Discrete devaluations and multiple equilibria in a first generation model of currency crises

The first generation models of currency crises have often been criticized because they predict that, in the absence of very large triggering shocks, currency attacks should be predictable and lead to small devaluations. This paper shows that these features of first generation models are not robust to the inclusion of private information. In particular, this paper analyzes a generalization of the Krugman-Flood-Garber (KFG) model, which relaxes the assumption that all consumers are perfectly informed about the level of fundamentals. In this environment, the KFG equilibrium of zero devaluation is only one of many possible equilibria. In all the other equilibria, the lack of perfect information delays the attack on the currency past the point at which the shadow exchange rate equals the peg, giving rise to unpredictable and discrete devaluations.

Spanish monetary policy: A structural VAR analysis

Some past studies analyzed Spanish monetary policy with the standard VAR. Their problem is that this method obliges researchers to impose a certain extreme form of the short run policy rule on their models. Hence, it does not allow researchers to study the possibility of structural changes in this rule, either. This paper overcomes these problems by using the structural VAR. I find that the rule has always been that of partial accommodation. Prior to 1984, it was quite close to money targeting. After 1984, it became closer to the interest rate targeting, with more emphasis on the exchange rate.

Relative price riddles in international business cycle theory: Are transport costs the explanation?

We study relative price behavior in an international business cyclemodel with specialization in production, in which a goods marketfriction is introduced through transport costs. The transporttechnology allows for flexible transport costs. We analyze whetherthis extension can account for the striking differences betweentheory and data as far as the moments of terms of trade and realexchange rates are concerned. We find that transport costs increaseboth the volatility of the terms of trade and the volatility of thereal exchange rate. However, unless the transport technology isspecified by a Leontief technology, transport costs do not resolvethe quantitative discrepancies between theory and data. Asurprising result is that transport costs may actually lower thepersistence of the real exchange rate, a finding that is in contrastto much of the emphasis of the empirical literature.

Crises and growth: A re-evaluation

We address the question of whether growth and welfare can be higher in crisis prone economies. First, we show that there is a robust empirical link between per-capita GDP growth and negative skewness of credit growth across countries with active financial markets. That is, countries that have experienced occasional crises have grown on average faster than countries with smooth credit conditions. We then present a two-sector endogenous growth model in which financial crises can occur, and analyze the relationship between financial fragility and growth. The underlying credit market imperfections generateborrowing constraints, bottlenecks and low growth. We show that under certain conditions endogenous real exchange rate risk arises and firms find it optimal to take on credit risk in the form of currency mismatch. Along such a risky path average growth is higher, but self-fulfilling crises occur occasionally. Furthermore, we establish conditions under which the adoption of credit risk is welfare improving and brings the allocation nearer to the Pareto optimal level. The design of the model is motivated by several features of recent crises: credit risk in the form of foreign currency denominated debt; costly crises that generate firesales and widespread bankruptcies; and asymmetric sectorial responses, wherethe nontradables sector falls more than the tradables sector in the wake of crises.

Determinantes da Inflação em Cabo Verde

Um incremento do nível geral de preços pode ter impacto marcante no bem-estar económico e social, já que há perda de valor da moeda e consequente deterioração do poder de compra da população, conduzindo assim ao agravamento das condições e custo de vida. Contudo, torna-se necessário investigar as causas (fatores determinantes) da inflação, pois é uma das etapas fundamentais para o controlo do processo inflacionário. Neste sentido, o presente estudo tem como objetivo principal averiguar quais os determinantes da inflação em Cabo Verde. Para tal foi utilizado o método de co-integração, recentemente proposto por Pesaran et al. (2001) – Bound Test. Os resultados obtidos evidenciam que as componentes sazonais, cambiais, monetárias, orçamentais e externas explicam grande parte da Inflação em Cabo Verde.

The transmission of US shocks to Latin America

I study whether and how US shocks are transmitted to eight Latin American countries. US shocks are identified using sign restrictions and treated as exogenous with respect to Latin American economies. Posterior estimates for individual and average effects are constructed. US monetary shocks produce significant fluctuations in Latin America, but real demand and supply shocks do not. Floaters and currency boarders display similar output but different inflation and interest rate responses. The financial channel plays a crucial role in the transmission. US disturbances explain important portions of the variability of LatinAmerican macrovariables, producing continental cyclical fluctuations and, in two episodes, destabilizing nominal exchange rate effects. Policy implications are discussed.

