Banks, liquidity crises and economic growth

How do the liquidity functions of banks affect investment and growth at different stages ofeconomic development? How do financial fragility and the costs of banking crises evolve with the level of wealth of countries? We analyze these issues using an overlapping generations growth model where agents, who experience idiosyncratic liquidity shocks, can invest in a liquid storage technology or in a partially illiquid Cobb Douglas technology. By pooling liquidity risk, banks play a growth enhancing role in reducing inefficient liquidation of long term projects, but they may face liquidity crises associated with severe output losses. We show that middle income economies may find optimal to be exposed to liquidity crises, while poor and rich economies have more incentives to develop a fully covered banking system. Therefore, middle income economies could experience banking crises in the process of their development and, as they get richer, they eventually converge to a financially safe long run steady state. Finally, the model replicates the empirical fact of higher costs of banking crises for middle income economies.

Equilibrium unemployment insurance

In this paper, we incorporate a positive theory of unemployment insuranceinto a dynamic overlapping generations model with search-matching frictionsand on-the-job learning-by-doing. The model shows that societies populatedby identical rational agents, but differing in the initial distributionof human capital across agents, may choose very different unemploymentinsurance levels in a politico-economic equilibrium. The interactionbetween the political decision about the level of the unemployment insuranceand the optimal search behavior of the unemployed gives rise to aself-reinforcing mechanism whichmay generate multiple steady-stateequilibria. In particular, a European-type steady-state with highunemployment, low employment turnover and high insurance can co-exist withan American-type steady-state with low unemployment, high employment turnoverand low unemployment insurance. A calibrated version of the model featurestwo distinct steady-state equilibria with unemployment levels and durationrates resembling those of the U.S. and Europe, respectively.

Vitamin C requirements in parenteral nutrition.

Some biochemical functions of vitamin C make it an essential component of parenteral nutrition (PN) and an important therapeutic supplement in other acute conditions. Ascorbic acid is a strong aqueous antioxidant and is a cofactor for several enzymes. The average body pool of vitamin C is 1.5 g, of which 3%-4% (40-60 mg) is used daily. Steady state is maintained with 60 mg/d in nonsmokers and 140 mg/d in smokers. Shocked surgical, trauma, and septic patients have a drastic reduction of circulating plasma ascorbate concentrations. These low concentrations require 3-g doses/d to restore normal plasma ascorbate concentrations, questioning the recommended PN dose of 100 mg/d. Determination of intravenous requirements is usually based on plasma concentrations, which are altered during the inflammatory response. There is no clear indicator of deficiency: serum or plasma ascorbate concentrations <0.3 mg/dL (20 micromol/L) indicates inadequate vitamin C status. On the basis of available pharmacokinetic data the 100 mg/d dose for patients receiving home PN and 200 mg/d for stable adult patients receiving PN are adequate, but requirements have been shown to be higher in perioperative, trauma, burn, and critically ill patients, paralleling oxidative stress. One recommendation cannot fit all categories of patients. Large vitamin C supplements may be considered in severe critical illness, major trauma, and burns because of increased requirements resulting from oxidative stress and wound healing. Future research should distinguish therapeutic use of high-dose ascorbic acid antioxidant therapy from nutritional PN requirements.

The poor stay poor: Non-convergence across countries and regions

We study the issue of income convergence across countries and regions witha Bayesian estimator which allows us to use information in an efficient andflexible way. We argue that the very slow convergence rates to a commonlevel of per-capita income found, e.g., by Barro and Xavier Sala-i-Martin,is due to a 'fixed effect bias' that their cross-sectional analysisintroduces in the results. Our approach permits the estimation of differentconvergence rates to different steady states for each cross sectional unit.When this diversity is allowed, we find that convergence of each unit to(its own) steady state income level is much faster than previously estimatedbut that cross sectional differences persist: inequalities will only bereduced by a small amount by the passage of time. The cross countrydistribution of the steady state is largely explained by the cross countrydistribution of initial conditions.

Educational opportunity and the college premium

Since World War II, the United States government has made improved accessto higher education a priority. This e¤ort has substantially increasedthe number of people who complete college. We show that by reducing theeffective interest rate on borrowing for education, such policies canactually increase the gap in wages between those with a college educationand those without. The mechanism that drives our results is the signaling role of education first explored by Spence (1973). We argue that financialconstraints on education reduce the value of education as a signal. Wesolve for the reduced form relationship between the interest rate and thewage premium in the steady state of a dynamic asymmetric information model.In addition, we discuss evidence of decreases in borrowing costs for educationfinancing in the U.S.

