Three essays in international finance

Executive Summary The first essay of this dissertation investigates whether greater exchange rate uncertainty (i.e., variation over time in the exchange rate) fosters or depresses the foreign investment of multinational firms. In addition to the direct capital financing it supplies, foreign investment can be a source of valuable technology and know-how, which can have substantial positive effects on a host country's economic growth. Thus, it is critically important for policy makers and central bankers, among others, to understand how multinationals base their investment decisions on the characteristics of foreign exchange markets. In this essay, I first develop a theoretical framework to improve our knowledge regarding how the aggregate level of foreign investment responds to exchange rate uncertainty when an economy consists of many firms, each of which is making decisions. The analysis predicts a U-shaped effect of exchange rate uncertainty on the total level of foreign investment of the economy. That is, the effect is negative for low levels of uncertainty and positive for higher levels of uncertainty. This pattern emerges because the relationship between exchange rate volatility and 'the probability of investment is negative for firms with low productivity at home (i.e., firms that find it profitable to invest abroad) and the relationship is positive for firms with high productivity at home (i.e., firms that prefer exporting their product). This finding stands in sharp contrast to predictions in the existing literature that consider a single firm's decision to invest in a unique project. The main contribution of this research is to show that the aggregation over many firms produces a U-shaped pattern between exchange rate uncertainty and the probability of investment. Using data from industrialized countries for the period of 1982-2002, this essay offers a comprehensive empirical analysis that provides evidence in support of the theoretical prediction. In the second essay, I aim to explain the time variation in sovereign credit risk, which captures the risk that a government may be unable to repay its debt. The importance of correctly evaluating such a risk is illustrated by the central role of sovereign debt in previous international lending crises. In addition, sovereign debt is the largest asset class in emerging markets. In this essay, I provide a pricing formula for the evaluation of sovereign credit risk in which the decision to default on sovereign debt is made by the government. The pricing formula explains the variation across time in daily credit spreads - a widely used measure of credit risk - to a degree not offered by existing theoretical and empirical models. I use information on a country's stock market to compute the prevailing sovereign credit spread in that country. The pricing formula explains a substantial fraction of the time variation in daily credit spread changes for Brazil, Mexico, Peru, and Russia for the 1998-2008 period, particularly during the recent subprime crisis. I also show that when a government incentive to default is allowed to depend on current economic conditions, one can best explain the level of credit spreads, especially during the recent period of financial distress. In the third essay, I show that the risk of sovereign default abroad can produce adverse consequences for the U.S. equity market through a decrease in returns and an increase in volatility. The risk of sovereign default, which is no longer limited to emerging economies, has recently become a major concern for financial markets. While sovereign debt plays an increasing role in today's financial environment, the effects of sovereign credit risk on the U.S. financial markets have been largely ignored in the literature. In this essay, I develop a theoretical framework that explores how the risk of sovereign default abroad helps explain the level and the volatility of U.S. equity returns. The intuition for this effect is that negative economic shocks deteriorate the fiscal situation of foreign governments, thereby increasing the risk of a sovereign default that would trigger a local contraction in economic growth. The increased risk of an economic slowdown abroad amplifies the direct effect of these shocks on the level and the volatility of equity returns in the U.S. through two channels. The first channel involves a decrease in the future earnings of U.S. exporters resulting from unfavorable adjustments to the exchange rate. The second channel involves investors' incentives to rebalance their portfolios toward safer assets, which depresses U.S. equity prices. An empirical estimation of the model with monthly data for the 1994-2008 period provides evidence that the risk of sovereign default abroad generates a strong leverage effect during economic downturns, which helps to substantially explain the level and the volatility of U.S. equity returns.

Fluorescence imaging reveals the nuclear behavior of peroxisome proliferator-activated receptor/retinoid X receptor heterodimers in the absence and presence of ligand.

