Aggregate and welfare effects of long run inflation risk under inflation and price-level targeting

This paper presents a DSGE model in which long run inflation risk matters for social welfare. Aggregate and welfare effects of long run inflation risk are assessed under two monetary regimes: inflation targeting (IT) and price-level targeting (PT). These effects differ because IT implies base-level drift in the price level, while PT makes the price level stationary around a target price path. Under IT, the welfare cost of long run inflation risk is equal to 0.35 percent of aggregate consumption. Under PT, where long run inflation risk is largely eliminated, it is lowered to only 0.01 per cent. There are welfare gains from PT because it raises average consumption for the young and lowers consumption risk substantially for the old. These results are strongly robust to changes in the PT target horizon and fairly robust to imperfect credibility, fiscal policy, and model calibration. While the distributional effects of an unexpected transition to PT are sizeable, they are short-lived and not welfare-reducing.

Low-frequency drug-resistant HIV-1 and risk of virological failure to first-line NNRTI-based ART: a multicohort European case-control study using centralized ultrasensitive 454 pyrosequencing.

OBJECTIVES: It is still debated if pre-existing minority drug-resistant HIV-1 variants (MVs) affect the virological outcomes of first-line NNRTI-containing ART. METHODS: This Europe-wide case-control study included ART-naive subjects infected with drug-susceptible HIV-1 as revealed by population sequencing, who achieved virological suppression on first-line ART including one NNRTI. Cases experienced virological failure and controls were subjects from the same cohort whose viraemia remained suppressed at a matched time since initiation of ART. Blinded, centralized 454 pyrosequencing with parallel bioinformatic analysis in two laboratories was used to identify MVs in the 1%-25% frequency range. ORs of virological failure according to MV detection were estimated by logistic regression. RESULTS: Two hundred and sixty samples (76 cases and 184 controls), mostly subtype B (73.5%), were used for the analysis. Identical MVs were detected in the two laboratories. 31.6% of cases and 16.8% of controls harboured pre-existing MVs. Detection of at least one MV versus no MVs was associated with an increased risk of virological failure (OR = 2.75, 95% CI = 1.35-5.60, P = 0.005); similar associations were observed for at least one MV versus no NRTI MVs (OR = 2.27, 95% CI = 0.76-6.77, P = 0.140) and at least one MV versus no NNRTI MVs (OR = 2.41, 95% CI = 1.12-5.18, P = 0.024). A dose-effect relationship between virological failure and mutational load was found. CONCLUSIONS: Pre-existing MVs more than double the risk of virological failure to first-line NNRTI-based ART.

Unemployment Risk and Wage Differentials

Workers in less secure jobs are often paid less than identical-looking workers in more secure jobs. We show that this lack of compensating differentials for unemployment risk can arise in equilibrium when all workers are identical and firms differ only in job security (i.e. the probability that the worker is not sent into unemployment). In a setting where workers search for new positions both on and off the job, the worker's marginal willingness to pay for job security is endogenous: it depends on the behavior of all firms in the labor market and increases with the rent the employing firm leaves to the worker. We solve for the labor market equilibrium, finding that wages increase with job security for at least all firms in the risky tail of the distribution of firm-level unemployment risk. Meanwhile, unemployment becomes persistent for low-wage and unemployed workers, a seeming pattern of 'unemployment scarring' created entirely by firm heterogeneity. Higher in the wage distribution, workers can take wage cuts to move to more stable employment.

Asset Prices, Business Cycles, and Markov-Perfect Fiscal Policy when Agents are Risk-Sensitive

We study a business cycle model in which a benevolent fiscal authority must determine the optimal provision of government services, while lacking credibility, lump-sum taxes, and the ability to bond finance deficits. Households and the fiscal authority have risk sensitive preferences. We find that outcomes are affected importantly by the household's risk sensitivity, but not by the fiscal authority's. Further, while household risk-sensitivity induces a strong precautionary saving motive, which raises capital and lowers the return on assets, its effects on fluctuations and the business cycle are generally small, although more pronounced for negative shocks. Holding the stochastic steady state constant, increases in household risk-sensitivity lower the risk-free rate and raise the return on equity, increasing the equity premium. Finally, although risk-sensitivity has little effect on the provision of government services, it does cause the fiscal authority to lower the income tax rate. An additional contribution of this paper is to present a method for computing Markov-perfect equilibria in models where private agents and the government are risk-sensitive decisionmakers.

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.

Comparative Statics of Asset Prices: the effect of other assets' risk

Currently, financial economics is unable to predict changes in asset prices with respect to changes in the underlying risk factors, even when an asset's dividend is independent of a given factor. This paper takes steps towards addressing this issue by highlighting a crucial component of wealth effects on asset prices hitherto ignored by the literature. Changes in wealth do not only alter an agents risk aversion, but also her perceived 'riskiness' of a security. The latter enhances significantly the extent to which market- clearing leads to endogenously-generated correlation across asset prices, over and above that induced by correlation between payoffs, giving the appearance of 'contagion.'

