Estimating the Price of ROCs

The UK government introduced the Renewable Obligation (RO), a system of tradable quotas, to encourage the installation of renewable electricity capacity. Each unit of generation from renewables created a renewable obligation certificate (ROC). Electricity generators must either; earn ROCs through their own production, purchase ROCs in the market or pay the buy-out price to comply with the quota set by the RO. A unique aspect of this regulation is that all entities holding ROCs receive a share of the buy-out fund (the sum of all compliance purchases using the buy-out price). This set-up ensures that the difference between the market price for ROCs and the buy-out price should equal the expected share of the buy-out fund, as regulated entities arbitrage these two compliance options. The expected share of the buy-out fund depends on whether enough renewable generation is available to meet the quota. This analysis tests whether variables associated with renewable generation or electricity demand are correlated with, and thus can help predict, the price of ROCs.

Measuring the Euro-Dollar Permanent Equilibrium Exchange Rate using the Unobserved Components Model

This paper employs an unobserved component model that incorporates a set of economic fundamentals to obtain the Euro-Dollar permanent equilibrium exchange rates (PEER) for the period 1975Q1 to 2008Q4. The results show that for most of the sample period, the Euro-Dollar exchange rate closely followed the values implied by the PEER. The only significant deviations from the PEER occurred in the years immediately before and after the introduction of the single European currency. The forecasting exercise shows that incorporating economic fundamentals provides a better long-run exchange rate forecasting performance than a random walk process.

The role of education in equity portfolios during the recent financial crisis

Using a panel of 38 economies, over the period 2001 to 2010, we analyse the link between diversification in equity portfolios and different facets of education. We find that traditionally used measures of education play an important role in reducing equity home bias. After separating countries according to their level of financial development, we find that less developed economies tend to benefit more from an improvement in the level of education compared to their more developed counterparts. We also find that the beneficial effect of education is more pronounced during the most recent financial crisis, especially for economies with less developed financial markets.

Picking the Right Budget Constraint for Scotland

This position paper considers the devolution of further fiscal powers to the Scottish Parliament in the context of the objectives and remit of the Smith Commission. The argument builds on our discussion of fiscal decentralization made in our previous published work on this topic. We ask what sort of budget constraint the Scottish Parliament should operate with. A soft budget constraint (SBC) allows the Scottish Parliament to spend without having to consider all of the tax and, therefore, political consequences, of that spending, which is effectively the position at the moment. The incentives to promote economic growth through fiscal policy – on both the tax and spending sides are weak to non-existent. This is what the Scotland Act, 1998, and the continuing use of the Barnett block grant, gave Scotland. Now other budget constraints are being discussed – those of the Calman Commission (2009) and the Scotland Act (2012), as well as the ones offered in 2014 by the various political parties – Scottish Conservatives, Scottish Greens, Scottish Labour, the Scottish Liberal Democrats and the Scottish Government. There is also the budget constraint designed by the Holtham Commission (2010) for Wales that could just as well be used in Scotland. We examine to what extent these offer the hard budget constraint (HBC) that would bring tax policy firmly into the realm of Scottish politics, asking the Scottish electorate and Parliament to consider the costs to them of increasing spending in terms of higher taxes; or the benefits to them of using public spending to grow the tax base and own-sourced taxes? The hardest budget constraint of all is offered by independence but, as is now known, a clear majority of those who voted in the referendum did not vote for this form of budget constraint. Rather they voted for a significant further devolution of fiscal powers while remaining within a political and monetary union with the rest of the UK, with the risk pooling and revenue sharing that this implies. It is not surprising therefore that none of the budget constraints on offer, apart from the SNP’s, come close to the HBC of independence. However, the almost 25% fall in the price of oil since the referendum, a resource stream so central to the SNP’s economic policy making, underscores why there is a need for a trade off between a HBC and risk pooling and revenue sharing. Ranked according to the desirable characteristic of offering something approaching a HBC the least desirable are those of the Calman Commission, the Scotland Act, 2012, and Scottish Labour. In all of these the ‘elasticity’ of the block grant in the face of failure to grow the Scottish tax base is either not defined or is very elastic – meaning that the risk of failure is shuffled off to taxpayers outside of Scotland. The degree of HBC in the Scottish Conservative, Scottish Greens and Scottish Liberal Democrats proposals are much more desirable from an economic growth point of view, the latter even embracing the HBC proposed by the Holtham Commission that combines serious tax policy with welfare support in the long-run. We judge that the budget constraint in the SNP’s proposals is too hard as it does not allow for continuation of the ‘welfare union’ in the UK. We also consider that in the case of a generalized UK economic slow requiring a fiscal stimulus that the Scottish Parliament be allowed increased borrowing to be repaid in the next economic upturn.