In a global approach combining fluorescence recovery after photobleaching (FRAP), fluorescence correlation spectroscopy (FCS), and fluorescence resonance energy transfer (FRET), we address the behavior in living cells of the peroxisome proliferator-activated receptors (PPARs), a family of nuclear receptors involved in lipid and glucose metabolism, inflammation control, and wound healing. We first demonstrate that unlike several other nuclear receptors, PPARs do not form speckles upon ligand activation. The subnuclear structures that may be observed under some experimental conditions result from overexpression of the protein and our immunolabeling experiments suggest that these structures are subjected to degradation by the proteasome. Interestingly and in contrast to a general assumption, PPARs readily heterodimerize with retinoid X receptor (RXR) in the absence of ligand in living cells. PPAR diffusion coefficients indicate that all the receptors are engaged in complexes of very high molecular masses and/or interact with relatively immobile nuclear components. PPARs are not immobilized by ligand binding. However, they exhibit a ligand-induced reduction of mobility, probably due to enhanced interactions with cofactors and/or chromatin. Our study draws attention to the limitations and pitfalls of fluorescent chimera imaging and demonstrates the usefulness of the combination of FCS, FRAP, and FRET to assess the behavior of nuclear receptors and their mode of action in living cells.

Insufficient coping behavior under chronic stress and vulnerability to psychiatric disorders

Epidemiological data indicate that 75% of subjects with major psychiatric disorders have their onset in the age range of 17-24 years. An estimated 35-50% of college and university students drop out prematurely due to insufficient coping skills under chronic stress, while 85% of students receiving a psychiatric diagnosis withdraw from college/university prior to the completion of their education. In this study we aimed at developing standardized means for identifying students with insufficient coping skills under chronic stress and at risk for mental health problems. A sample of 1,217 college students from 3 different sites in the U.S. and Switzerland completed 2 self-report questionnaires: the Coping Strategies Inventory "COPE" and the Zurich Health Questionnaire "ZHQ" which assesses "regular exercises", "consumption behavior", "impaired physical health", "psychosomatic disturbances", and "impaired mental health". The data were subjected to structure analyses by means of a Neural Network approach. We found 2 highly stable and reproducible COPE scales that explained the observed inter-individual variation in coping behavior sufficiently well and in a socio-culturally independent way. The scales reflected basic coping behavior in terms of "activity-passivity" and "defeatism-resilience", and in the sense of stable, socio-culturally independent personality traits. Correlation analyses carried out for external validation revealed a close relationship between high scores on the defeatism scale and impaired physical and mental health. This underlined the role of insufficient coping behavior as a risk factor for physical and mental health problems. The combined COPE and ZHQ instruments appear to constitute powerful screening tools for insufficient coping skills under chronic stress and for risks of mental health problems.

Is accurate perception of body image associated with appropriate weight-control behavior among adolescents of the Seychelles

BACKGROUND: We examined body image perception and its association with reported weight-control behavior among adolescents in the Seychelles.METHODS: We conducted a school-based survey of 1432 students aging 11-17 years in the Seychelles. Perception of body image was assessed using both a closed-ended question (CEQ) and Stunkard's pictorial silhouettes (SPS). Voluntary attempts to change weight were also assessed.RESULTS: A substantial proportion of the overweight students did not consider themselves as overweight (SPS: 24%, CEQ: 34%), and a substantial proportion of the normal-weight students considered themselves as too thin (SPS: 29%, CEQ: 15%). Logistic regression analysis showed that students with an accurate weight perception were more likely to have appropriate weight-control behavior.CONCLUSIONS: We found that substantial proportions of students had an inaccurate perception of their weight and that weight perception was associated with weight-control behavior. These findings point to forces that can drive the upwards overweight trends.