Complete Markets Strikes Back: Revisiting Risk Sharing Tests under Discount Rate Heterogeneity

Recent risk sharing tests strongly reject the hypothesis of complete markets, because in the data: (1) the individual consumption comoves with income and (2) the consumption dispersion increases over the life cycle. In this paper, I revisit the implications of these risk sharing tests in the context of a complete market model with discount rate heterogeneity, which is extended to introduce the individual choices of effort in education. I .nd that a complete market model with discount rate heterogeneity can pass both types of the risk sharing tests. The endogenous positive correlation between income growth rate and patience makes the individual consumption comove with income, even if the markets are complete. I also show that this model is quantitatively admissible to account for both the observed comovement of consumption and income and the increase of consumption dispersion over the life cycle.

Modeling Dependence Structure and Forecasting Portfolio Value-at-Risk with Dynamic Copulas

We study the asymmetric and dynamic dependence between financial assets and demonstrate, from the perspective of risk management, the economic significance of dynamic copula models. First, we construct stock and currency portfolios sorted on different characteristics (ex ante beta, coskewness, cokurtosis and order flows), and find substantial evidence of dynamic evolution between the high beta (respectively, coskewness, cokurtosis and order flow) portfolios and the low beta (coskewness, cokurtosis and order flow) portfolios. Second, using three different dependence measures, we show the presence of asymmetric dependence between these characteristic-sorted portfolios. Third, we use a dynamic copula framework based on Creal et al. (2013) and Patton (2012) to forecast the portfolio Value-at-Risk of long-short (high minus low) equity and FX portfolios. We use several widely used univariate and multivariate VaR models for the purpose of comparison. Backtesting our methodology, we find that the asymmetric dynamic copula models provide more accurate forecasts, in general, and, in particular, perform much better during the recent financial crises, indicating the economic significance of incorporating dynamic and asymmetric dependence in risk management.

Unemployment Risk and Wage Differentials

Workers in less-secure jobs are often paid less than identical-looking workers in more secure jobs. We show that this lack of compensating differentials for unemployment risk can arise in equilibrium when all workers are identical and firms differ only in job security (i.e. the probability that the worker is not sent into unemployment). In a setting where workers search for new positions both on and off the job, the worker’s marginal willingness to pay for job security is endogenous, increasing with the rent received by a worker in his job, and depending on the behavior of all firms in the labor market. We solve for the labor market equilibrium and find that wages increase with job security for at least all firms in the risky tail of the distribution of firm-level unemployment risk. Unemployment becomes persistent for low-wage and unemployed workers, a seeming pattern of ‘unemployment scarring’ created entirely by firm heterogeneity. Higher in the wage distribution, workers can take wage cuts to move to more stable employment.

Modeling Dependence Structure and Forecasting Market Risk with Dynamic Asymmetric Copula

We investigate the dynamic and asymmetric dependence structure between equity portfolios from the US and UK. We demonstrate the statistical significance of dynamic asymmetric copula models in modelling and forecasting market risk. First, we construct “high-minus-low" equity portfolios sorted on beta, coskewness, and cokurtosis. We find substantial evidence of dynamic and asymmetric dependence between characteristic-sorted portfolios. Second, we consider a dynamic asymmetric copula model by combining the generalized hyperbolic skewed t copula with the generalized autoregressive score (GAS) model to capture both the multivariate non-normality and the dynamic and asymmetric dependence between equity portfolios. We demonstrate its usefulness by evaluating the forecasting performance of Value-at-Risk and Expected Shortfall for the high-minus-low portfolios. From back-testing, e find consistent and robust evidence that our dynamic asymmetric copula model provides the most accurate forecasts, indicating the importance of incorporating the dynamic and asymmetric dependence structure in risk management.

Administering brief motivational interventions to young men: Results from a pilot census transmissible study among 19 year-old francophone Swiss men.