A medium-scale open economy model of Australia

We estimate an open economy dynamic stochastic general equilibrium (DSGE)model of Australia with a number of shocks, frictions and rigidities, matching alarge number of observable time series. We find that both foreign and domesticshocks are important drivers of the Australian business cycle.We also find that theinitial impact on inflation of an increase in demand for Australian commoditiesis negative, due to an improvement in the real exchange rate, though there is apersistent positive effect on inflation that dominates at longer horizons.

Trade, extent of the market and economic growth 1960-1996

We find that trade and domestic market size are robust determinants of economic growth overthe 1960-1996 period when trade openness is measured as the US dollar value of imports andexports relative to GDP in PPP US$ ('real openness'). When trade openness is measured asthe US dollar value of imports and exports relative to GDP in exchange rate US$ ('nominalopenness') however, trade and the size of domestic markets are often non-robust determinantsof growth. We argue that real openness is the more appropriate measure of trade and that ourempirical results should be seen as evidence in favor of the extent-of-the-market hypothesis.

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.

Foreign trade traps in the european periphery: Spain, 1870-1913

In this article we research into the difficulties that foreign trade imposed onSpanish process of integration into the international economy in the years priorto the First World War. We start out by examining some features of the foreigntrade structure of the country. By means of an econometric analysis of importand export series, it is possible to observe the presence of a trend towards tradedeficit, which was in force when Spain grew at a rate similar to that of itstrading partners. We also check that, in the absence of these compensatorymechanisms, adjustment in foreign payments could be reached by means ofprotective measures and the exchange rate.

Novel anesthetics and other treatment strategies for refractory status epilepticus

