The impact of the European sovereign debt crisis on the recovering from the financial crisis: Equity returns of the banking sector

This paper analyses, through a dynamic panel data model, the impact of the Financial and the European Debt crisis on the equity returns of the banking system. The model is also extended to specifically investigate the impact on countries who received rescue packages. The sample under analysis considers eleven countries from January 2006 to June 2013. The main conclusion is that there was in fact a structural change in banks’ excess returns due to the outbreak of the European Debt Crisis, when stock markets were still recovering from the Financial Crisis of 2008.

Mechanical ventilation for the treatment of severe excessive dynamic airway collapse

[Excerpt] We read with interest the case report by Ismael et al1 describing a patient with Sjo¨gren’s syndrome and cystic lung disease who could not be weaned from a ventilator due to severe central excessive dynamic airway collapse (EDAC) of the lower part of the trachea and proximal bronchi. EDAC corresponds to the expiratory bulging of the tracheobronchial wall without known airway structural abnormalities, leading to a decrease of at least 50% in internal diameter.2 It is a rare and underdiagnosed entity, commonly confused with other respiratory diseases such as asthma and COPD. Although noninvasive procedures such as cervicothoracic computed tomography scan on inspiration and expiration may suggest the disorder, the accepted standard method for diagnosis is bronchoscopy.3-7 (...).

Financial stress and sovereign debt composition

"Published online: 19 Oct 2015"

A Reorganização Administrativa do Território das Freguesias 2013 enquanto determinante de voto: estudo caso do Concelho de Braga e Guimarães

Dissertação de mestrado em Administração Pública

Prevalence of excessive daytime sleepiness in Brazilian community-dwelling older adults with very low levels of schooling, and its association with sociodemographic characteristics and lifestyle: the Bambuí Health and Ageing Study (BHAS)

OBJECTIVE: Population-based studies on excessive daytime sleepiness (EDS) in older adults living in less developed countries are scarce. The purpose of this paper was to estimate the prevalence of EDS and its association with sociodemographic characteristics and lifestyle factors in Brazilian community-dwelling older adults. METHODS: The study was carried out in Bambuí, a city in the state of Minas Gerais, Brazil. EDS was defined as the presence of sleepiness in the last month occurring three or more times per week, with any interference in usual activities. The exploratory variables were: gender, age, skin color, marital status, schooling level, current employment status, religion, recent migration, smoking, binge drinking and physical activities during leisure time. RESULTS: Of 1,742 residents aged > 60 years, 1,514 (86.9%) participated. The prevalence of EDS was 13%. After adjustment for confounders, female gender and low schooling level remained positively and independently associated with EDS. CONCLUSIONS: The prevalence of EDS in the study population was within the range observed in studies carried out in developed countries. The most impressive finding was the association of EDS with schooling, indicating that even in a population with low levels of schooling, this was an important factor to explain the distribution of EDS.

Antidepressant induced excessive yawning and indifference

Introduction Antidepressant induced excessive yawning has been described as a possible side effect of pharmacotherapy. A syndrome of indifference has also been described as another possible side effect. The frequency of those phenomena and their physiopathology are unknown. They are both considered benign and reversible after antidepressant discontinuation but severe cases with complications as temporomandibular lesions, have been described. Methods We report two unprecedented cases in which excessive yawning and indifference occurred simultaneously as side effects of antidepressant therapy, discussing possible physiopathological mechanisms for this co-occurrence. Case 1: A male patient presented excessive yawning (approximately 80/day) and apathy after venlafaxine XR treatment. Symptoms reduced after a switch to escitalopram, with a reduction to 50 yawns/day. Case 2: A female patient presented excessive yawning (approximately 25/day) and inability to react to environmental stressors with desvenlafaxine. Conclusion Induction of indifference and excessive yawning may be modulated by serotonergic and noradrenergic mechanisms. One proposal to unify these side effects would be enhancement of serotonin in midbrain, especially paraventricular and raphe nucleus.

Valuation of defaultable bonds and debt restructuring

In this paper we develop a contingent valuation model for zero-coupon bonds with default. In order to emphasize the role of maturity time and place of the lender’s claim in the hierarchy of debt of a firm, we consider a firm that issues two bonds with different maturities and different seniorage. The model allows us to analyze the implications of both debt renegotiation and capital structure of a firm on the prices of bonds. We obtain that renegotiation brings about a significant change in the bond prices and that the effect is dispersed through different channels: increasing the value of the firm, reallocating payments, and avoiding costly liquidation. Moreover, the presence of two creditors leads to qualitatively different implications for pricing, while emphasizing the importance of bond covenants and renegotiation of the entire debt.

Can competition in the credit market be excessive?

We study how market power affects investment and welfare when banks choose between restricting loan sizes and monitoring, in order to alleviate an underlying moral hazard problem. The impact of market power on aggregate welfare is the result of two countervailing effects. An increase in banks' market power results in: (i) higher lending rates, which worsens the borrower's incentive problem and reduces investment by unmonitored firms, (ii) higher monitoring effort, which reduces the proportion of credit-constrained firms. Whenever the second effect dominates, it is optimal to provide banks with some degree of market power.

