Climate change and coupling of macronutrient cycles along the atmospheric, terrestrial, freshwater and estuarine continuum

This paper provides an introduction to the Special Issue on “Climate Change and Coupling of Macronutrient Cycles along the Atmospheric, Terrestrial, Freshwater and Estuarine Continuum”, dedicated to Colin Neal on his retirement. It is not intended to be a review of this vast subject, but an attempt to synthesize some of the major findings from the 22 contributions to the Special Issue in the context of what is already known. The major research challenges involved in understanding coupled macronutrient cycles in these environmental media are highlighted, and the difficulties of making credible predictions of the effects of climate change are discussed. Of particular concern is the possibility of interactions which will enhance greenhouse gas concentrations and provide positive feedback to global warming.

The information content of REIT credit rating actions and transparency

We examine the short-run and long-run price reaction of equity REIT shares following credit rating actions, testing the transparency of the REIT structure. Generally, the economic effect on the stock price is subdued for both upgrades and downgrades compared to prior literature examining the broader U.S. equity market. An examination of trading volume revealed a significant increase in trading in reaction to downgrade credit rating changes, with a more subdued response to upgrades. The findings support the notion that REITs are more publicly forthcoming about the expectation of positive news in comparison to negative news.

Nuclear fuel cycles: interfaces with the environment

The waste materials generated in the nuclear fuel cycle are very varied,ranging from the tailings arising from mining and processing uranium ore, depleted uranium in a range of chemical forms, to a range of process wastes of differing activities and properties. Indeed, the wastes generated are intimately linked to the options selected in operating the nuclear fuel cycle, most obviously to the management of spent fuel. An open fuel cycle implies the disposal of highly radioactive spent fuel, whereas a closed fuel cycle generates a complex array of waste streams. On the other hand, a closed fuel cycle offers options for waste management, for example reduction in highly active waste volume, decreased radiotoxicity, and removal of fissile material. Many technological options have been proposed or explored, and each brings its own particular mix of wastes and environmental challenges.

Endogenous business cycles with frictional labour markets

We present a neoclassical model of capital accumulation with frictional labour markets. Under standard parameter values the equilibrium of the model is indeterminate and consequently displays expectations-driven business cycles – so-called endogenous business cycles. We study the properties of such cycles, and find that the model predicts the high autocorrelation in output growth and the hump-shaped impulse response of output found in US data – important features that existing endogenous real business cycle models fail to explain. The indeterminacy of the equilibrium stems from job search externalities and does not rely on increasing returns to scale as in most models.

The credit relationship between Henry III and merchants of Douai and Ypres, 1247-70

This article looks at an important but neglected aspect of medieval sovereign debt, namely ‘accounts payable’ owed by the Crown to merchants and employees. It focuses on the unusually well-documented relationship between Henry III, King of England between 1216 and 1272, and Flemish merchants from the towns of Douai and Ypres, who provided cloth on credit to the royal wardrobe. From the surviving royal documents, we reconstruct the credit advanced to the royal wardrobe by the merchants of Ypres and Douai for each year between 1247 and 1270, together with the king's repayment history. The interactions between the king and the merchants are then analysed. The insights from this analysis are applied to the historical data to explain the trading decisions made by the merchants during this period, as well as why the strategies of the Yprois sometimes differed from those of the Douaissiens.

Ovarian expression of insulin-like peptide 3 (INSL3) and its receptor (RXFP2) during development of bovine antral follicles and corpora lutea and measurement of circulating INSL3 levels during synchronized estrous cycles

Insulin-like peptide 3 (INSL3), a major product of testicular Leydig cells, is also expressed by the ovary but its functional role remains poorly understood. Here, we quantified expression of INSL3 and its receptor RXFP2 in theca interna (TIC) and granulosa (GC) compartments of developing bovine antral follicles and in corpora lutea (CL). INSL3 and RXFP2 mRNA levels were much higher in TIC than GC and increased progressively during follicle maturation with INSL3 peaking in large (11-18mm) estrogen-active follicles and RXFP2 peaking in 9-10mm follicles before declining in larger (11-18mm) follicles. Expression of both INSL3 and RXFP2 in CL was much lower than in TIC. In situ hybridization and immunohistochemistry confirmed abundant expression of INSL3 mRNA and protein in TIC. These observations indicate follicular TIC rather than CL as the primary site of both INSL3 production and action, implying a predominantly auto-/paracrine role in TIC. To corroborate the above findings, we showed that in vitro exposure of TIC to a luteinizing concentration of LH greatly attenuated expression of both INSL3 and its receptor while increasing progesterone secretion and expression of STAR and CYP11A1. Moreover, in vivo, a significant cyclic variation in plasma INSL3 was observed during synchronized estrous cycles. INSL3 and estradiol-17β followed a similar pattern, both increasing after luteolysis, before falling sharply after the LH surge. Thus, theca-derived INSL3, likely from the dominant pre-ovulatory follicle, is detectable in peripheral blood of cattle and expression is down-regulated during luteinisation induced by the pre-ovulatory LH surge. Collectively, these findings underscore the likely role of INSL3 as an important intrafollicular modulator of TIC function/steroidogenesis, whilst raising doubts about its potential contribution to CL function.