Refractory status epilepticus (RSE)-that is, seizures resistant to at least two antiepileptic drugs (AEDs)-is generally managed with barbiturates, propofol, or midazolam, despite a low level of evidence (Rossetti, 2007). When this approach fails, the need for alternative pharmacologic and nonpharmacologic strategies emerges. These have been investigated even less systematically than the aforementioned compounds, and are often used, sometimes in succession, in cases of extreme refractoriness (Robakis & Hirsch, 2006). Several possibilities are reviewed here. In view of the marked heterogeneity of reported information, etiologies, ages, and comedications, it is extremely difficult to evaluate a given method, not to say to compare different strategies among them. Pharmacologic Approaches Isoflurane and desflurane may complete the armamentarium of anesthetics,' and should be employed in a ''close'' environment, in order to prevent intoxication of treating personnel. c-Aminobutyric acid (GABA)A receptor potentiation represents the putative mechanism of action. In an earlier report, isoflurane was used for up to 55 h in nine patients, controlling seizures in all; mortality was, however, 67% (Kofke et al., 1989). More recently, the use of these inhalational anesthetics was described in seven subjects with RSE, for up to 26 days, with an endtidal concentration of 1.2-5%. All patients required vasopressors, and paralytic ileus occurred in three; outcome was fatal in three patients (43%) (Mirsattari et al., 2004). Ketamine, known as an emergency anesthetic because of its favorable hemodynamic profile, is an N-methyl-daspartate (NMDA) antagonist; the interest for its use in RSE derives from animal works showing loss of GABAA efficacy and maintained NMDA sensitivity in prolonged status epilepticus (Mazarati & Wasterlain, 1999). However, to avoid possible neurotoxicity, it appears safer to combine ketamine with GABAergic compounds (Jevtovic-Todorovic et al., 2001; Ubogu et al., 2003), also because of a likely synergistic effect (Martin & Kapur, 2008). There are few reported cases in humans, describing progressive dosages up to 7.5 mg/kg/h for several days (Sheth & Gidal, 1998; Quigg et al., 2002; Pruss & Holtkamp, 2008), with moderate outcomes. Paraldehyde acts through a yet-unidentified mechanism, and appears to be relatively safe in terms of cardiovascular tolerability (Ramsay, 1989; Thulasimani & Ramaswamy, 2002), but because of the risk of crystal formation and its reactivity with plastic, it should be used only as fresh prepared solution in glass devices (Beyenburg et al., 2000). There are virtually no recent reports regarding its use in adults RSE, whereas rectal paraldehyde in children with status epilepticus resistant to benzodiazepines seems less efficacious than intravenous phenytoin (Chin et al., 2008). Etomidate is another anesthetic agent for which the exact mechanism of action is also unknown, which is also relatively favorable regarding cardiovascular side effects, and may be used for rapid sedation. Its use in RSE was reported in eight subjects (Yeoman et al., 1989). After a bolus of 0.3 mg/kg, a drip of up to 7.2 mg/kg/h for up to 12 days was administered, with hypotension occurring in five patients; two patients died. A reversible inhibition of cortisol synthesis represents an important concern, limiting its widespread use and implying a careful hormonal substitution during treatment (Beyenburg et al., 2000). Several nonsedating approaches have been reported. The use of lidocaine in RSE, a class Ib antiarrhythmic agent modulating sodium channels, was reviewed in 1997 (Walker & Slovis, 1997). Initial boluses up to 5 mg/kg and perfusions of up to 6 mg/kg/h have been mentioned; somewhat surprisingly, at times lidocaine seemed to be successful in controlling seizures in patients who were refractory to phenytoin. The aforementioned dosages should not be overshot, in order to keep lidocaine levels under 5 mg/L and avoid seizure induction (Hamano et al., 2006). A recent pediatric retrospective survey on 57 RSE episodes (37 patients) described a response in 36%, and no major adverse events; mortality was not given (Hamano et al., 2006 Verapamil, a calcium-channel blocker, also inhibits P-glycoprotein, a multidrug transporter that may diminish AED availability in the brain (Potschka et al., 2002). Few case reports on its use in humans are available; this medication nevertheless appears relatively safe (under cardiac monitoring) up to dosages of 360 mg/day (Iannetti et al., 2005). Magnesium, a widely used agent for seizures elicited by eclampsia, has also been anecdotally reported in RSE (Fisher et al., 1988; Robakis & Hirsch, 2006), but with scarce results even at serum levels of 14 mm. The rationale may be found in the physiologic blockage of NMDA channels by magnesium ions (Hope & Blumenfeld, 2005). Ketogenic diet has been prescribed for decades, mostly in children, to control refractory seizures. Its use in RSE as ''ultima ratio'' has been occasionally described: three of six children (Francois et al., 2003) and one adult (Bodenant et al., 2008) were responders. This approach displays its effect subacutely over several days to a few weeks. Because ''malignant RSE'' seems at times to be the consequence of immunologic processes (Holtkamp et al., 2005), a course of immunomodulatory treatment is often advocated in this setting, even in the absence of definite autoimmune etiologies (Robakis & Hirsch, 2006); steroids, adrenocorticotropic hormone (ACTH), plasma exchanges, or intravenous immunoglobulins may be used alone or in sequential combination. Nonpharmacologic Approaches These strategies are described somewhat less frequently than pharmacologic approaches. Acute implantation of vagus nerve stimulation (VNS) has been reported in RSE (Winston et al., 2001; Patwardhan et al., 2005; De Herdt et al., 2009). Stimulation was usually initiated in the operation room, and intensity progressively adapted over a few days up to 1.25 mA (with various regimens regarding the other parameters), allowing a subacute seizure control; one transitory episode of bradycardia/asystole has been described (De Herdt et al., 2009). Of course, pending identification of a definite seizure focus, resective surgery may also be considered in selected cases (Lhatoo & Alexopoulos, 2007). Low-frequency (0.5 Hz) transcranial magnetic stimulation (TMS) at 90% of the resting motor threshold has been reported to be successful for about 2 months in a patient with epilepsia partialis continua, but with a weaning effect afterward, implying the need for a repetitive use (Misawa et al., 2005). More recently, TMS was applied in a combination of a short ''priming'' high frequency (up to 100 Hz) and longer runs of low-frequency stimulations (1 Hz) at 90-100% of the motor threshold in seven other patients with simple-partial status, with mixed results (Rotenberg et al., 2009). Paradoxically at first glance, electroconvulsive treatment may be found in cases of extremely resistant RSE. A recent case report illustrates its use in an adult patient with convulsive status, with three sessions (three convulsions each) carried out over 3 days, resulting in a moderate recovery; the mechanism is believed to be related to modification of the synaptic release of neurotransmitters (Cline & Roos, 2007). Therapeutic hypothermia, which is increasingly used in postanoxic patients (Oddo et al., 2008), has been the object of a recent case series in RSE (Corry et al., 2008). Reduction of energy demand, excitatory neurotransmission, and neuroprotective effects may account for the putative mechanism of action. Four adult patients in RSE were cooled to 31_-34_C with an endovascular system for up to 90 h, and then passively rewarmed over 2-50 h. Seizures were controlled in two patients, one of whom died; also one of the other two patients in whom seizures continued subsequently deceased. Possible side effects are related to acid-base and electrolyte disturbances, and coagulation dysfunction including thrombosis, infectious risks, cardiac arrhythmia, and paralytic ileus (Corry et al., 2008; Cereda et al., 2009). Finally, anecdotic evidence suggests that cerebrospinal fluid (CSF)-air exchange may induce some transitory benefit in RSE (Kohrmann et al., 2006); although this approach was already in use in the middle of the twentieth century, the mechanism is unknown. Acknowledgment A wide spectrum of pharmacologic (sedating and nonsedating) and nonpharmacologic (surgical, or involving electrical stimulation) regimens might be applied to attempt RSE control. Their use should be considered only after refractoriness to AED or anesthetics displaying a higher level of evidence. Although it seems unlikely that these uncommon and scarcely studied strategies will influence the RSE outcome in a decisive way, some may be interesting in particular settings. However, because the main prognostic determinant in status epilepticus appears to be related to the underlying etiology rather than to the treatment approach (Rossetti et al., 2005, 2008), the safety issue should always represent a paramount concern for the prescribing physician. Conclusion The author confirms that he has read the Journal's position on issues involved in ethical publication and affirms that this paper is consistent with those guidelines.