Endogenous business cycles and stabilization policies

The paper reports results on the effects of stylized stabilization policies on endogenously created fluctuations. A simple monetary model with intertemporally optimizing agents is considered. Fluctuations in output may occur due to fluctuations in labor supply which are again caused by volatile expectations which are ``self fulfilling'', i.e. correct given the model. It turns out that stabilization policies that are sufficiently countercyclical in the sense that government spending (on transfers or demand) depends sufficiently strongly negatively on GNP-increases can stabilize the economy at a monetary steadystate for an arbitrarily low degree of distortion of that steady state. Such stabilization has unambiguously good welfare effects and can be achieved without features such as positive lump sum taxation or negative income taxation as part of the stabilization policy.

A low dimensional Kalman filter for systems with lagged observables

This note describes how the Kalman filter can be modified to allow for thevector of observables to be a function of lagged variables without increasing the dimensionof the state vector in the filter. This is useful in applications where it is desirable to keepthe dimension of the state vector low. The modified filter and accompanying code (whichnests the standard filter) can be used to compute (i) the steady state Kalman filter (ii) thelog likelihood of a parameterized state space model conditional on a history of observables(iii) a smoothed estimate of latent state variables and (iv) a draw from the distribution oflatent states conditional on a history of observables.

Inactivation of Notch 1 in immature thymocytes does not perturb CD4 or CD8T cell development.

Notch proteins influence cell-fate decisions in many developing systems. Several gain-of-function studies have suggested a critical role for Notch 1 signaling in CD4-CD8 lineage commitment, maturation and survival in the thymus. However, we show here that tissue-specific inactivation of the gene encoding Notch 1 in immature (CD25+CD44-)T cell precursors does not affect subsequent thymocyte development. Neither steady-state numbers nor the rate of production of CD4+ and CD8+ mature thymocytes is perturbed in the absence of Notch 1. In addition, Notch 1-deficient thymocytes are normally sensitive to spontaneous or glucocorticoid-induced apoptosis. In contrast to earlier reports, these data formally exclude an essential role for Notch 1 in CD4-CD8 lineage commitment, maturation or survival.

Externalities and interdependent growth: Theory and evidence

I formulate and estimate a model of externalities within countriesand technological interdependence across countries. I find that externalreturns to scale to physical capital within countries are 8 percent; thata 10 percent increase of total factor productivity of a country's neighborsraises its total factor productivity by 6 percent; and that a 2 percentannual growth rate of labor productivity can be explained as an endogenousresponse to an exogenous 0.2 percent annual growth rate of total factorproductivity in the steady--state.

North-South convergence and the allocation of CO2 emissions

We postulate a two-region world, comprised of North (calibrated after the US) and South(calibrated after China). Our optimization results show the compatibility of the following threedesiderata:(1) Global CO2 emissions follow a conservative path that leads to the stabilizationof concentrations at 450 ppm.(2) North and South converge to a path of sustained growth at 1% per year (28.2%per generation) in 2075.(3) During the transition to the steady state, North also grows at 1% per year whileSouth s rates of growth are markedly higher.The transition paths require a drastic reduction of the share of emissions allocated to North,large investments in knowledge, both in North and South, as well as very large investments ineducation in South. Surprisingly, in order to sustain North s utility growth rate, some output mustbe transferred from South to North during the transition.Although undoubtedly subject to many caveats, our results support a degree of optimism byproviding prima facie evidence of the possibility of tackling climate change in a way that is fairboth across generations and across regions while allowing for positive rates of humandevelopment.

The rate-limiting step for glucose transport into the hypothalamus is across the blood-hypothalamus interface.

Specialized glucosensing neurons are present in the hypothalamus, some of which neighbor the median eminence, where the blood-brain barrier has been reported leaky. A leaky blood-brain barrier implies high tissue glucose levels and obviates a role for endothelial glucose transporters in the control of hypothalamic glucose concentration, important in understanding the mechanisms of glucose sensing We therefore addressed the question of blood-brain barrier integrity at the hypothalamus for glucose transport by examining the brain tissue-to-plasma glucose ratio in the hypothalamus relative to other brain regions. We also examined glycogenolysis in hypothalamus because its occurrence is unlikely in the potential absence of a hypothalamus-blood interface. Across all regions the concentration of glucose was comparable at a given plasma glucose concentration and was a near linear function of plasma glucose. At steady-state, hypothalamic glucose concentration was similar to the extracellular hypothalamic glucose concentration reported by others. Hypothalamic glycogen fell at a rate of approximately 1.5 micromol/g/h and remained present in substantial amounts. We conclude for the hypothalamus, a putative primary site of brain glucose sensing that: the rate-limiting step for glucose transport into brain cells is at the blood-hypothalamus interface, and that glycogenolysis is consistent with a substantial blood -to- intracellular glucose concentration gradient.