Policy initiatives and firms’ access to external finance: Evidence from a panel of emerging Asian economies

This paper analyses the impact of policy initiatives co-ordinated by Asian national governments on firms' access to external finance, using a unique firm-level database of eight Asian countries- Hong Kong SAR, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand over the period of 1996-2012. Using a difference-indifferences approach and controlling for firm-level and macroeconomic factors, the results show a significant impact of policy on firms' access to external finance. After splitting firms into constrained and unconstrained, using several criteria, the results document that unconstrained firms benefited significantly in obtaining external finance, compared to their constrained counterparts. Finally, we show that the increase in access to external finance after the policy initiative helped firms to raise their investment spending, especially for unconstrained firms.

Education and the local equity bias around the world

Using a panel of 38 economies, over the period 2001 to 2010, we analyse the link between different facets of education and diversification in international portfolios. We find that university education, mathematical numeracy, in addition to financial skill, play an important role in reducing home bias. After separating countries according to their level of financial development, we find that less developed economies with more university graduates, or with higher level of mathematical numeracy, have lower level of local equity bias compared to more developed countries. We also find that the beneficial effect of education is more pronounced during the most recent financial crisis, especially for economies with less developed financial markets.

Lack of directed V alpha 14-J alpha 281 rearrangements in NK1+ T cells.

NK1.1+ T cells are an unusual subset of TCR alpha beta cells distinguished by their highly restricted V beta repertoire and predominant usage of an invariant V alpha 14-J alpha 281 chain. To assess whether a directed rearrangement mechanism could be responsible for this invariant alpha chain, we have analyzed V alpha 14 rearrangements by polymerase chain reaction and Southern blot in a panel of cloned T-T hybrids derived from thymic NK1.1+ T cells. As expected a high proportion (17/20) of the hybrids had rearranged V alpha 14 to J alpha 281. However, V alpha 14-J alpha 281 rearrangements always occurred on only one chromosome and were accompanied by other V alpha-J alpha rearrangements (not involving V alpha 14) on the homologous chromosome. These data argue that rigorous ligand selection rather than directed rearrangement is responsible for the high frequency of V alpha 14-J alpha 281 rearrangements in NK1.1+ T cells.

Selective lysis of activated cells in oncorna virus infection.

The authors devised a cytotoxic assay based on cytofluorometric analysis of target surface markers in order to compare lysis exerted in vitro by cytotoxic T lymphocytes (CTLs) on different cell subsets in the context of a single lymphoid target cell population. Using this assay, the authors evaluated when oncorna virus-infected lymphocytes become a suitable target for virus-specific T cell effectors. A lymphocyte population from Moloney-murine leukaemia virus (M-MuLV)-infected (carrier) mice, in which the proliferation of selective V beta T-cell receptor (TCR) families was induced in response to Mlsa encoded antigens, was utilized as a target. The authors observed that a virus-specific T cell clone exerted lytic activity preferentially against activated cell subsets. Moreover, virus-specific CTLs generated in mixed leucocyte tumour cell cultures (MLTC) were also able to impair the concomitant anti-Mlsa response of lymphocytes from M-MuLV carrier mice. It was found that the proliferative status of oncorna virus-infected target cells played an important role in limiting the in vitro efficacy of the immune response, and it is speculated that this phenomenon might represent an in vivo escape mechanism from immunosurveillance.

Alpha beta lineage-committed thymocytes can be rescued by the gamma delta T cell receptor (TCR) in the absence of TCR beta chain.

Commitment of the alpha beta and gamma delta T cell lineages within the thymus has been studied in T cell receptor (TCR)-transgenic and TCR mutant murine strains. TCR gamma delta-transgenic or TCR beta knockout mice, both of which are unable to generate TCR alpha beta-positive T cells, develop phenotypically alpha beta-like thymocytes in significant proportions. We provide evidence that in the absence of functional TCR beta protein, the gamma delta TCR can promote the development of alpha beta-like thymocytes, which, however, do not expand significantly and do not mature into gamma delta T cells. These results show that commitment to the alpha beta lineage can be determined independently of the isotype of the TCR, and suggest that alpha beta versus gamma delta T cell lineage commitment is principally regulated by mechanisms distinct from TCR-mediated selection. To accommodate our data and those reported previously on the effect of TCR gamma and delta gene rearrangements on alpha beta T cell development, we propose a model in which lineage commitment occurs independently of TCR gene rearrangement.

Absolute requirement for the pre-T cell receptor alpha chain during NK1.1+ TCRalphabeta cell development.