Emotional behavior in acute stroke : the Lausanne emotion in stroke study

Résumé : Objectif: Etudier les comportements émotionnels chez les patients ayant souffert d'un accident vasculaire cérébral (AVC) Contexte: Les modifications du comportement émotionnel après un AVC sont actuellement bien reconnues mais ont été très peu étudiées dans la phase aigüe de l'AVC. Méthode: Tous les patients présentant un AVC datant de moins de 24 heures ont été inclus prospectivement. Nous avons validé une échelle (the Emotional Behavior Index (EBI)), comprenant 38 qualificatifs, représentant la tristesse, l'agressivité, la désinhibition, l'adaptation, la passivité, l'indifférence et le déni. Les informations cliniques et radiologiques (CT et IRM) ont été obtenues par le biais de notre Registre des AVC. L'analyse statistique a été faite au moyen de tests uni- et multi-variés Résultats: Des 254 patients inclus, 40% présentaient de la tristesse, 49% de la passivité, 17% de l'agressivité, 53% de l'indifférence, 76% de la désinhibition, 18% un manque d'adaptation et 44% une réaction de déni. Plusieurs interactions statistiquement significatives ont été mises en évidence. En effet, la tristesse semble corréler à des antécédents d'alcoolisme (r = p< 0.037), au sexe féminin (r = p<0.028) et à la nature hémorragique de l'AVC (r = p<0.063). L'agressivité corrèle à des antécédents de troubles dépressifs (r = p<0.046) et à la nature hémorragique de l'AVC (r = p<0.06). Le déni corrèle plutôt au sexe masculin (r = p<0.035) et aux lésions hémorragiques (r = p<0.05). Le comportement émotionnel ne corrèle ni au degré et type d'atteinte neurologique, ni à la localisation de l'AVC mais une association entre Les lésions hémorragiques et un comportement agressif a été mis en évidence (p<0.001) de même qu'avec un manque d'adaptation (r = p<0.015), une certaine indifférence (r = p<0.018) et une réaction de déni (r = p<0.045). Conclusion: L'observation systématique des modifications du comportement émotionnel après un AVC suggère que les altérations émotionnelles sont indépendantes de la thymie et de l'atteinte physique et représentent donc probablement des séquelles à part entière de l'AVC. Abstract: Objective: To study emotional behaviors in an acute stroke population. Background: Alterations in emotional behavior after stroke have been recently recognized, but little attention has been paid to these changes in the very acute phase of stroke. Methods: Adult patients presenting with acute stroke were prospectively recruited and studied. We validated the Emotional Behavior Index (EBI), a 38-item scale designed to evaluate behavioral aspects of sadness, aggressiveness, disinhibition, adaptation, passivity, indifference, and denial. Clinical, historical, and imaging (computed tomography/magnetic resonance imaging) data were obtained on each subject through our Stroke Registry. Statistical analysis was performed with both univariate and multivariate tests. Results: Of the 254 patients, 40% showed sadness, 49% passivity, 17% aggressiveness, 53% indifference, 76% disinhibition, 18% lack of adaptation, and 44% denial reactions. Several significant correlations were identified. Sadness was correlated with a personal history of alcohol abuse (r = P < 0.037), female gender (r = P < 0.028), and hemorrhagic nature of the stroke (r = P < 0.063). Aggressiveness was correlated with a personal history of depression (r = P < 0.046) and hemorrhage (r = P < 0.06). Denial was correlated with male gender (r= P < 0.035) and hemorrhagic lesions (r = P < 0.05). Emotional behavior did not correlate with either neurologic impairment or lesion localization, but there was an association between hemorrhage and aggressive behavior (P < 0.001), lack of adaptation (r = P < 0.015), indifference (r = P < 0.018), and denial (r = P < 0.045). Conclusions: Systematic observations of acute emotional behaviors after stroke suggest that emotional alterations are independent of mood and physical status and should be considered as a separate consequence of stroke.