Credit risk in covered bonds

Covered bonds are a promising alternative for prime mortgage securitization. In this paper, we explore risk premia in the covered bond market and particularly investigate whether and how credit risk is priced. In extant literature, yield spreads between high-quality covered bonds and government bonds are often interpreted as pure liquidity premia. In contrast, we show that although liquidity is important, it is not the exclusive risk factor. Using a hand-collected data set of cover pool information, we find that the credit quality of the cover assets is an important determinant of covered bond yield spreads. This effect is particularly strong in times of financial turmoil and has a significant influence on the issuer's refinancing cost.

Synchronisation and commonalities in metropolitan housing market cycles

This paper examines the degree of commonalities present in the cyclical behavior of the eight largest metropolitan housing markets in Australia. Using two techniques originally in the business cycle literature we consider the degree of synchronization present and secondly decompose the series’ into their permanent and cyclical components. Both empirical approaches reveal similar results. Sydney and Melbourne are closely related to each other and are relatively segmented from the smaller metropolitan areas. In contrast, there is substantial evidence of commonalities in the cyclical behavior of the remaining cities, especially those on the Eastern and Southern coasts of Australia.

A bank lending channel or a credit supply shock?

Shifts in credit supply could have a bearing on house prices e.g. through financial innovations and changes in regulation independently of the existence of a bank lending channel of monetary policy. This paper assesses the responses of US house prices to an exogenous credit supply shock and compares them with the effects from variations in credit supply associated with a bank lending channel. The contribution of the study is twofold. First, innovations in credit supply are identified using a mortgage mix variable, thereby accounting for the market-based financial intermediaries. As a robustness check a survey variable of bank lending standards for mortgage loans is also used. Second, the policy-induced credit supply effect on house prices is disentangled and compared with the effect from an exogenous credit supply shock. It is shown that in the first 3 years credit supply shocks affect house prices exogenously rather than through the bank lending channel. Monetary policy has still a large impact on house prices, even when the bank lending channel is ‘turned off’.

Credit and liquidity components of corporate CDS spreads

This paper investigates the role of credit and liquidity factors in explaining corporate CDS price changes during normal and crisis periods. We find that liquidity risk is more important than firm-specific credit risk regardless of market conditions. Moreover, in the period prior to the recent “Great Recession” credit risk plays no role in explaining CDS price changes. The dominance of liquidity effects casts serious doubts on the relevance of CDS price changes as an indicator of default risk dynamics. Our results show how multiple liquidity factors including firm specific and aggregate liquidity proxies as well as an asymmetric information measure are critical determinants of CDS price variations. In particular, the impact of informed traders on the CDS price increases when markets are characterised by higher uncertainty, which supports concerns of insider trading during the crisis.

Seasonal cycles and variability of O3 and H2O in the UT/LMS during SPURT

Airborne high resolution in situ measurements of a large set of trace gases including ozone (O3) and total water (H2O) in the upper troposphere and the lowermost stratosphere (UT/LMS) have been performed above Europe within the SPURT project. SPURT provides an extensive data coverage of the UT/LMS in each season within the time period between November 2001 and July 2003. In the LMS a distinct spring maximum and autumn minimum is observed in O3, whereas its annual cycle in the UT is shifted by 2–3 months later towards the end of the year. The more variable H2O measurements reveal a maximum during summer and a minimum during autumn/winter with no phase shift between the two atmospheric compartments. For a comprehensive insight into trace gas composition and variability in the UT/LMS several statistical methods are applied using chemical, thermal and dynamical vertical coordinates. In particular, 2-dimensional probability distribution functions serve as a tool to transform localised aircraft data to a more comprehensive view of the probed atmospheric region. It appears that both trace gases, O3 and H2O, reveal the most compact arrangement and are best correlated in the view of potential vorticity (PV) and distance to the local tropopause, indicating an advanced mixing state on these surfaces. Thus, strong gradients of PV seem to act as a transport barrier both in the vertical and the horizontal direction. The alignment of trace gas isopleths reflects the existence of a year-round extra-tropical tropopause transition layer. The SPURT measurements reveal that this layer is mainly affected by stratospheric air during winter/spring and by tropospheric air during autumn/summer. Normalised mixing entropy values for O3 and H2O in the LMS appear to be maximal during spring and summer, respectively, indicating highest variability of these trace gases during the respective seasons.

