Debt enforcement and relational contracting

We examine how third-party debt enforcement affects the emergence and performance ofrelational contracts in credit markets. We implement an experiment with finitely repeatedcredit relationships in which borrowers can default. In the weak enforcement treatmentdefaulting borrowers can keep their funds invested. In the strong enforcement treatmentdefaulting borrowers have to liquidate their investment. Under weak enforcement fewerrelationships emerge in which loans are extended and repaid. When such relationships doemerge they exhibit a lower credit volume than under strong enforcement. These findingssuggest that relational contracting in credit markets requires a minimum standard of thirdpartydebt enforcement.

Range expansion of the greater white-toothed shrew Crocidura russula in Switzerland results in local extinction of the bicoloured white-toothed shrew C-leucodon

The distribution limits of Crocidura russula (Hermann, 1780) and C. leucodon (Hermann, 1780) were investigated during an interval of 25 years in the bottom of the Rhone valley above Lake Geneva, Switzerland (total data set: 105 spatio-temporal occurrences, 1137 shrews). In 1975, the contact zone between the two species was situated in the region of Martigny. In 1999/2000, new sampling revealed three results: (1) The contact zone showed an upward shift of about 25 km. (2) In the expanded range of C. russula, the resident species has totally disappeared (confirmed by owl pellets analysis). (3) This demonstrates a dominance of C, russula over C. leucodon. Three hypotheses which may explain the range expansion of C. russula were evaluated: (1) habitat modification favouring linear dispersal due to the construction of a highway; (2) temporal event favoured by climate fluctuations, or (3) ongoing postglacial colonisation of Europe. Hypothesis 1 was rejected, because the progression of the shrews anticipated the construction. Hypothesis 3 received only weak support because range limits of C. russula in the region of Nice have been stable for thousands of years. Therefore hypothesis 2, admitting that ongoing climate change has facilitated range expansion, is the most probable.

The hidden costs of hidden debt

We report evidence that salience may have economically signi.cant e¤ects on homeowners.borrowing behavior, through a bias in favour of less salient but more costly loans. Survey evidence corroborates the existence of such a bias. We outline a simple model in which some consumers are biased and show that under plausible assumptions this affects prices in equilibrium. Market data support the predictions of the model.

Relaxation of selective constraints causes independent selenoprotein extinction in insect genomes

BACKGROUND: Selenoproteins are a diverse family of proteins notable for the presence of the 21st amino acid, selenocysteine. Until very recently, all metazoan genomes investigated encoded selenoproteins, and these proteins had therefore been believed to be essential for animal life. Challenging this assumption, recent comparative analyses of insect genomes have revealed that some insect genomes appear to have lost selenoprotein genes. METHODOLOGY/PRINCIPAL FINDINGS: In this paper we investigate in detail the fate of selenoproteins, and that of selenoprotein factors, in all available arthropod genomes. We use a variety of in silico comparative genomics approaches to look for known selenoprotein genes and factors involved in selenoprotein biosynthesis. We have found that five insect species have completely lost the ability to encode selenoproteins and that selenoprotein loss in these species, although so far confined to the Endopterygota infraclass, cannot be attributed to a single evolutionary event, but rather to multiple, independent events. Loss of selenoproteins and selenoprotein factors is usually coupled to the deletion of the entire no-longer functional genomic region, rather than to sequence degradation and consequent pseudogenisation. Such dynamics of gene extinction are consistent with the high rate of genome rearrangements observed in Drosophila. We have also found that, while many selenoprotein factors are concomitantly lost with the selenoproteins, others are present and conserved in all investigated genomes, irrespective of whether they code for selenoproteins or not, suggesting that they are involved in additional, non-selenoprotein related functions. CONCLUSIONS/SIGNIFICANCE: Selenoproteins have been independently lost in several insect species, possibly as a consequence of the relaxation in insects of the selective constraints acting across metazoans to maintain selenoproteins. The dispensability of selenoproteins in insects may be related to the fundamental differences in antioxidant defense between these animals and other metazoans.

Institutions, Public Debt and Foreign Finance

We study the role of domestic financial institutions in sustaining capital flows to the private and public sector of a country whose government can default on its debt. As in recent public debt crises, in our model public defaults weaken banks' balance sheets, disrupting domestic financial markets. This effect leads to a novel complementarity between private capital inflows and public borrowing, where the former sustain the latter by boosting the government's cost of default. Our key message is that, by shaping the direction of private capital flows, financial institutions determine whether financial integration improves or reduces government discipline. We explore the implications of this complementarity for financial liberalization and debt-financed bailouts of banks. We present some evidence consistent with complementarity.

Nominal Debt as a Burden on Monetary Policy

We study the effects of nominal debt on the optimal sequential choice of monetary policy. When the stock of debt is nominal, the incentive to generate unanticipated inflation increases the cost of the outstanding debt even if no unanticipated inflation episodes occur in equilibrium. Without full commitment, the optimal sequential policy is to deplete the outstanding stock of debt progressively until these extra costs disappear. Nominal debt is therefore a burden on monetary policy, not only because it must be serviced, but also because it creates a time inconsistency problem that distorts interest rates. The introduction of alternative forms of taxation may lessen this burden, if there is enough commtiment to fiscal policy. If there is full commitment to an optimal fiscal policy, then the resulting monetary policy is the Friedman rule of zero nominal interest rates.

On metapopulation resistance to drift and extinction.

