The ins and outs of unemployment: An analysis conditional on technology shocks

We analyze how unemployment, job finding and job separation rates reactto neutral and investment-specific technology shocks. Neutral shocks increaseunemployment and explain a substantial portion of it volatility; investment-specificshocks expand employment and hours worked and contribute to hoursworked volatility. Movements in the job separation rates are responsible for theimpact response of unemployment while job finding rates for movements alongits adjustment path. The evidence warns against using models with exogenousseparation rates and challenges the conventional way of modelling technologyshocks in search and sticky price models.

Structural changes in the US economy: is there a role for monetary policy?

This paper investigates the contribution of monetary policy to the changes in outputgrowth and inflation dynamics in the US. We identify a policy shock and a policy rule ina time-varying coefficients VAR using robust sign restrictions. The transmission of policyshocks has been relatively stable. The variance of the policy shock has decreased over time,but policy shocks account for a small fraction of the level and of the variations in inflationand output growth volatility and persistence. We find little evidence of a significant increasein the long run response of the interest rate to inflation. A more aggressive inflation policyin the 1970s would have produced large output growth costs.

Rethinking the effects of financial liberalization

During the last few decades, many emerging markets have lifted restrictions on cross-borderfinancial transactions. The conventional view was that this would allow these countries to: (i)receive capital inflows from advanced countries that would finance higher investment and growth;(ii) insure against aggregate shocks and reduce consumption volatility; and (iii) accelerate thedevelopment of domestic financial markets and achieve a more efficient domestic allocationof capital and better sharing of individual risks. However, the evidence suggests that thisconventional view was wrong.In this paper, we present a simple model that can account for the observed effects of financialliberalization. The model emphasizes the role of imperfect enforcement of domestic debts and theinteractions between domestic and international financial transactions. In the model, financialliberalization might lead to different outcomes: (i) domestic capital flight and ambiguous effectson net capital flows, investment, and growth; (ii) large capital inflows and higher investmentand growth; or (iii) volatile capital flows and unstable domestic financial markets. The modelshows how these outcomes depend on the level of development, the depth of domestic financialmarkets, and the quality of institutions.

Short-term investment and equilibrium multiplicity

I study the effects of the heterogeneity of traders'horizon in the context of a 2-period NREE model whereall traders are risk averse. Owing to inventory effects,myopic trading behavior generates multiplicity ofequilibria. In particular, two distinct patterns arise.Along the first equilibrium, short term tradersanticipate higher second period price reaction toinformation arrival and, owing to risk aversion,scale back their trading intensity. This, in turn,reduces both risk sharing and information impoundinginto prices enforcing a high returns' volatility-lowprice informativeness equilibrium. In the second one,the opposite happens and a low volatility-high priceinformativeness equilibrium arises.

A generalization of Hull and White formula and applications to option pricing approximation

By means of Malliavin Calculus we see that the classical Hull and White formulafor option pricing can be extended to the case where the noise driving thevolatility process is correlated with the noise driving the stock prices. Thisextension will allow us to construct option pricing approximation formulas.Numerical examples are presented.

Financial development, financial fragility and growth

This paper studies the apparent contradiction between two strands of the literature on the effects of financial intermediation on economic activity. On the one hand, the empirical growth literature finds a positive effect of financial depth as measured by, for instance, private domestic credit and liquid liabilities (e.g., Levine, Loayza, and Beck 2000). On the other hand, the banking and currency crisis literature finds that monetary aggregates, such as domestic credit, are among the best predictors of crises and their related economic downturns (e.g., Kaminski and Reinhart 1999). The paper accounts for these contrasting effects based on the distinction between the short- and long-run impacts of financial intermediation. Working with a panel of cross-country and time-series observations, the paper estimates an encompassing model of short- and long-run effects using the Pooled Mean Group estimator developed by Pesaran, Shin, and Smith (1999). The conclusion from this analysis is that a positive long-run relationship between financial intermediation and output growth co-exists with a, mostly, negative short-run relationship. The paper further develops an explanation for these contrasting effects by relating them to recent theoretical models, by linking the estimated short-run effects to measures of financial fragility(namely, banking crises and financial volatility), and by jointly analyzing the effects of financial depth and fragility in classic panel growth regressions.