Price discovery of credit spreads in tranquil and crisis periods

In this paper we investigate the price discovery process in single-name credit spreads obtained from bond, credit default swap (CDS), equity and equity option prices. We analyse short term price discovery by modelling daily changes in credit spreads in the four markets with a vector autoregressive model (VAR). We also look at price discovery in the long run with a vector error correction model (VECM). We find that in the short term the option market clearly leads the other markets in the sub-prime crisis (2007-2009). During the less severe sovereign debt crisis (2009-2012) and the pre-crisis period, options are still important but CDSs become more prominent. In the long run, deviations from the equilibrium relationship with the option market still lead to adjustments in the credit spreads observed or implied from other markets. However, options no longer dominate price discovery in any of the periods considered. Our findings have implications for traders, credit risk managers and financial regulators.

A universal agro-hydrological model for water and nitrogen cycles in the soil-crop system SMCR_N: critical update and further validation

Agro-hydrological models have widely been used for optimizing resources use and minimizing environmental consequences in agriculture. SMCRN is a recently developed sophisticated model which simulates crop response to nitrogen fertilizer for a wide range of crops, and the associated leaching of nitrate from arable soils. In this paper, we describe the improvements of this model by replacing the existing approximate hydrological cascade algorithm with a new simple and explicit algorithm for the basic soil water flow equation, which not only enhanced the model performance in hydrological simulation, but also was essential to extend the model application to the situations where the capillary flow is important. As a result, the updated SMCRN model could be used for more accurate study of water dynamics in the soil-crop system. The success of the model update was demonstrated by the simulated results that the updated model consistently out-performed the original model in drainage simulations and in predicting time course soil water content in different layers in the soil-wheat system. Tests of the updated SMCRN model against data from 4 field crop experiments showed that crop nitrogen offtakes and soil mineral nitrogen in the top 90 cm were in a good agreement with the measured values, indicating that the model could make more reliable predictions of nitrogen fate in the crop-soil system, and thus provides a useful platform to assess the impacts of nitrogen fertilizer on crop yield and nitrogen leaching from different production systems. (C) 2010 Elsevier B.V. All rights reserved.

Coupled subdaily and multiweek cycles during the lava dome erupt of Soufriere Hills Volcano, Montserrat

Observations of volcanoes extruding andesitic lava to produce lava domes often reveal cyclic behaviour. At Soufriere Hills Volcano, Montserrat, cycles with sub-daily and multi-week periods have been recognised on many occasions. These two types of cycle have been modelled separately as stick-slip magma flow at the junction between a dyke and an overlying cylindrical conduit (Costa et al. 2012), and as the filling and discharge of magma through the elastic-walled dyke (Costa et al., 2007a) respectively. Here, we couple these two models to simulate the behaviour over a period of well-observed multi-week cycles, with accompanying sub-daily cycles, from 13 May to 21 September 1997. The coupled model captures well the asymmetrical first-order behaviour: the first 40% of the multi-week cycle consists of high rates of lava extrusion during short period/high amplitude sub-daily cycles as the dyke reservoir discharges itself. The remainder of the cycle involves increasing pressurization as more magma is stored, and extrusion rate falls, followed by a gradual increase in the period of the sub-daily cycles.

Concordance in global office market cycles

Concordance in global office market cycles, Regional Studies. A large proportion of international real estate investment is concentrated in the office markets of the world's largest cities. However, many of these global cities are also key financial services centres, highlighting the possibility of reduced economic diversification from an investor's perspective. This paper assesses the degree of synchronization in cycles across twenty of the world's largest office markets, finding evidence of significant concordance across a large number of markets. The results highlight the problems associated with commonalities in the underlying economic bases of the markets. The concentration of investment also raises the possibility of common flow of funds effects that may further reduce diversification opportunities.