The impact of interest-rate subsidies on long-term household debt: Evidence from a large program

The responsiveness of long-term household debt to the interest rate is acrucial parameter for assessing the effectiveness of public policies aimedat promoting specific types of saving. This paper estimates the effect ofa reform of Credito Bonificado, a large program in Portugal that subsidizedmortgage interest rates, on long-term household debt. The reform establisheda ceiling in the price of the house that could be financed through theprogram, and provides plausibly exogenous variation in incentives. Usinga unique dataset of matched household survey data and administrative recordsof debt, we document a large decrease in the probability of signing a newloan after the removal of the subsidy.

Incomplete markets, labor supply and capital accumulation

In this paper we explore the accumulation of capital in the presence oflimited insurance against idiosyncratic shocks, borrowing constraintsand endogenous labor supply. As in the exogenous labor supply case(e.g. Aiyagari 1994, Huggett 1997), we find that steady states arecharacterized with an interest rate smaller than the rate of timepreference. However,wealsofind that when labor supply is endogenous thepresence of uncertainty and a borrowing limit are not enough to giverise to aggregate precautionary savings .

Further evidence on the statistical properties of real GNP

The well-known lack of power of unit root tests has often been attributed to the shortlength of macroeconomic variables and also to DGP s that depart from the I(1)-I(0)alternatives. This paper shows that by using long spans of annual real GNP and GNPper capita (133 years) high power can be achieved, leading to the rejection of both theunit root and the trend-stationary hypothesis. This suggests that possibly neither modelprovides a good characterization of these data. Next, more flexible representations areconsidered, namely, processes containing structural breaks (SB) and fractional ordersof integration (FI). Economic justification for the presence of these features in GNP isprovided. It is shown that the latter models (FI and SB) are in general preferred to theARIMA (I(1) or I(0)) ones. As a novelty in this literature, new techniques are appliedto discriminate between FI and SB models. It turns out that the FI specification ispreferred, implying that GNP and GNP per capita are non-stationary, highly persistentbut mean-reverting series. Finally, it is shown that the results are robust when breaksin the deterministic component are allowed for in the FI model. Some macroeconomicimplications of these findings are also discussed.

Judges' cognition and market order

We argue that during the crystallization of common and civil law in the 19th century, the optimal degree of discretion in judicial rulemaking, albeit influenced by the comparative advantages of both legislative and judicial rulemaking, was mainly determined by the anti-market biases of the judiciary. The different degrees of judicial discretion adopted in both legal traditions were thus optimally adapted to different circumstances, mainly rooted in the unique, market-friendly, evolutionary transition enjoyed by English common law as opposed to the revolutionary environment of the civil law. On the Continent, constraining judicial discretion was essential for enforcing freedom of contract and establishing a market economy. The ongoing debasement of pro-market fundamentals in both branches of the Western legal system is explained from this perspective as a consequence of increased perceptions of exogenous risks and changes in the political system, which favored the adoption of sharing solutions and removed the cognitive advantage of parliaments and political leaders.

Evénements traumatiques et réponses de stress: le rôle de l'ocytocine et de l'attachement [Traumatic events and stress responses: the role of oxytocin and attachement].

Being repeatedly confronted to very difficult situations since childhood influences the way indivuals will later respond to even mildly stressful events. The hypothalamic-pituitary-adrenal axis (HPA) is a complex system implicated in regulating neuroendocrine responses to stress. Its activation produces among others the <stress hormonea, cortisol. However, the regulation of the physiological response to stress depends on psychological factors linked with the representations that individuals develop regarding their close relationships i.e. attachment. Furthermore, attachment representations seem to be associated with oxytocin, a hormone involved both in cortisol reduction and in positive social behaviours.