An hybrid methodology for RL-based behavior coordination in a target following mission with an AUV

Proposes a behavior-based scheme for high-level control of autonomous underwater vehicles (AUVs). Two main characteristics can be highlighted in the control scheme. Behavior coordination is done through a hybrid methodology, which takes in advantages of the robustness and modularity in competitive approaches, as well as optimized trajectories

A behavior-based scheme using reinforcement learning for autonomous underwater vehicles

This paper presents a hybrid behavior-based scheme using reinforcement learning for high-level control of autonomous underwater vehicles (AUVs). Two main features of the presented approach are hybrid behavior coordination and semi on-line neural-Q_learning (SONQL). Hybrid behavior coordination takes advantages of robustness and modularity in the competitive approach as well as efficient trajectories in the cooperative approach. SONQL, a new continuous approach of the Q_learning algorithm with a multilayer neural network is used to learn behavior state/action mapping online. Experimental results show the feasibility of the presented approach for AUVs

Feeding behavior of Triatoma vitticeps (Reduviidae: Triatominae) in the state of Minas Gerais, Brazil

The objective of this study was to evaluate the feeding behavior of Triatoma vitticeps through the identification of its food sources and the characterization of the blood ingestion process. In addition, we aimed to verify if the saliva of this vector interferes with the perception of the host during the feedings by creating a nervous impulse. Here, we demonstrated that the T. vitticeps saliva reduces, gradually and irreversibly, the amplitude of the compound action potential of the nervous fibre, which helps decrease the perception of the insect by the host. The precipitin reaction demonstrated the feeding eclecticism of this vector, with the identification of eight food sources - most of them found simultaneously in the same insect. The analysis of the electrical signals produced by the cibarial pump during meals demonstrated that the best feeding performance of T. vitticeps nymphs that fed on pigeons is mainly due to the higher contraction frequency of the pump. The longer contact period with the host to obtain a complete meal compared with other triatominae species of the same instar could favor the occurrence of multiple blood sources in T. vitticeps under natural conditions, as it was evidenced by the precipitin test.

The renin-angiotensin system and arterial wall behavior.

To assess the behavior of the arterial wall in hypertensive patients, we developed a noninvasive ultrasonic device. Simultaneous recordings of internal diameter and blood pressure over the whole cardiac cycle are used to establish compliance-pressure curves. Blood pressure, which is a co-determinant of compliance, is thus taken into account. This method allows one to compare arteries from patients with different blood pressures. Arterial compliance and distensibility were first investigated in healthy young volunteers administered either lisinopril (20 mg), atenolol (100 mg) or nitrendipine (20 mg) once a day. After 8 days of treatment, only lisinopril was found to increase arterial compliance. Subsequently, we compared arterial diameter- and distensibility-pressure curves from newly diagnosed and untreated hypertensive patients with those of matched normotensive control patients. Diameter-pressure curves did not differ significantly between the groups and distensibility was not reduced. Similar findings were later obtained in an animal model, when mechanical properties of carotid arteries were compared between spontaneously hypertensive rats and normotensive counterparts (Wistar-Kyoto rats). These results, although interesting by providing noninvasive information on the elastic response of the wall, call for further development of the technique to be able to measure arterial wall thickness. Stress-strain relationship could ultimately be established to thoroughly characterize physical properties of blood vessel walls.