Drivers and sources of supply flexibility: An exploratory study

Purpose - There has been much research on manufacturing flexibility, but supply chain flexibility is still an under-investigated area. This paper focuses on supply flexibility, the aspects of flexibility related to the upstream supply chain. Our purpose is to investigate why and how firms increase supply flexibility.Methodology/Approach An exploratory multiple case study was conducted. We analyzed seven Spanish manufacturers from different sectors (automotive, apparel, electronics and electrical equipment).Findings - The results show that there are some major reasons why firms need supply flexibility (manufacturing schedule fluctuations, JIT purchasing, manufacturing slack capacity, low level of parts commonality, demand volatility, demand seasonality and forecast accuracy), and that companies increase this type of flexibility by implementing two main strategies: to increase suppliers responsiveness capability and flexible sourcing . The results also suggest that the supply flexibility strategy selected depends on two factors: the supplier searching and switching costs and the type of uncertainty (mix, volume or delivery).Research limitations - This paper has some limitations common to all case studies, such as the subjectivity of the analysis, and the questionable generalizability of results (since the sample of firms is not statistically significant).Implications - Our study contributes to the existing literature by empirically investigating which are the main reasons for companies needing to increase supply flexibility, how they increase this flexibility, and suggesting some factors that could influence the selection of a particular supply flexibility strategy.

Phylogeny of wasps of the genus Mischocyttarus de Saussure (Hymenoptera, Vespidae, Polistinae)

A phylogenetic analysis is presented of subgenera and species-groups of Mischocyttarus de Saussure, the largest genus of social wasps. The analysis is based on 62 morphological and nest architecture characters, coded for 71 terminals representing much of the taxonomic diversity within the genus, plus three outgroup terminals representing other polistine tribes. The main conclusions about phylogenetic relationships within the genus are based on parsimony analysis under implied weights. Monophyly of Mischocyttarus is confirmed as well as that of most of the previously recognized subgenera: Mischocyttarus s. str., Clypeopolybia, Monogynoecus, Scytokeraia, Phi, Kappa, Megacanthopus and Omega sensu Richards (1978). Haplometrobius as conceived by Richards (1978) is not a monophyletic taxon, but some of its species-groups are monophyletic. The groups of M.artifex and M.cerberus are raised to subgenus level, and a new concept of Haplometrobius restricts it to the group of M.iheringi (the type species of this subgenus) in the sense of this work. The concept of subgenus Omega is widened to include the species-groups of M.surinamensis and M.prominulus. Besides the new subgeneric classification presented, limits and diagnoses of all species-groups of the subgenera Phi and Haplometrobius sensu Richards (1978) are discussed, and a new key for all subgenera and species-groups of Mischocyttarus is also presented.

Schumpeterian technology shocks

We analyze the labor market effects of neutral and investment-specific technologyshocks along the intensive margin (hours worked) and the extensive margin(unemployment). We characterize the dynamic response of unemploymentin terms of the job separation and the job finding rate. Labor market adjustmentsoccur along the extensive margin in response to neutral shocks, along theintensive margin in response to investment specific shocks. The job separationrate accounts for a major portion of the impact response of unemployment. Neutralshocks prompt a contemporaneous increase in unemployment because of asharp rise in the separation rate. This is prolonged by a persistent fall in thejob finding rate. Investment specific shocks rise employment and hours worked.Neutral shocks explain a substantial portion of the volatility of unemploymentand output; investment specific shocks mainly explain hours worked volatility.This suggests that neutral progress is consistent with Schumpeterian creative destruction,while investment-specific progress operates as in a neoclassical growthmodel.

