The role of interbank markets in monetary policy: A model with rationing

This paper analyses the impact of asymmetric information in the interbankmarket and establishes its crucial role in the microfoundations of the monetarypolicy transmission mechanism. We show that interbank market imperfectionsinduce an equilibrium with rationing in the credit market. This has two majorimplications: first, it reconciles the irresponsiveness of business investment to theuser cost of capital with the large impact of monetary policy (magnitude effect)and, second, it shows that banks liquidity positions condition their reaction tomonetary policy (Kashyap and Stein liquidity effect).

Microfabrics in carbonate mylonites along a large-scale shear zone (Helvetic Alps)

Carbonate mylonites with varying proportions of second-phase minerals were collected at positions of increasing metamorphic grade along the basal thrust of the Morcles nappe (Helvetic nappes, Switzerland). Variations of temperature, stress, and strain rate, changes in chemistry of solid and fluid phases, and differing degrees of strain localization and annealing were tracked by measuring the shapes, mean sizes, and size distributions of both matrix and second-phase grains, as well as crystal preferred orientation (CPO) of the matrix. Field structures suggest that strain rate was constant along the fault. The mean and distribution of the calcite grain sizes were affected most profoundly by temperature: Increased temperature, presumably accompanied by decreased stress, correlated with larger mean sizes and wider size distributions. At a given location, the matrix grains in mylonites with more second-phase particles are, on average, smaller, have narrower size distributions, and have more elongate shapes. For example, mylonites with 50 vol.% of second phases have matrix grain sizes half that of pure mylonites. Changes in calcite chemistry and the presence of synkinematic fluids seemed to influence microfabric only weakly. Temporal variations in conditions, such as exhumation-induced cooling, apparently provoke changes in temperature, stress, and strain rate along the nappe. These changes result in further strain localization during retrograde conditions and cause the grain size to be reduced by an additional 50%. The matrix CPO strengthens with increasing temperature or strain, but weakens and rotates with increasing second-phase content, These fabric changes suggest differing rates of grain growth, grain size reduction, and development of CPO owing to variations in the deformation conditions and, perhaps, mechanisms. To interpret natural mylonite structures or to extrapolate mechanical data to natural situations requires careful characterization of the microfabric, and, in particular, second-phase minerals. (c) 2007 Elsevier B.V, All rights reserved.

Full insurance, asymmetric information and genetic testing

This paper extends previous resuls on optimal insurance trading in the presence of a stock market that allows continuous asset trading and substantial personal heterogeneity, and applies those results in a context of asymmetric informationwith references to the role of genetic testing in insurance markets.We find a novel and surprising result under symmetric information:agents may optimally prefer to purchase full insurance despitethe presence of unfairly priced insurance contracts, and other assets which are correlated with insurance.Asymmetric information has a Hirschleifer-type effect whichcan be solved by suspending insurance trading. Nevertheless,agents can attain their first best allocations, which suggeststhat the practice of restricting insurance not to be contingenton genetic tests can be efficient.

Iodine-131-labeled MAb F(ab')2 fragments are more efficient and less toxic than intact anti-CEA antibodies in radioimmunotherapy of large human colon carcinoma grafted in nude mice.

During one week, beginning 18 days after transplantation, nude mice bearing human colon carcinoma ranging from 115 to 943 mm3 (mean 335 mm3) were treated by repeated intravenous injections of either iodine-131-(131I) labeled intact antibodies or 131I-labeled corresponding F(ab')2 fragments of a pool of four monoclonal antibodies (MAbs) directed against distinct epitopes of carcinoembryonic antigen (CEA). Complete tumor remission was observed in 8 of 10 mice after therapy with F(ab')2 and 6 of the animals survived 10 mo in good health. In contrast, after treatment with intact MAbs, tumors relapsed in 7 of 8 mice after remission periods of 1 to 3.5 mo despite the fact that body weight loss and depression of peripheral white blood cells, symptoms of radiation toxicity, and the calculated radiation doses for liver, spleen, bone, and blood were increased or equal in these animals as compared to mice treated with F(ab')2.

Research joint ventures and optimal R&D policy with asymmetric information

When to allow Research Joint Ventures (RJVs) or not is an importantinstrument in the development of an optimal R&D policy. Theregulator, however, is unlikely to know all the relevant informationto regulate R&D optimally. The extent to which there existappropriability problems between the firms is one such variable thatis private information to the firms in the industry. In a duopolysetting we analyze the characteristics of a second-best R&D policywhere the government can either allow RJVs or not and give lump-sumsubsidies to the parties involved. The second-best R&D policy withoutsubsidies will either block some welfare improving RJVs or allow somewelfare reducing ones. With lump-sum subsidies, the second-best policytrades off the expected subsidy cost with allowing welfare decreasingRJVs or blocking welfare increasing ones.