Most natural killer T (NKT) cells express a highly skewed alphabeta TCR repertoire, consisting of an invariant V alpha14-J alpha281 chain paired preferentially with a polyclonal Vbeta8.2 chain. This repertoire is positively selected by the monomorphic CD1d molecule expressed on cells of hematopoietic origin. The origin of NKT cells and their lineage relationship to conventional T cells is controversial. We show here that the development of NKT cells is absolutely dependent on expression of the pre-TCRalpha chain, in marked contrast to conventional T cells which arise in significant numbers even in the absence of a functional pre-TCR. Distinct developmental requirements for pre-TCR expression in the NKT and T cell lineages may reflect differences in the ability of the TCRalphabeta to substitute functionally for the pre-TCR in immature precursor cells.

Tissue-specific segregation of CD1d-dependent and CD1d-independent NK T cells.

NKT cells, defined as T cells expressing the NK cell marker NK1.1, are involved in tumor rejection and regulation of autoimmunity via the production of cytokines. We show in this study that two types of NKT cells can be defined on the basis of their reactivity to the monomorphic MHC class I-like molecule CD1d. One type of NKT cell is positively selected by CD1d and expresses a biased TCR repertoire together with a phenotype found on activated T cells. A second type of NKT cell, in contrast, develops in the absence of CD1d, and expresses a diverse TCR repertoire and a phenotype found on naive T cells and NK cells. Importantly, the two types of NKT cells segregate in distinct tissues. Whereas thymus and liver contain primarily CD1d-dependent NKT cells, spleen and bone marrow are enriched in CD1d-independent NKT cells. Collectively, our data suggest that recognition of tissue-specific ligands by the TCR controls localization and activation of NKT cells.

Cutting edge: NKT cell development is selectively impaired in Fyn- deficient mice.

Most NK1.1+ T (NKT) cells express a biased TCRalphabeta repertoire that is positively selected by the monomorphic MHC class I-like molecule CD1d. The development of CD1d-dependent NKT cells is thymus dependent but, in contrast to conventional T cells, requires positive selection by cells of hemopoietic origin. Here, we show that the Src protein tyrosine kinase Fyn is required for development of CD1d-dependent NKT cells but not for the development of conventional T cells. In contrast, another Src kinase, Lck, is required for the development of both NKT and T cells. Impaired NKT cell development in Fyn-deficient mice cannot be rescued by transgenic expression of CD8, which is believed to increase the avidity of CD1d recognition by NKT cells. Taken together, our data reveal a selective and nonredundant role for Fyn in NKT cell development.

Cutting edge: apoptosis of superantigen-activated T cells occurs preferentially after a discrete number of cell divisions in vivo.

Staphylococcal enterotoxins are bacterial products that display superantigen activity in vitro as well as in vivo. For instance, staphylococcal enterotoxin B (SEB) polyclonally activates T cells that bear the Vbeta8 gene segment of the TCR. SEB-activated T cells undergo a burst of proliferation that is followed by apoptosis. Using an in vivo adaptation of a fluorescent cell division monitoring technique, we show here that SEB-activated T cells divide asynchronously, and that apoptosis of superantigen-activated T cells is preferentially restricted to cells which have undergone a discrete number of cell divisions. Collectively, our data suggest that superantigen-activated T cells are programmed to undergo a fixed number of cell divisions before undergoing apoptosis. A delayed death program may provide a mechanistic compromise between effector functions and homeostasis of activated T cells.

Unexpectedly late expression of intracellular CD3epsilon and TCR gammadelta proteins during adult thymus development.

During adult thymus development immature CD4(-)CD8(-) [double-negative (DN)] precursor cells pass through four phenotypically distinct stages defined by expression of CD44 and CD25: CD44(hi)CD25(-) (DN1), CD44(hi)CD25(+) (DN2), CD44(lo)CD25(+) (DN3) and CD44(lo)CD25(-) (DN4). Although it is well established that the TCR beta, gamma and delta genes are rearranged and expressed in association with the CD3 components in DN thymocytes, the precise timing of expression of the TCR and CD3 proteins has not been determined. In this report we have utilized a sensitive intracellular (ic) staining technique to analyze the expression of ic CD3epsilon, TCR beta and TCR gammadelta proteins in immature DN subsets. As expected from previous studies of TCR beta rearrangement and mRNA expression, icTCR beta(+) cells were first detected in the DN3 subset and their proportion increased thereafter. Surprisingly, however, both icCD3epsilon(+) and icTCR gammadelta(+) cells were detected at later stages of development than was predicted by molecular studies. In particular icCD3epsilon protein expression coincided with the transition from the DN2 to DN3 stage of development, whereas icTCR gammadelta protein expression was only detected in a minor subset of DN4 cells. The implications of these findings for alphabeta lineage divergence will be discussed.