Monetary unions and the transaction cost savings of a single currency

This paper studies the transaction cost savings of moving froma multi-currency exchange system to a single currency one. Theanalysis concentrates exclusively on the transaction andprecautionary demand for money and abstracts from any othermotives to hold currency. A continuous-time, stochastic Baumol-like model similar to that in Frenkel and Jovanovic (1980) isgeneralized to include several currencies and calibrated to fitEuropean data. The analysis implies an upper bound for thesavings associated with reductions of transaction costs derivedfrom the European Monetary Union of approximately 0.6\% of theCommunity GDP. Additionally, the magnitudes of the brokeragefee and the volatility of transactions, whose estimation hastraditionally been difficult to address empirically, areapproximated for Europe.

Financing local development: Quasi-experimental evidence from municipalities in Brazil, 1980-1991

This paper uses a regression discontinuity design to estimate the impact of additional unrestrictedgrant financing on local public spending, public service provision, schooling, literacy, andincome at the community (municipio) level in Brazil. Additional transfers increased local publicspending per capita by about 20% with no evidence of crowding out own revenue or otherrevenue sources. The additional local spending increased schooling per capita by about 7% andliteracy rates by about 4 percentage points. The implied marginal cost of schooling -accountingfor corruption and other leakages- amounts to about US$ 126, which turns out to be similar tothe average cost of schooling in Brazil in the early 1980s. In line with the effect on human capital,the poverty rate was reduced by about 4 percentage points, while income per capita gains werepositive but not statistically significant. Results also suggest that additional public spending hadstronger effects on schooling and literacy in less developed parts of Brazil, while poverty reductionwas evenly spread across the country.

Aggregate consequences of limited contract enforceability

We study a general equilibrium model in which entrepreneurs finance investment with optimal financial contracts. Because of enforceability problems, contracts are constrained efficient. We show that limited enforceability amplifies the impact of technological innovations on aggregate output. More generally, we show that lower enforceability of contracts will be associated with greater aggregate volatility. A key assumption for this result is that defaulting entrepreneurs are not excluded from the market.

Gall inducing arthropods from a seasonally dry tropical forest in Serra do Cipó, Brazil

Highly diverse forms of galling arthropods can be identified in much of southeastern Brazil's vegetation. Three fragments of a Seasonally Dry Tropical Forest (SDTF) located in the southern range of the Espinhaço Mountains were selected for study in the first survey of galling organisms in such tropical vegetation. Investigators found 92 distinct gall morphotypes on several organs of 51 host plant species of 19 families. Cecidomyiidae (Diptera) was the most prolific gall-inducing species, responsible for the largest proportion of galls (77%) observed. Leaves were the most frequently galled plant organ (63%), while the most common gall morphotype was of a spherical shape (30%). The two plant species, Baccharis dracunculifolia (Asteraceae) and Celtis brasiliensis (Cannabaceae), presented the highest number of gall morphtypes, displaying an average of 5 gall morphotypes each. This is the first study of gall-inducing arthropods and their host plant species ever undertaken in a Brazilian SDTF ecosystem. Given the intense human pressure on SDTFs, the high richness of galling arthropods, and implied floral host diversity found in this study indicates the need for an increased effort to catalogue the corresponding flora and fauna, observe their intricate associations and further understand the implications of such rich diversity in these stressed and vulnerable ecosystems.

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.

The structural dynamics of US output and inflation: What explains the changes?

We examine the dynamics of US output and inflation using a structural time varyingcoefficient VAR. We show that there are changes in the volatility of both variables andin the persistence of inflation. Technology shocks explain changes in output volatility,while a combination of technology, demand and monetary shocks explain variations inthe persistence and volatility of inflation. We detect changes over time in the transmission of technology shocks and in the variance of technology and of monetary policyshocks. Hours and labor productivity always increase in response to technology shocks.