Why England? Demand, growth and inequality during the Industrial Revolution

Why was England first? And why Europe? We present a probabilistic model that builds on big-push models by Murphy, Shleifer and Vishny (1989), combined with hierarchical preferences. The interaction of exogenous demographic factors (in particular the English low-pressure variant of the European marriage pattern)and redistributive institutions such as the old Poor Law combined to make an Industrial Revolution more likely. Essentially, industrialization is the result of having a critical mass of consumers that is rich enough to afford (potentially) mass-produced goods. Our model is then calibrated to match the main characteristics of the English economy in 1750 and the observed transition until 1850.This allows us to address explicitly one of the key features of the British IndustrialRevolution unearthed by economic historians over the last three decades the slowness of productivity and output change. In our calibration, we find that the probability of Britain industrializing is 5 times larger than France s. Contrary to the recent argument by Pomeranz, China in the 18th century had essentially no chance to industrialize at all. This difference is decomposed into a demographic and a policy component, with the former being far more important than the latter.

Association between the A-2518G polymorphism in the monocyte chemoattractant protein-1 gene and insulin resistance and Type 2 diabetes mellitus.

AIMS/HYPOTHESIS: The molecular mechanisms of obesity-related insulin resistance are incompletely understood. Macrophages accumulate in adipose tissue of obese individuals. In obesity, monocyte chemoattractant protein-1 (MCP-1), a key chemokine in the process of macrophage accumulation, is overexpressed in adipose tissue. MCP-1 is an insulin-responsive gene that continues to respond to exogenous insulin in insulin-resistant adipocytes and mice. MCP-1 decreases insulin-stimulated glucose uptake into adipocytes. The A-2518G polymorphism in the distal regulatory region of MCP-1 may regulate gene expression. The aim of this study was to investigate the impact of this gene polymorphism on insulin resistance. METHODS: We genotyped the Ludwigshafen Risk and Cardiovascular Health (LURIC) cohort ( n=3307). Insulin resistance, estimated by homeostasis model assessment, and Type 2 diabetes were diagnosed in 803 and 635 patients respectively. RESULTS: Univariate analysis revealed that plasma MCP-1 levels were significantly and positively correlated with WHR ( p=0.011), insulin resistance ( p=0.0097) and diabetes ( p<0.0001). Presence of the MCP-1 G-2518 allele was associated with decreased plasma MCP-1 ( p=0.017), a decreased prevalence of insulin resistance (odds ratio [OR]=0.82, 95% CI: 0.70-0.97, p=0.021) and a decreased prevalence of diabetes (OR=0.80, 95% CI: 0.67-0.96, p=0.014). In multivariate analysis, the G allele retained statistical significance as a negative predictor of insulin resistance (OR=0.78, 95% CI: 0.65-0.93, p=0.0060) and diabetes (OR=0.80, 95% CI: 0.66-0.96, p=0.018). CONCLUSIONS/INTERPRETATION: In a large cohort of Caucasians, the MCP-1 G-2518 gene variant was significantly and negatively correlated with plasma MCP-1 levels and the prevalence of insulin resistance and Type 2 diabetes. These results add to recent evidence supporting a role for MCP-1 in pathologies associated with hyperinsulinaemia.

World population growth and fertility patterns, 1960-2000. A simple model explaining the evolution of world's fertility during the second half of the 20th Century

In this paper we attempt to describe the general reasons behind the world populationexplosion in the 20th century. The size of the population at the end of the century inquestion, deemed excessive by some, was a consequence of a dramatic improvementin life expectancies, attributable, in turn, to scientific innovation, the circulation ofinformation and economic growth. Nevertheless, fertility is a variable that plays acrucial role in differences in demographic growth. We identify infant mortality, femaleeducation levels and racial identity as important exogenous variables affecting fertility.It is estimated that in poor countries one additional year of primary schooling forwomen leads to 0.614 child less per couple on average (worldwide). While it may bepossible to identify a global tendency towards convergence in demographic trends,particular attention should be paid to the case of Africa, not only due to its differentdemographic patterns, but also because much of the continent's population has yet toexperience improvement in quality of life generally enjoyed across the rest of theplanet.