Corporate finance and the monetary transmission mechanism

This paper analyzes the transmission mechanisms of monetarypolicy in a general equilibrium model of securities marketsand banking with asymmetric information. Banks' optimal asset/liability policy is such that in equilibrium capital adequacy constraints are always binding. Asymmetric information about banks' net worth adds a cost to outside equity capital, which limits the extent to which banks can relax their capital constraint. In this context monetarypolicy does not affect bank lending through changes in bank liquidity. Rather, it has the effect of changing theaggregate composition of financing by firms. The model also produces multiple equilibria, one of which displays all the features of a "credit crunch". Thus, monetary policy can also have large effects when it induces a shift from one equilibrium to the other.

Physical activity assessment using a pedometer and its comparison with a questionnaire in a large population survey.

The aim of this study was to evaluate the use of the pedometer in epidemiologic research on physical activity. Within the framework of a health examination survey in 1988-1989, physical activity was assessed in a representative population sample of 493 men and women aged 25-74 years who were residents of Switzerland. They wore a pedometer for 1 week at work and during leisure time, and the results, converted into steps per day, were compared with answers to a questionnaire. The average number of steps per day decreased from 11,900 to 6,700 and from 9,300 to 7,300 for men and women, respectively, in the youngest to the oldest age groups. For men, categorized according to type of physical activity at work, there was a highly significant difference in the number of steps (p < 0.001), whereas in women the results were associated with leisure-time physical activity (p = 0.003). For both sexes, practicing sports more than once a week was associated with an important increase in steps per day. Analyzing the number of steps according to the day of the week and occupational category produced an unexpected result: Men with a physically active job engaged in more leisure-time physical activity on the weekend. The pedometer proved to be useful in assessing physical activity in a large, free-living population.

Fiscal decentralization in Spain: An asymmetric transition to democracy

Asymmetric fiscal decentralization, by which we mean different fiscal arrangements between the central government and different groups of, or individual, lower-level governments, may be justified from an economic efficiency perspective. As argued by Tiebout (1956), Oates (1972) and others, a decentralized system of regional and local governments is better able to accommodate differences in tastes for public goods and services. This efficiency argument calls for decentralization of fiscal authority to regional and local governments, but not necessarily asymmetric decentralization. However, when the differences in tastes for public goods and services arise out of differences in history, culture and language across regions of a country, asymmetric treatment may be justified. History, culture and language may influence how a group of people (a region) views autonomy, independence and fiscal authority. Some regions may have had experience with autonomous government in the past, they may have a culture that is strongly reliant upon (or leery of) the central government, or they may be fearful of losing their separate languages if they do not have special arrangements. To accommodate differences in taste for independence, autonomy, and fiscal authority, it may be necessary to have different fiscal arrangements between the central government and the different regions comprising the country.

The dog that did not bark: Insider trading and crashes

This paper documents that at the individual stock level insiders sales peak many months before a large drop in the stock price, while insiders purchases peak only the month before a large jump. We provide a theoretical explanation for this phenomenon based on trading constraints and asymmetric information. We test our hypothesis against competing stories such as patterns of insider trading driven by earnings announcement dates, or insiders timing their trades to evade prosecution. Finally we provide new evidence regarding crashes and the degree of information asymmetry.

Failure to collude in the presence of asymmetric information

In this paper, we design the optimal contract when two agents can collude under asymmetric information. They have correlated types, produce complementary inputs and are protected by limited liability. Therefore, a joint manipulation of reports allows them to internalize informational and productive externalities. We show that by taking advantage of the transaction costs created by asymmetric information, even though they collude, the principal can achieve the outcome without collusion regardless of the sign and the degree of correlation. In particular, the principal can implement a non-monotonic quantity schedule in a collusion-proof way while this is impossible if collusion occurs under complete information.

How do very open economies adjust to large immigration flows? Recent evidence from Spanish regions

In recent years, Spain has received unprecedented immigration flows. Between 2001 and 2006 the fraction of the population born abroad more than doubled, increasing from4.8% to 10.8%. For Spanish provinces with above-median inflows (relative to population),immigration increased by 24% the number of high school dropouts while only increasingcollege graduates by 11%. We study different channels by which regional labor markets haveabsorbed the large increase in relative supply of low educated workers. We identify theexogenous supply shock using historical immigrant settlement patterns by country of origin.Using data from the Labor Force Survey and the decennial Census, we find a large expansion ofemployment in high immigration regions. Disaggregating by industry, the absorption operatedthrough large increases in the share of low-educated workers, compared to the same industry inlow-immigration regions. We do not find changes in sectoral specialization. Overall, andperhaps surprisingly, the pattern of absorption is very similar to the one found in the US.