Two-stage, extreme albitization of A-type granites from Rajasthan, NW India

Albitization is a common process during which hydrothermal fluids convert plagioclase and/or K-feldspar into nearly pure albite; however, its specific mechanism in granitoids is not well understood. The c. 1700 Ma A-type metaluminous ferroan granites in the Khetri complex of Rajasthan, NW India, have been albitized to a large extent by two metasomatic fronts, an initial transformation of oligoclase to nearly pure albite and a subsequent replacement of microcline by albite, with sharp contacts between the microcline-bearing and microcline-free zones. Albitization has bleached the original pinkish grey granite and turned it white. The mineralogical changes include transformation of oligoclase (similar to An(12)) and microcline (similar to Or(95)) to almost pure albite (similar to An(0 center dot 5-2)), amphibole from potassian ferropargasite (X-Fe 0 center dot 84-0 center dot 86) to potassic hastingsite (X-Fe 0 center dot 88-0 center dot 97) and actinolite (X-Fe 0 center dot 32-0 center dot 67), and biotite from annite (X-Fe 0 center dot 71-0 center dot 74) to annite (X-Fe 0 center dot 90-0 center dot 91). Whole-rock isocon diagrams show that, during albitization, the granites experienced major hydration, slight gain in Si and major gain in Na, whereas K, Mg, Fe and Ca were lost along with Rb, Ba, Sr, Zn, light rare earth elements and U. Whole-rock Sm-Nd isotope data plot on an apparent isochron of 1419 +/- 98 Ma and reveal significant disturbance and at least partial resetting of the intrusion age. Severe scatter in the whole-rock Rb-Sr isochron plot reflects the extreme Rb loss in the completely albitized samples, effectively freezing Sr-87/Sr-86 ratios in the albite granites at very high values (0 center dot 725-0 center dot 735). This indicates either infiltration of highly radiogenic Sr from the country rock or, more likely, radiogenic ingrowth during a considerable time lag (estimated to be at least 300 Myr) between original intrusion and albitization. The albitization took place at similar to 350-400 degrees C. It was caused by the infiltration of an ascending hydrothermal fluid that had acquired high Na/K and Na/Ca ratios during migration through metamorphic rocks at even lower temperatures in the periphery of the plutons. Oxygen isotope ratios increase from delta O-18 = 7 parts per thousand in the original granite to values of 9-10 parts per thousand in completely albitized samples, suggesting that the fluid had equilibrated with surrounding metamorphosed crust. A metasomatic model, using chromatographic theory of fluid infiltration, explains the process for generating the observed zonation in terms of a leading metasomatic front where oligoclase of the original granite is converted to albite, and a second, trailing front where microcline is also converted to albite. The temperature gradients driving the fluid infiltration may have been produced by the high heat production of the granites themselves. The confinement of the albitized granites along the NE-SW-trending Khetri lineament and the pervasive nature of the albitization suggest that the albitizing fluids possibly originated during reactivation of the lineament. More generally, steady-state temperature gradients induced by the high internal heat production of A-type granites may provide the driving force for similar metasomatic and ore-forming processes in other highly enriched granitoid bodies.

Stable sunspot equilibria in a cash-in-advance economy

We analyze a monetary model with flexible labor supply, cash-inadvance constraints and seigniorage-financed government deficits. If the intertemporal elasticity of substitution of labor is greater than one, there are two steady states, one determinate and the other indeterminate. If the elasticity is less than one, there is a unique steady state, which can be indeterminate. Only in the latter case do there exist sunspot equilibria that are stable under adaptive learning. A sufficient reduction in government purchases can in many cases eliminate the sunspot equilibria while raising consumption/labor taxes even enough to balance the budget may fail to achieve determinacy.

Local selection rules that can determine specific pathways of DNA unknotting by type II DNA topoisomerases.

We performed numerical simulations of DNA chains to understand how local geometry of juxtaposed segments in knotted DNA molecules can guide type II DNA topoisomerases to perform very efficient relaxation of DNA knots. We investigated how the various parameters defining the geometry of inter-segmental juxtapositions at sites of inter-segmental passage reactions mediated by type II DNA topoisomerases can affect the topological consequences of these reactions. We confirmed the hypothesis that by recognizing specific geometry of juxtaposed DNA segments in knotted DNA molecules, type II DNA topoisomerases can maintain the steady-state knotting level below the topological equilibrium. In addition, we revealed that a preference for a particular geometry of juxtaposed segments as sites of strand-passage reaction enables type II DNA topoisomerases to select the most efficient pathway of relaxation of complex DNA knots. The analysis of the best selection criteria for efficient relaxation of complex knots revealed that local structures in random configurations of a given knot type statistically behave as analogous local structures in ideal geometric configurations of the corresponding knot type.

Malthusian dynamism and the rise of Europe: Make war, not love

This paper argues that Malthusian regimes are capable of sustained changes in per capita incomes. Shifting mortality and fertility schedules can lead to different steady-state income levels, with long periods of growth during the transition. Europe checked the downward pressure on wages through late marriage, which reduced fertility, and a mortality regime that combined high death rates with high incomes. We argue that both emerged as a result of the Black Death.