that the nature of political appointments (such that the subordinate's reappointment is conditioned on the chief's re-election) together with implicit contracting makes political cronyism the most extreme case. JEL classifi…cation: D72, D73, D86. Keywords: Cronyism; Meritocracy; Manager; Bureaucrat; Politician.

Language and syntactic impairment following stroke in late bilingual aphasics.

PURPOSE: Bilingual aphasia generally affects both languages. However, the age of acquisition of the second language (L2) seems to play a role in the anatomo-functional correlation of the syntactical/grammatical processes, thus potentially influencing the L2 syntactic impairment following a stroke. The present study aims to analyze the influence of late age of acquisition of the L2 on syntactic impairment in bilingual aphasic patients. METHODS: Twelve late bilingual participants (speaking French as L2 and either English, German, Italian or Spanish as L1) with stroke-induced aphasia participated in the study. The MAST or BAT aphasia batteries were used to evaluate overall aphasia score. An auditory syntactic judgement task was developed and used to test participants syntactic performance. RESULTS: The overall aphasia scores did not differ between L1 and L2. In a multiple case analysis, only one patient had lower scores in L2. However, four patients presented significantly lower performances in syntactic processing in the late L2 than in their native language (L1). In these four patients the infarct was localized, either exclusively or at least partially, in the pre-rolandic region. CONCLUSION: This pilot study suggests that, in late bilingual aphasics, syntactic judgment abilities may be more severely impaired in L2, and that this syntactic deficit is most likely to occur following anterior lesions.

Health Risks and Health Inequalities in Housing: an Assessment Tool

This tool is designed to assess the health risks of housing and the residential environment at the scale of a neighbourhood, housing stock or administrative area. For each health risk, the tool enables a judgement to be recorded about the level of health risk attributable to unhealthy or unsafe housing conditions, and for this to be compared with the adequacy of local practice in mitigating the risk.

Quality assurance in road traffic analyses in Switzerland.

Swiss laboratories performing toxicological road traffic analyses have been authorized for many years by the Swiss Federal Roads Office (FEDRO). In 2003 FEDRO signed a contract with the Swiss Society of Legal Medicine (SSLM) to organize the complete quality management concerning road traffic analyses. For this purpose a multidisciplinary working group was established under the name of "road traffic commission (RTC)". RTC has to organize external quality control, to interpret the results of these controls, to perform audits in the laboratories and to report all results to FEDRO. Furthermore the working group can be mandated for special tasks by FEDRO. As an independent organization the Swiss Center for Quality Control (CSCQ) in Geneva manages the external quality controls in the laboratory over the past years. All tested drugs and psychoactive substances are listed in a federal instruction. The so-called 'zero tolerance substances' (THC, morphine, cocaine, amphetamine, methamphetamine, MDMA and MDEA) and their metabolites have to be tested once a year, all other substances (benzodiazepines, zolpidem, phenobarbital, etc.) periodically. Results over the last years show that all laboratories are generally within the confidence interval of +/-30% of the mean value. In cases of non-conformities measures have to be taken immediately and reported to the working group. External audits are performed triennially but accredited laboratories can combine this audit with the approval of the Swiss Accreditation Service (SAS). During the audits a special checklist filled in by the laboratory director is assessed. Non-conformities have to be corrected. During the process of establishing a new legislation, RTC had an opportunity of advising FEDRO. In collaboration with FEDRO, RTC and hence SSLM can work actively on improving of quality assurance in road traffic toxicological analyses, and has an opportunity to bring its professional requests to the federal authorities.

Fine-tuning the space, time, and host distribution of mycobacteria in wildlife.

Background. We describe the diversity of two kinds of mycobacteria isolates, environmental mycobacteria and Mycobacterium bovis collected from wild boar, fallow deer, red deer and cattle in Doñana National Park (DNP, Spain), analyzing their association with temporal, spatial and environmental factors. Results. High diversity of environmental mycobacteria species and M. bovis typing patterns (TPs) were found. When assessing the factors underlying the presence of the most common types of both environmental mycobacteria and M. bovis TPs in DNP, we evidenced (i) host species differences in the occurrence, (ii) spatial structuration and (iii) differences in the degree of spatial association of specific types between host species. Co-infection of a single host by two M. bovis TPs occurred in all three wild ungulate species. In wild boar and red deer, isolation of one group of mycobacteria occurred more frequently in individuals not infected by the other group. While only three TPs were detected in wildlife between 1998 and 2003, up to 8 different ones were found during 2006-2007. The opposite was observed in cattle. Belonging to an M. bovis-infected social group was a significant risk factor for mycobacterial infection in red deer and wild boar, but not for fallow deer. M. bovis TPs were usually found closer to water marshland than MOTT. Conclusions. The diversity of mycobacteria described herein is indicative of multiple introduction events and a complex multi-host and multi-pathogen epidemiology in DNP. Significant changes in the mycobacterial isolate community may have taken place, even in a short time period (1998 to 2007). Aspects of host social organization should be taken into account in wildlife epidemiology. Wildlife in DNP is frequently exposed to different species of non-tuberculous, environmental mycobacteria, which could interact with the immune response to pathogenic mycobacteria, although the effects are unknown. This research highlights the suitability of molecular typing for surveys at small spatial and temporal scales.