Debt and deficit fluctuations and the structure of bond markets

We analyse the implications of optimal taxation for the stochastic behaviour of debt. We show that when a government pursues an optimal fiscal policy under complete markets, the value of debt has the same or less persistence than other variables in the economy and it declines in response to shocks that cause the deficit to increase. By contrast, under incomplete markets debt shows more persistence than other variables and it increases in response to shocks that cause a higher deficit. Data for US government debt reveals diametrically opposite results from those of complete markets and is much more supportive of bond market incompleteness.

Fiscal insurance and debt management in OECD economies

Assuming the role of debt management is to provide hedging against fiscal shocks we consider three questions: i) what indicators can be used to assess the performance of debt management? ii) how well have historical debt management policies performed? and iii) how is that performance affected by variations in debt issuance? We consider these questions using OECD data on the market value of government debt between 1970 and 2000. Motivated by both the optimal taxation literature and broad considerations of debt stability we propose a range of performance indicators for debt management. We evaluate these using Monte Carlo analysis and find that those based on the relative persistence of debt perform best. Calculating these measures for OECD data provides only limited evidence that debt management has helped insulate policy against unexpected fiscal shocks. We also find that the degree of fiscal insurance achieved is not well connected to cross country variations in debt issuance patterns. Given the limited volatility observed in the yield curve the relatively small dispersion of debt management practices across countries makes little difference to the realised degree of fiscal insurance.

In Search of a theory of debt management

A growing literature integrates theories of debt management into models of optimal fiscal policy. One promising theory argues that the composition of government debt should be chosen so that fluctuations in the market value of debt offset changes in expected future deficits. This complete market approach to debt management is valid even when the government only issues non-contingent bonds. A number of authors conclude from this approach that governments should issue long term debt and invest in short term assets. We argue that the conclusions of this approach are too fragile to serve as a basis for policy recommendations. This is because bonds at different maturities have highly correlated returns, causing the determination of the optimal portfolio to be ill-conditioned. To make this point concrete we examine the implications of this approach to debt management in various models, both analytically and using numerical methods calibrated to the US economy. We find the complete market approach recommends asset positions which are huge multiples of GDP. Introducing persistent shocks or capital accumulation only worsens this problem. Increasing the volatility of interest rates through habits partly reduces the size of these simulations we find no presumption that governments should issue long term debt ? policy recommendations can be easily reversed through small perturbations in the specification of shocks or small variations in the maturity of bonds issued. We further extend the literature by removing the assumption that governments every period costlessly repurchase all outstanding debt. This exacerbates the size of the required positions, worsens their volatility and in some cases produces instability in debt holdings. We conclude that it is very difficult to insulate fiscal policy from shocks by using the complete markets approach to debt management. Given the limited variability of the yield curve using maturities is a poor way to substitute for state contingent debt. The result is the positions recommended by this approach conflict with a number of features that we believe are important in making bond markets incomplete e.g allowing for transaction costs, liquidity effects, etc.. Until these features are all fully incorporated we remain in search of a theory of debt management capable of providing robust policy insights.

Discretionary Policy in a Monetary Union with Sovereign Debt

This paper examines the interactions between multiple national fiscal policy- makers and a single monetary policy maker in response to shocks to government debt in some or all of the countries of a monetary union. We assume that national governments respond to excess debt in an optimal manner, but that they do not have access to a commitment technology. This implies that national fi scal policy gradually reduces debt: the lack of a commitment technology precludes a random walk in steady state debt, but the need to maintain national competitiveness avoids excessively rapid debt reduction. If the central bank can commit, it adjusts its policies only slightly in response to higher debt, allowing national fiscal policy to undertake most of the adjustment. However if it cannot commit, then optimal monetary policy involves using interest rates to rapidly reduce debt, with signifi cant welfare costs. We show that in these circumstances the central bank would do better to ignore national fiscal policies in formulating its policy.

The EMU sovereign-debt crisis: Fundamentals, expectations and contagion

We offer a detailed empirical investigation of the European sovereign debt crisis based on the theoretical model by Arghyrou and Tsoukalas (2010). We find evidence of a marked shift in market pricing behaviour from a ‘convergence-trade’ model before August 2007 to one driven by macro-fundamentals and international risk thereafter. The majority of EMU countries have experienced contagion from Greece. There is no evidence of significant speculation effects originating from CDS markets. Finally, the escalation of the Greek debt crisis since November 2009 is confirmed as the result of an unfavourable shift in countryspecific market expectations. Our findings highlight the necessity of structural, competitiveness-inducing reforms in periphery EMU countries and institutional reforms at the EMU level enhancing intra-EMU economic monitoring and policy co-ordination.

Delay and Haircuts in Sovereign Debt: Recovery and Sustainability

One of the striking aspects of recent sovereign debt restructurings is, conditional on default, delay length is positively correlated with the size of haircut. In this paper, we develop an incomplete information model of debt restructuring where the prospect of uncertain economic recovery and the signalling about sustainability concerns together generate multi-period delay. The results from our analysis show that there is a correlation between delay length and size of haircut. Such results are supported by evidence. We show that Pareto ranking of equilibria, conditional on default, can be altered once we take into account the ex ante incentive of sovereign debtor. We use our results to evaluate proposals advocated to ensure orderly resolution of sovereign debt crises.