AIMS - To pilot the implementation of brief motivational intervention (BMI) among conscripts, and to test the effectiveness of BMI in young men voluntarily showing up for a single face-to-face alcohol BMI session. Participants were conscripts attending the army recruitment process in Lausanne. This process is mandatory for all Swiss males at age 19 and Lausanne serves all francophone Swiss men. METHODS - Of 3'227 young men that were seen during the army recruitment procedures, 445 voluntarily showed up for a BMI and 367 were included in the study (exclusions were random and unsystematic and related to organizational aspects in the recruitment center). After an initial assessment, subjects were randomized into two groups: an immediate BMI and a 6-month delayed BMI (waiting list design). A 6-month follow-up assessment was conducted in both groups. BMI was a face-to-face 20 minutes counseling session with a psychologist trained in motivational interviewing at baseline and a telephone session for the control group at follow-up. Strategies of BMI included the exploration and evocation of a possible behavior change, importance of future change, readiness to change, and commitment to change. A filmed example of such an intervention is available in French at www.alcoologie.ch. RESULTS - All procedures are now fully implemented and working and the provision of preventive efforts found general approval by the army. 3'227 were eligible for BMI and 445 of them (13.8%) showed up for receiving a BMI. 367 were included in the study, 181 in the BMI group and 186 in the control group. More than 86% of those included were reached at follow-up. With one exception all findings on alcohol use went in the expected direction, i.e. a stronger decrease in alcohol use (or a smaller increase as for usual weekly drinking amount) in the BMI group. The risk for risky single occasion drinking (RSOD) decreased from 57% at-risk users at baseline to 50.6%, i.e. a 6.4% point decrease in the BMI group, while there was only a 0.6% point decrease (from 57.5% to 56.9%) in the control group. Moreover, the study showed that there was a likelihood of crossover effects for other substances like tobacco smoking and cannabis use. Despite these encouraging and consistent positive findings, none reached significance at conventional levels (p < 0.05). DISCUSSION - Data suggest a beneficial impact of BMI on alcohol use outcomes and potential effect on other substance use in 19-year old men attending the army recruitment and showing up voluntarily for BMI. As the main aim was to implement and test feasibility of conducting BMI in this setting none of our findings reached statistical significance. The consistency of findings across measures and substances, however, raises hope that non-significance in the present study does not mean no effect, but mainly insufficient power of this pilot study. [Authors]

Serological survey for canine cutaneous and visceral leishmaniasis in areas at risk for transmission in Rio de Janeiro where prophylatic measures had been adopted

A serological survery for canine visceral (VL) and American cutaneous leishmaniasis (ACL) has been carried out during 1984-1989, to assess the effects of the prophylactic measures adopted in areas where there was a risk of transmission of the diseases in Rio de Janeiro. A previous serologival survey (1982/83) had detected serum positive dogas as well as the human disease in these same areas. A total fo 22,828 dogs have been examined in this last survey, 7,807 of which came from Campo Grande (VL and ACL area), 4,110 from Jacarepaguá (ACL area), 4,l46 from Realengo, 3,879 from Bangu and 2,886 from Senador Camará, (three VL areas). The analysis of these results showed a notable reduction in the number of serum positve dogs, compared to those of the first survey was 12.7%, against 0.62% of the second; (b) in Jacarepaguá (ACL) it decreased from 8.6%) to l.8% (c) in Bangu, Realengo and Senador Camará (VL) the rate decreased from 4.3% to 0.38%. The results indicate that this decrease was due to the prophylactic measures adopted in those areas.

Influence of age, risk factors, and cardiovascular and renal disease on arterial stiffness: clinical applications.

Age is the main clinical determinant of large artery stiffness. Central arteries stiffen progressively with age, whereas peripheral muscular arteries change little with age. A number of clinical studies have analyzed the effects of age on aortic stiffness. Increase of central artery stiffness with age is responsible for earlier wave reflections and changes in pressure wave contours. The stiffening of aorta and other central arteries is a potential risk factor for increased cardiovascular morbidity and mortality. Arterial stiffening with aging is accompanied by an elevation in systolic blood pressure (BP) and pulse pressure (PP). Although arterial stiffening with age is a common situation, it has now been confirmed that older subjects with increased arterial stiffness and elevated PP have higher cardiovascular morbidity and mortality. Increase in aortic stiffness with age occurs gradually and continuously, similarly for men and women. Cross-sectional studies have shown that aortic and carotid stiffness (evaluated by the pulse wave velocity) increase with age by approximately 10% to 15% during a period of 10 years. Women always have 5% to 10% lower stiffness than men of the same age. Although large artery stiffness increases with age independently of the presence of cardiovascular risk factors or other associated conditions, the extent of this increase may depend on several environmental or genetic factors. Hypertension may increase arterial stiffness, especially in older subjects. Among other cardiovascular risk factors, diabetes type 1 and 2 accelerates arterial stiffness, whereas the role of dyslipidemia and tobacco smoking is unclear. Arterial stiffness is also present in several cardiovascular and renal diseases. Patients with heart failure, end stage renal disease, and those with atherosclerotic lesions often develop central artery stiffness. Decreased carotid distensibility, increased arterial thickness, and presence of calcifications and plaques often coexist in the same subject. However, relationships between these three alterations of the arterial wall remain to be explored.