Topics in public finance: social security and taxation

Summary The field of public finance focuses on the spending and taxing activities of governments and their influence on the allocation of resources and distribution of income. This work covers in three parts different topics related to public finance which are currently widely discussed in media and politics. The first two parts deal with issues on social security, which is in general one of the biggest spending shares of governments. The third part looks at the main income source of governments by analyzing the perceived value of tax competition. Part one deals with the current problem of increased early retirement by focusing on Switzerland as a special case. Early retirement is predominantly considered to be the result of incentives set by social security and the tax system. But the Swiss example demonstrates that the incidence of early retirement has dramatically increased even in the absence of institutional changes. We argue that the wealth effect also plays an important role in the retirement decision for middle and high income earners. An actuarially fair, but mandatory funded system with a relatively high replacement rate may thus contribute to a low labor market participation rate of elderly workers. We provide evidence using a unique dataset on individual retirement decisions in Swiss pension funds, allowing us to perfectly control for pension scheme details. Our findings suggest that affordability is a key determinant in the retirement decisions. The higher the accumulated pension capital, the earlier men, and to a smaller extent women, tend to leave the workforce. The fact that early retirement has become much more prevalent in the last 15 years is a further indicator of the importance of a wealth effect, as the maturing of the Swiss mandatory funded pension system over that period has led to an increase in the effective replacement rates for middle and high income earners. Part two covers the theoretical side of social security. Theories analyzing optimal social security benefits provide important qualitative results, by mainly using one general type of an economy. Economies are however very diverse concerning numerous aspects, one of the most important being the wealth level. This can lead to significant quantitative benefit differences that imply differences in replacement rates and levels of labor supply. We focus on several aspects related to this fact. In a within cohort social security model, we introduce disability insurance with an imperfect screening mechanism. We then vary the wealth level of the model economy and analyze how the optimal social security benefit structure or equivalently, the optimal replacement rates, changes depending on the wealth level of the economy, and if the introduction of disability insurance into a social security system is preferable for all economies. Second, the screening mechanism of disability insurance and the threshold level at which people are defined as disabled can differ. For economies with different wealth levels, we determine for different thresholds the screening level that maximizes social welfare. Finally, part three turns to the income of governments, by adding an element to the controversy on tax competition versus tax harmonization.2 Inter-jurisdictional tax competition can generate at least two potential benefits or costs: On a public level, tax competition may result in a lower or higher efficiency in the production of public services. But there is also a more private benefit in the form of an option for individuals to move to a community with a lower tax rate in the future. To explore the value citizens attach to tax competition we analyze a unique popular vote for a complete tax harmonization between communities in the third largest Swiss canton, Vaud. Although a majority of voters would have seemingly benefited from replacing the current tax rate by a revenue-neutral average tax rate, the proposal was rejected by a large margin. Our estimates suggest that the estimated combined perceived benefit from tax competition is in the range of 10%.

Orexin/hypocretin (Orx/Hcrt) transmission and drug-seeking behavior: is the paraventricular nucleus of the thalamus (PVT) part of the drug seeking circuitry?

The orexin/hypocretin (Orx/Hcrt) system has long been considered to regulate a wide range of physiological processes, including feeding, energy metabolism, and arousal. More recently, concordant observations have demonstrated an important role for these peptides in the reinforcing properties of most drugs of abuse. Orx/Hcrt neurons arise in the lateral hypothalamus (LH) and project to all brain structures implicated in the regulation of arousal, stress, and reward. Although Orx/Hcrt neurons have been shown to massively project to the paraventricular nucleus of the thalamus (PVT), only recent evidence suggested that the PVT may be a key relay of Orx/Hcrt-coded reward-related communication between the LH and both the ventral and dorsal striatum. While this thalamic region was not thought to be part of the "drug addiction circuitry," an increasing amount of evidence demonstrated that the PVT-particularly PVT Orx/Hcrt transmission-was implicated in the modulation of reward function in general and several aspects of drug-directed behaviors in particular. The present review discusses recent findings that suggest that maladaptive recruitment of PVT Orx/Hcrt signaling by drugs of abuse may promote persistent compulsive drug-seeking behavior following a period of protracted abstinence and as such may represent a relevant target for understanding the long-term vulnerability to drug relapse after withdrawal.

Real-time recording of circadian liver gene expression in freely moving mice reveals the phase-setting behavior of hepatocyte clocks.

The mammalian circadian timing system consists of a master pacemaker in the suprachiasmatic nucleus (SCN) in the hypothalamus, which is thought to set the phase of slave oscillators in virtually all body cells. However, due to the lack of appropriate in vivo recording technologies, it has been difficult to study how the SCN synchronizes oscillators in peripheral tissues. Here we describe the real-time recording of bioluminescence emitted by hepatocytes expressing circadian luciferase reporter genes in freely moving mice. The technology employs a device dubbed RT-Biolumicorder, which consists of a cylindrical cage with reflecting conical walls that channel photons toward a photomultiplier tube. The monitoring of circadian liver gene expression revealed that hepatocyte oscillators of SCN-lesioned mice synchronized more rapidly to feeding cycles than hepatocyte clocks of intact mice. Hence, the SCN uses signaling pathways that counteract those of feeding rhythms when their phase is in conflict with its own phase.