The immunomodulator PSK induces in vitro cytotoxic activity in tumour cell linesvia arrest of cell cycle and induction of apoptosis

BACKGROUND Protein-bound polysaccharide (PSK) is derived from the CM-101 strain of the fungus Coriolus versicolor and has shown anticancer activity in vitro and in in vivo experimental models and human cancers. Several randomized clinical trials have demonstrated that PSK has great potential in adjuvant cancer therapy, with positive results in the adjuvant treatment of gastric, esophageal, colorectal, breast and lung cancers. These studies have suggested the efficacy of PSK as an immunomodulator of biological responses. The precise molecular mechanisms responsible for its biological activity have yet to be fully elucidated. METHODS The in vitro cytotoxic anti-tumour activity of PSK has been evaluated in various tumour cell lines derived from leukaemias, melanomas, fibrosarcomas and cervix, lung, pancreas and gastric cancers. Tumour cell proliferation in vitro was measured by BrdU incorporation and viable cell count. Effect of PSK on human peripheral blood lymphocyte (PBL) proliferation in vitro was also analyzed. Studies of cell cycle and apoptosis were performed in PSK-treated cells. RESULTS PSK showed in vitro inhibition of tumour cell proliferation as measured by BrdU incorporation and viable cell count. The inhibition ranged from 22 to 84%. Inhibition mechanisms were identified as cell cycle arrest, with cell accumulation in G0/G1 phase and increase in apoptosis and caspase-3 expression. These results indicate that PSK has a direct cytotoxic activity in vitro, inhibiting tumour cell proliferation. In contrast, PSK shows a synergistic effect with IL-2 that increases PBL proliferation. CONCLUSION These results indicate that PSK has cytotoxic activity in vitro on tumour cell lines. This new cytotoxic activity of PSK on tumour cells is independent of its previously described immunomodulatory activity on NK cells.

Distinct mechanisms of loss of IFN-gamma mediated HLA class I inducibility in two melanoma cell lines

BACKGROUND The inability of cancer cells to present antigen on the cell surface via MHC class I molecules is one of the mechanisms by which tumor cells evade anti-tumor immunity. Alterations of Jak-STAT components of interferon (IFN)-mediated signaling can contribute to the mechanism of cell resistance to IFN, leading to lack of MHC class I inducibility. Hence, the identification of IFN-gamma-resistant tumors may have prognostic and/or therapeutic relevance. In the present study, we investigated a mechanism of MHC class I inducibility in response to IFN-gamma treatment in human melanoma cell lines. METHODS Basal and IFN-induced expression of HLA class I antigens was analyzed by means of indirect immunofluorescence flow cytometry, Western Blot, RT-PCR, and quantitative real-time RT-PCR (TaqMan(R) Gene Expression Assays). In demethylation studies cells were cultured with 5-aza-2'-deoxycytidine. Electrophoretic Mobility Shift Assay (EMSA) was used to assay whether IRF-1 promoter binding activity is induced in IFN-gamma-treated cells. RESULTS Altered IFN-gamma mediated HLA-class I induction was observed in two melanoma cells lines (ESTDAB-004 and ESTDAB-159) out of 57 studied, while treatment of these two cell lines with IFN-alpha led to normal induction of HLA class I antigen expression. Examination of STAT-1 in ESTDAB-004 after IFN-gamma treatment demonstrated that the STAT-1 protein was expressed but not phosphorylated. Interestingly, IFN-alpha treatment induced normal STAT-1 phosphorylation and HLA class I expression. In contrast, the absence of response to IFN-gamma in ESTDAB-159 was found to be associated with alterations in downstream components of the IFN-gamma signaling pathway. CONCLUSION We observed two distinct mechanisms of loss of IFN-gamma inducibility of HLA class I antigens in two melanoma cell lines. Our findings suggest that loss of HLA class I induction in ESTDAB-004 cells results from a defect in the earliest steps of the IFN-gamma signaling pathway due to absence of STAT-1 tyrosine-phosphorylation, while absence of IFN-gamma-mediated HLA class I expression in ESTDAB-159 cells is due to epigenetic blocking of IFN-regulatory factor 1 (IRF-1) transactivation.