Gross capital flows: Dynamics and crises

This paper analyzes the behavior of international capital flows by foreign and domestic agents,dubbed gross capital flows, over the business cycle and during financial crises. We show thatgross capital flows are very large and volatile, especially relative to net capital flows. Whenforeigners invest in a country, domestic agents invest abroad, and vice versa. Gross capital flowsare also pro-cyclical. During expansions, foreigners invest more domestically and domesticagents invest more abroad. During crises, total gross flows collapse and there is a retrenchmentin both inflows by foreigners and outflows by domestic agents. These patterns hold for differenttypes of capital flows and crises. This evidence sheds light on the sources of fluctuations drivingcapital flows and helps discriminate among existing theories. Our findings seem consistent withcrises affecting domestic and foreign agents asymmetrically, as would be the case under thepresence of sovereign risk or asymmetric information.

The quasi-judicial role of large retailers: An efficiency hypothesis of their relation with suppliers

The paper explores an efficiency hypothesis regarding the contractual process between large retailers, such as Wal-Mart and Carrefour, and their suppliers. The empirical evidence presented supports the idea that large retailers play a quasi-judicial role, acting as "courts of first instance" in their relationships with suppliers. In this role, large retailers adjust the terms of trade to on-going changes and sanction performance failures, sometimes delaying payments. A potential abuse of their position is limited by the need for re-contracting and preserving their reputations. Suppliers renew their confidence in their retailers on a yearly basis, through writing new contracts. This renovation contradicts the alternative hypothesis that suppliers are expropriated by large retailers as a consequence of specific investments.

Optimal law enforcement under asymmetric information

In this paper, we focus on the problem created by asymmetric informationabout the enforcer's (agent's) costs associated to enforcement expenditure. This adverse selection problem affects optimal law enforcement because a low cost enforcer may conceal its information by imitating a high cost enforcer, and must then be given a compensation to be induced to reveal its true costs. The government faces a trade-off between minimizing the enforcer's compensation and maximizing the net surplus of harmful acts. As a consequence, the probability of apprehension and punishment is usually reduced leading to more offenses being committed. We show that asymmetry of information does not affect law enforcement as long as raising public funds is costless. The consideration of costly raising of public funds permits to establish the positive correlation between asymmetry of information between government and enforcers andthe crime rate.

Synapses on motoneuron dendrites in the brachial section of the frog spinal cord: a computer-aided electron microscopic study of cobalt-filled cells.

Cobalt-labelled motoneuron dendrites of the frog spinal cord at the level of the second spinal nerve were photographed in the electron microscope from long series of ultrathin sections. Three-dimensional computer reconstructions of 120 dendrite segments were analysed. The samples were taken from two locations: proximal to cell body and distal, as defined in a transverse plane of the spinal cord. The dendrites showed highly irregular outlines with many 1-2 microns-long 'thorns' (on average 8.5 thorns per 100 microns 2 of dendritic area). Taken together, the reconstructed dendrite segments from the proximal sites had a total length of about 250 microns; those from the distal locations, 180 microns. On all segments together there were 699 synapses. Nine percent of the synapses were on thorns, and many more close to their base on the dendritic shaft. The synapses were classified in four groups. One third of the synapses were asymmetric with spherical vesicles; one half were symmetric with spherical vesicles; and one tenth were symmetric with flattened vesicles. A fourth, small class of asymmetric synapses had dense-core vesicles. The area of the active zones was large for the asymmetric synapses (median value 0.20 microns 2), and small for the symmetric ones (median value 0.10 microns 2), and the difference was significant. On average, the areas of the active zones of the synapses on thin dendrites were larger than those of synapses on large calibre dendrites. About every 4 microns 2 of dendritic area received one contact. There was a significant difference between the areas of the active zones of the synapses at the two locations. Moreover, the number per unit dendritic length was correlated with dendrite calibre. On average, the active zones covered more than 4% of the dendritic area; this value for thin dendrites was about twice as large as that of large calibre dendrites. We suggest that the larger active zones and the larger synaptic coverage of the thin dendrites compensate for the longer electrotonic distance of these synapses from the soma.