The simple macroeconomics of North and South in EMU. Bruegel Working Paper 2012/12, 30 July 2012

The euro area today consists of a competitive, moderately leveraged North and an uncompetitive, over-indebted South. Its main macroeconomic challenge is to carry out the adjustment required to restore the competitiveness of its southern part and eliminate its excessive public and private debt burden. This paper investigates the relationship between fiscal and competitiveness adjustment in a stylised model with two countries in a monetary union, North and South. To restore competitiveness, South implements a more restrictive fiscal policy than North. We consider two scenarios. In the first, monetary policy aims at keeping inflation constant in the North. The South therefore needs to deflate to regain competitiveness, which worsens the debt dynamics. In the second, monetary policy aims at keeping inflation constant in the monetary union as a whole. This results in more monetary stimulus, inflation in the North is higher, and this in turn helps the debt dynamics in the South. Our main findings are: •The differential fiscal stance between North and South is what determines real exchange rate changes. South therefore needs to tighten more. There is no escape from relative austerity. •If monetary policy aims at keeping inflation stable in the North and the initial debt is above a certain threshold, debt dynamics are perverse: fiscal retrenchment is self-defeating; •If monetary policy targets average inflation instead, which implies higher inflation in the North, the initial debt threshold above which the debt dynamics become perverse is higher. Accepting more inflation at home is therefore a way for the North to contribute to restoring debt sustainability in the South. •Structural reforms in the South improve the debt dynamics if the initial debt is not too high. Again, targeting average inflation rather than inflation in the North helps strengthen the favourable effects of structural reforms.

Agricultural Policy and Nest Success of Prairie Ducks in Canada and the United States

The Prairie Pothole Region of North America has been modified by agriculture during the past 100 yr, resulting in habitat loss, fragmentation, and degradation that have reduced the abundance and productivity of many wildlife species. The 1985 U.S. Farm Bill provided economic incentives to agriculture that are considered by many to be beneficial to nesting waterfowl and other wildlife. Canada has not experienced an equally comprehensive legislative initiative, which would seem to indicate that benefits to waterfowl in Canada should lag behind those in the United States. However, with the removal of some agricultural subsidies in Canada during the 1990s, the amount of perennial cover in the Canadian prairies increased to levels similar to those of the 1970s. Therefore, it is unclear whether and how the U.S. and Canadian prairies might differ with regard to habitat quality for nesting waterfowl. We used historical and contemporary data to compare temporal trends in duck nest success between the United States and Canada and to assess how mean nest success varied with proportion of cropland and wetland density. The data best supported models with nonlinear temporal trends that varied between the two countries and suggested that mean nest success in Canada declined from its high point in 1930s and remained below the long-term value of 0.16 until the end of the time series in 2005. Mean nest success in the United States also declined from its high point in the 1930s, but increased to above the long-term value of 0.25 during the early 2000s. Mean nest success varied negatively with proportion of cropland in both the United States and Canada. Mean nest success was positively correlated with pond density at Canadian sites, but showed only a weak association with pond density at U.S. sites. All models explained the low proportions of the variation in nest success, suggesting that unmeasured factors such as the abundance and identity of nest predators may have strong effects on nest success. Nonetheless, these results support earlier suggestions that agricultural policy that encourages permanent cover positively influences duck reproductive success. We also found that, for reasons that are not entirely clear, nest success for the same intensity of row cropping was generally higher in the United States than in Canada. Further research is required to elucidate the exact nature of the composition, size, and distribution of permanent cover that coincides with greater average nest success by dabbling ducks in the United States. In addition, the data suggest that the benefits that might accrue from increases in the amount of perennial cover in Canada would be better realized if these efforts are accompanied by strong measures to conserve wetlands.

The spatial distribution and evolution characteristics of North Atlantic cyclones

A climatology of extratropical cyclones is produced using an objective method of identifying cyclones based on gradients of 1-km height wet-bulb potential temperature. Cyclone track and genesis density statistics are analyzed and this method is found to compare well with other cyclone identification methods. The North Atlantic storm track is reproduced along with the major regions of genesis. Cyclones are grouped according to their genesis location and the corresponding lysis regions are identified. Most of the cyclones that cross western Europe originate in the east Atlantic where the baroclinicity and the sea surface temperature gradients are weak compared to the west Atlantic. East Atlantic cyclones also have higher 1-km height relative vorticity and lower mean sea level pressure at their genesis point than west Atlantic cyclones. This is consistent with the hypothesis that they are secondary cyclones developing on the trailing fronts of preexisting “parent” cyclones. The evolution characteristics of composite west and east Atlantic cyclones have been compared. The ratio of their upper- to lower-level forcing indicates that type B cyclones are predominant in both the west and east Atlantic, with strong upper- and lower-level features. Among the remaining cyclones, there is a higher proportion of type C cyclones in the east Atlantic, whereas types A and C are equally frequent in the west Atlantic.

Multiple phases of North African humidity recorded in lacustrine sediments from the Fazzan Basin, Libyan Sahara

The Fazzan Basin of south-west Libya is at present arid with less than 20 mm of rainfall per annum. However, regionally extensive limestones, lacustrine sands and coquina (fossiliferous carbonate rock) deposits show that the Fazzan Basin previously contained a large palaeolake, indicating that the climate in the past was more humid. Optically stimulated luminescence (OSL) dating techniques have been applied to key lacustrine deposits within the basin in an attempt to provide an internally consistent chronology for this humidity record. Results indicate that palaeolake sediments within the Fazzan Basin record a very long history of palacohydrological change, ranging from present day and conditions to humidity capable of sustaining a lake with an approximate area of 76,250 km(2). The existence of humid periods in mid oxygen isotope stage 5 and the early Holocene is confirmed. An older lacustrine event, tentatively correlated to oxygen isotope stage 11, is also recognized. In addition, evidence is presented for at least two humid phases beyond the age range over which the conventional OSL dating technique is applicable. This study demonstrates that OSL dating of palaeolake sediments within the Fazzan Basin offers the potential to provide a detailed record of North African humidity spanning several glacial-interglacial cycles. (c) 2006 Elsevier Ltd. All rights reserved.

The impact of global freshwater forcing on the thermohaline circulation: adjustment of North Atlantic convection sites in a CGCM

On the time scale of a century, the Atlantic thermohaline circulation (THC) is sensitive to the global surface salinity distribution. The advection of salinity toward the deep convection sites of the North Atlantic is one of the driving mechanisms for the THC. There is both a northward and a southward contributions. The northward salinity advection (Nsa) is related to the evaporation in the subtropics, and contributes to increased salinity in the convection sites. The southward salinity advection (Ssa) is related to the Arctic freshwater forcing and tends on the contrary to diminish salinity in the convection sites. The THC changes results from a delicate balance between these opposing mechanisms. In this study we evaluate these two effects using the IPSL-CM4 ocean-atmosphere-sea-ice coupled model (used for IPCC AR4). Perturbation experiments have been integrated for 100 years under modern insolation and trace gases. River runoff and evaporation minus precipitation are successively set to zero for the ocean during the coupling procedure. This allows the effect of processes Nsa and Ssa to be estimated with their specific time scales. It is shown that the convection sites in the North Atlantic exhibit various sensitivities to these processes. The Labrador Sea exhibits a dominant sensitivity to local forcing and Ssa with a typical time scale of 10 years, whereas the Irminger Sea is mostly sensitive to Nsa with a 15 year time scale. The GIN Seas respond to both effects with a time scale of 10 years for Ssa and 20 years for Nsa. It is concluded that, in the IPSL-CM4, the global freshwater forcing damps the THC on centennial time scales.