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.

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

In a research project conducted while visiting the DG-ECFIN in June 2010, we provided a detailed empirical investigation of the EMU sovereign-debt crisis up to February 2010.

Indexed versus nominal government debt under inflation and price-level targeting

This paper presents a DSGE model in which long run inflation risk matters for social welfare. Optimal indexation of long-term government debt is studied under two monetary policy regimes: inflation targeting (IT) and price-level targeting (PT). Under IT, full indexation is optimal because long run inflation risk is substantial due to base-level drift, making indexed bonds a much better store of value than nominal bonds. Under PT, where long run inflation risk is largely eliminated, optimal indexation is substantially lower because nominal bonds become a better store of value relative to indexed bonds. These results are robust to the PT target horizon, imperfect credibility of PT and model calibration, but the assumption that indexation is lagged is crucial. From a policy perspective, a key finding is that accounting for optimal indexation has important welfare implications for comparisons of IT and PT.

The Inflation Risk Premium on Government Debt in an Overlapping Generations Model

This paper presents a general equilibrium model in which nominal government debt pays an inflation risk premium. The model predicts that the inflation risk premium will be higher in economies which are exposed to unanticipated inflation through nominal asset holdings. In particular, the inflation risk premium is higher when government debt is primarily nominal, steady-state inflation is low, and when cash and nominal debt account for a large fraction of consumers' retirement portfolios. These channels do not appear to have been highlighted in previous models or tested empirically. Numerical results suggest that the inflation risk premium is comparable in magnitude to standard representative agent models. These findings have implications for management of government debt, since the inflation risk premium makes it more costly for governments to borrow using nominal rather than indexed debt. Simulations of an extended model with Epstein-Zin preferences suggest that increasing the share of indexed debt would enable governments to permanently lower taxes by an amount that is quantitatively non-trivial.

Disputes, Debt and Equity

We show how the prospect of disputes over firms’ revenue reports promotes debt financing over equity. These findings are presented within a costly state verification model with a risk averse entrepreneur. The prospect of disputes encourages incentive regimes which limit penalties and avoid stochastic monitoring, even when the lender can commit to stochastic enforcement strategies. Consequently, optimal contracts shift away from equity and toward standard debt. For a useful special case of the model, closed form solutions are presented for leverage and consumption allocations under efficient debt contracts.

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", which is size of creditor losses. 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.

Infected erythrocyte choline carrier inhibitors: exploring some potentialities inside Plasmodium phospholipid metabolism for eventual resistance acquisition

We have developed a model for designing antimalarial drugs based on interference with an essential metabolism developed by Plasmodium during its intraerythrocytic cycle, phospholipid (PL) metabolism. The most promising drug interference is choline transporter blockage, which provides Plasmodium with a supply of precursor for synthesis of phosphatidylcholine (PC), the major PL of infected erythrocytes. Choline entry is a limiting step in this metabolic pathway and occurs by a facilitated-diffusion system involving an asymmetric carrier operating according to a cyclic model. Choline transport in the erythrocytes is not sodium dependent nor stereospecific as demonstrated using stereoisomers of alpha and beta methylcholine. These last two characteristics along with distinct effects of nitrogen substitution on transport rate demonstrate that choline transport in the infected erythrocyte possesses characteristics quite distinct from that of the nervous system. This indicates a possible discrimination between the antimalarial activity (inhibition of choline transport in the infected erythrocyte) and a possible toxic effect through inhibition of choline entry in synaptosomes. Apart from the de novo pathway of choline, PC can be synthesized by N-methylation from phosphatidylethanolamine (PE). There is a de novo pathway for PE biosynthesis from ethanolamine in infected cells but phosphatidylserine (PS) decarboxylation also occurs. In addition, PE can be directly and abundantly synthesized from serine decarboxylation into ethanolamine, a pathway which is absent from the host. The variety of the pathways that exist for the biosynthesis of one given PL led us to investigate whether an equilibrium can occur between all PL metabolic pathways. Indeed, if alternative (compensative) pathway(s) can operate after blockage of the de novo PC biosynthesis pathway this would indicate a potential mechanism for resistance acquisition. Up until now, there is no evidence of such a compensative process occurring in Plasmodium-infected erythrocytes under physiological conditions. Besides, the discovery of a highly parasite-specific pathway (serine decarboxylation and the presence of PS synthase) constitutes a very attractive and promising target, which could be attacked if resistances are built up against choline analogs. Indeed, potential inhibitions of the serine decarboxylase pathway could be very useful in acting instead of, or in surgery with, choline analogs.

Simian malaria at two sites in the Brazilian Amazon - II: Vertical distribution and frequency of anopheline species inside and outside the forest

An anopheline survey was carried out in two simian malaria areas in the Brazilian Amazon, Balbina and Samuel, to determine the potential vectors of Plasmodium brasilianum. The most abundant and/or acrodendrophilic anophelines in the forest and the most likely vector were Anopheles mediopunctatus, An. nuneztovari, An. oswaldoi, An. triannulatus and An. shannoni. An. darlingi and An. marajoara were captured essentially in anthropic habitats outside the forest and are unlikely to be involved in the transmission of P. brasilianum among monkeys within the forests and from monkeys to man in their surroundings in the Amazon.

Getting Inside Men's Health

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Women, Debt & Health; a Joint report of The Women’s Health Council and MABS

Women, Debt & Health; a Joint report of The Women’s Health Council and MABS The main aims of the â?~Women, Debt and Healthâ?T project were to:- explore whether women attending the MABS service commonly discuss health during their money advice and budgeting consultations;- investigate whether women attending MABS identifi ed links between their debt or financial difficulties and their health; and- document the types of health issues experienced by MABS clients.- A secondary aim of the research was to explore the need for, and nature of, further research in this area. Click here to download PDF 1.1mb

Protect them on the inside too (childrens flu poster)

The flu vaccine is now available for all children aged 2 and over.

Diptera Brachycera found inside the esophagus of a mummified adult male from the early XIX century, Lisbon, Portugal

Fly puparia and adult fragments of diptera muscid were found inside the esophagus of a mummified body from the early XIX century, buried inside the crypt of the Sacrament Church (Lisbon, Portugal). The identification of the material revealed a monospecific colonization by Ophyra capensis (Wiedemann) (Diptera: Muscidae), a species known to invade corpses in the ammoniacal fermentation wave. This species can be found in corpses kept indoors, not available to the early waves of blowflies (Diptera: Calliphoridae). In the present case, the number of pupae and their developmental stage suggest that the female invaded the mummified corpse through the partially opened mouth and the oviposition took place directly inside the esophagus. This is the first case of O. capensis infesting internal organs of an intact corpse. The use of chemical products for the embalming process probably explains why external colonization did not occur.