Foreign trade traps in the european periphery: Spain, 1870-1913

In this article we research into the difficulties that foreign trade imposed onSpanish process of integration into the international economy in the years priorto the First World War. We start out by examining some features of the foreigntrade structure of the country. By means of an econometric analysis of importand export series, it is possible to observe the presence of a trend towards tradedeficit, which was in force when Spain grew at a rate similar to that of itstrading partners. We also check that, in the absence of these compensatorymechanisms, adjustment in foreign payments could be reached by means ofprotective measures and the exchange rate.

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.

Out-of-sample forecast tests robust to the choice of window size

This paper proposes new methodologies for evaluating out-of-sample forecastingperformance that are robust to the choice of the estimation window size. The methodologies involve evaluating the predictive ability of forecasting models over a wide rangeof window sizes. We show that the tests proposed in the literature may lack the powerto detect predictive ability and might be subject to data snooping across differentwindow sizes if used repeatedly. An empirical application shows the usefulness of themethodologies for evaluating exchange rate models' forecasting ability.

Aerodynamical instability of web

Diplomityön tavoitteena oli tutkia miten ilman turbulenttisuus vaikuttaa tasaisesti liikkuvan rainan tilaan. Yhtenä sovelluskohteena teollisuudessa voidaan mainita esimerkiksi leiju-kuivain. Tiedetään, että konenopeuksien kasvu ja siitä johtuva ilmavirran nopeuden kasvu aiheuttaa voimavaikutuksia rainaan ja voi aiheuttaa lepatusta. Lepatus johtaa dynaamiseen epästabiilisuuteen, joka voidaan havaita, kun lineaarinen systeemi tulee epävakaaksi ja joh-taa epälineaariseen, rajoitettuun värähtelyyn. Lepatus huonontaa tuotteiden laatua ja voi johtaa ratakatkoihin. Työssä on esitetty tietoa ilman ja rainan vuorovaikutuksesta, jota hyödyntämällä voidaan kehittää yksinkertaistettu malli, jonka avulla liikkuvaa rainaa voidaan simuloida kuivaimes-sa. Kaasufaasin virtausyhtälöt on ratkaistu eri turbulenttimalleja käyttäen. Myös viskoelas-tisen rainan muodonmuutosta on tarkasteltu. Koska rainalle ei ole kirjallisuudesta saatavilla tarkkoja fysikaalisia ja mekaanisia arvoja, näitä ominaisuuksia testattiin eri arvoilla, jotta rainan käyttäytymistä jännityksen alaisena voidaan tarkastella. Näiden ominaisuuksien tun-teminen on ensiarvoisen tärkeää määritettäessä rainan aeroviskoelastista käyttäytymistä. Virtaussimulointi on kallista ja aikaa vievää. Tämä tarkoittaa uusien tutkimusmenetelmien omaksumista. Tässä työssä vaihtoehtoisena lähestymistapana on esitetty yksinkertaistettu malli, joka sisältää ilman ja rainan vuorovaikutusta kuvaavat ominaisuudet. Mallin avulla saadaan tietoa epälineaarisuuden ja turbulenssin vaikutuksesta sekä monimutkaisesta yh-teydestä stabiilisuuden ja ulkoisesti aikaansaadun värähtelyn sekä itse aiheutetun värähtelyn välillä. Työn lopussa on esitetty havainnollinen esimerkki, jolla voidaan kuvata olosuhteita, jossa rainan tasainen liike muuttuu epävakaaksi. Kun turbulenttisuudesta johtuva painevaih-telu ylittää tietyn rajan, rainan värähtely kasvaa muuttuen satunnaisesta järjestäytyneeksi. Saaduttulokset osoittavat, että turbulenttisuudella on suuri vaikutus eikä sitä voi jättää huomioimatta. Myös rainan viskoelastiset ominaisuudet tulee huomioida, jotta rainan käyt-täytymistä voidaan kuvata tarkasti.