The spatial configuration of metapopulations (numbers, sizes, and localization of patches) affects their ability to resist demographic extinction and genetic drift, but sometimes with opposite effects. Small and isolated patches, for instance, contribute marginally to demography but may play a large role in genetics by maintaining a sizeable amount of genetic variance among demes. In source-sink systems, similarly, connectivity may be beneficial in terms of effective size, but detrimental in terms of survival, by lowering the reproductive value of source populations. How to reconcile these opposite effects? Here we propose an analytical framework that integrates fixation time (ability to resist genetic drift) and extinction time (ability to resist demographic extinction) into a single index of resistance, measuring the ability of a metapopulation to maintain its demo-genetic integrity. We then illustrate with numerical examples how conflicting demands may be resolved.

Credit card debt puzzles

Most US credit card holders revolve high-interest debt, often combined with substantial (i) asset accumulation by retirement, and (ii) low-rate liquid assets. Hyperbolic discounting can resolve only the former puzzle (Laibson et al., 2003). Bertaut and Haliassos (2002) proposed an 'accountant-shopper'framework for the latter. The current paper builds, solves, and simulates a fully-specified accountant-shopper model, to show that this framework canactually generate both types of co-existence, as well as target credit card utilization rates consistent with Gross and Souleles (2002). The benchmark model is compared to setups without self-control problems, with alternative mechanisms, and with impatient but fully rational shoppers.

Debt and deficit fluctuations and the structure of bond markets

This paper tests for the market environment within which US fiscal policyoperates, that is we test for the incompleteness of the US government bondmarket. We document the stochastic properties of US debt and deficits andthen consider the ability of competing optimal tax models to account forthis behaviour. We show that when a government pursues an optimal taxpolicy and issues a full set of contingent claims, the value of debthas the same or less persistence than other variables in the economyand declines in response to higher deficit shocks. By contrast, ifgovernments only issue one-period risk free bonds (incomplete markets),debt shows more persistence than other variables and it increases inresponse to expenditure shocks. Maintaining the hypothesis of Ramseybehavior, US data conflicts.

Risk sharing with the monarch: Excusable defaults and contingent debt in the age of Philip II, 1556-1598

Contingent sovereign debt can create important welfare gains. Nonetheless,there is almost no issuance today. Using hand-collected archival data, we examine thefirst known case of large-scale use of state-contingent sovereign debt in history. Philip IIof Spain entered into hundreds of contracts whose value and due date depended onverifiable, exogenous events such as the arrival of silver fleets. We show that this allowedfor effective risk-sharing between the king and his bankers. The data also stronglysuggest that the defaults that occurred were excusable they were simply contingenciesover which Crown and bankers had not contracted previously.

Sex differences in the neurobiology of fear conditioning and extinction: a preliminary fMRI study of shared sex differences with stress-arousal circuitry.

BACKGROUND: The amygdala, hippocampus, medial prefrontal cortex (mPFC) and brain-stem subregions are implicated in fear conditioning and extinction, and are brain regions known to be sexually dimorphic. We used functional magnetic resonance imaging (fMRI) to investigate sex differences in brain activity in these regions during fear conditioning and extinction. METHODS: Subjects were 12 healthy men comparable to 12 healthy women who underwent a 2-day experiment in a 3 T MR scanner. Fear conditioning and extinction learning occurred on day 1 and extinction recall occurred on day 2. The conditioned stimuli were visual cues and the unconditioned stimulus was a mild electric shock. Skin conductance responses (SCR) were recorded throughout the experiment as an index of the conditioned response. fMRI data (blood-oxygen-level-dependent [BOLD] signal changes) were analyzed using SPM8. RESULTS: Findings showed no significant sex differences in SCR during any experimental phases. However, during fear conditioning, there were significantly greater BOLD-signal changes in the right amygdala, right rostral anterior cingulate (rACC) and dorsal anterior cingulate cortex (dACC) in women compared with men. In contrast, men showed significantly greater signal changes in bilateral rACC during extinction recall. CONCLUSIONS: These results indicate sex differences in brain activation within the fear circuitry of healthy subjects despite similar peripheral autonomic responses. Furthermore, we found that regions where sex differences were previously reported in response to stress, also exhibited sex differences during fear conditioning and extinction.

Shrews in suburbia: an application of Goodman's extinction model

An equation is applied for calculating the expected persistence time of an unstructured population of the white-toothed shrew Crocidura russula from Preverenges, a suburban area in western Switzerland. Population abundance data from March and November between 1977 and 1988 were fit to the logistic density dependence model to estimate mean population growth rate as a function of population density. The variance in mean growth rate was approximated with two different models. The largest estimated persistence time was less than a few decades, the smallest less than 10 years. The results are sensitive to the magnitude of variance in population growth rate. Deviations from the logistic density dependence model in November are quite well explained by weather variables but those in March are uncorrelated with weather variables. Variability in population growth rates measured in winter months may be better explained by behavioural mechanisms. Environmental variability, dispersal of juveniles and refugia within the range of the population may contribute to its long-term survival.

Consumer Advisory Bulletin, More Sources on Students and Credit Card Debt, October 2007

The Attorney General’s Consumer Protection Division receives hundreds of calls and consumer complaints every year. Follow these tips to avoid unexpected expense and disappointments. This record is about: More Sources on Students and Credit Card Debt Suggested by the Office of Attorney General Tom Miller

Consumer Advisory Bulletin, Fair Debt Collection: Know Your Rights, March 2007

The Attorney General’s Consumer Protection Division receives hundreds of calls and consumer complaints every year. Follow these tips to avoid unexpected expense and disappointments. This record is about: Fair Debt Collection: Know Your Rights