A structural model of Australia as a small open economy

This paper sets up and estimates a structuralmodel of Australia as a small open economyusing Bayesian techniques. Unlike other recentstudies, the paper shows that a small microfoundedmodel can capture the open economydimensions quite well. Specifically, the modelattributes a substantial fraction of the volatilityof domestic output and inflation to foreigndisturbances, close to what is suggested by unrestrictedVAR studies. The paper also investigatesthe effects of various exogenous shockson the Australian economy.

Monetary policy shocks and transmission in Italy: A VAR analysis

This paper provides updated empirical evidence about the real and nominal effects of monetary policy in Italy, by using structural VAR analysis. We discuss different empirical approaches that have been used in order to identify monetary policy exogenous shocks. We argue that the data support the view that the Bank of Italy, at least in the recent past, has been targeting the rate on overnight interbank loans. Therefore, we interpret shocks to the overnight rate as purely exogenous monetary policy shocks and study how different macroeconomic variables react to such shocks.

Wealth, financial intermediation and growth

This paper presents empirical support for the existence of wealth effects in the contribution of financial intermediation to economic growth, and offers a theoretical explanation for these effects. Using GMM dynamic panel data techniques applied to study the growth-promoting effects of financial intermediation, we show that the exogenous contribution of financial development on economic growth has different effects for different levels of income per capita. We find that this contribution is generally increasing with thelevel of income per capita of the economy, up to a relatively high level of income. This contribution is consistently lower for poor countries; and for some low levels of income per capita it can be negative. We provide a model to account for these wealth effects. The model is a overlapping generations growth model where financial intermediaries implement liquidity risk sharing among depositors. We show that at early stages of economic development, a bank can increase welfare of its depositors only at the cost of lowering investment and growth. However, once the economy has crossed certain wealth threshold, the liquidity role of banks becomes unambiguously growth enhancing. As wealth increases, banks offer improving liquidity insurance, and higher growth; however, for high levels of wealth, growth generated byfinancial intermediation declines as the economy attains the optimal level of consumption risk sharing.

The transmission of US shocks to Latin America

I study whether and how US shocks are transmitted to eight Latin American countries. US shocks are identified using sign restrictions and treated as exogenous with respect to Latin American economies. Posterior estimates for individual and average effects are constructed. US monetary shocks produce significant fluctuations in Latin America, but real demand and supply shocks do not. Floaters and currency boarders display similar output but different inflation and interest rate responses. The financial channel plays a crucial role in the transmission. US disturbances explain important portions of the variability of LatinAmerican macrovariables, producing continental cyclical fluctuations and, in two episodes, destabilizing nominal exchange rate effects. Policy implications are discussed.

Money and prices in models of bounded rationality in high inflation economies

This paper studies the short run correlation of inflation and money growth. We study whether a model of learning can do better than a model of rational expectations, we focus our study on countries of high inflation. We take the money process as an exogenous variable, estimated from the data through a switching regime process. We findthat the rational expectations model and the model of learning both offer very good explanations for the joint behavior of money and prices.

The dot-com bubble, the Bush deficits and the US current account

Over the past decade the US has experienced widening current account deficits and a steady deterioration of its net foreign asset position. During the second half of the 1990s, this deterioration was fueled by foreign investment in a booming US stock market. During the first half of the 2000s, this deterioration has been fuelled by foreign purchases of rapidly increasing US government debt. A somewhat surprising aspect of the current debate is thatstock market movements and fiscal policy choices have been largely treated as unrelated events. Stock market movements are usually interpreted as reflecting exogenous changes in perceived or real productivity, while budget deficits are usually understood as a mainly political decision. We challenge this view here and develop two alternative interpretations. Both are based on the notion that a bubble (the dot-com bubble) has been driving the stock market, but differ in their assumptions about the interactions between this bubble and fiscal policy (the Bush deficits). The benevolent view holds that a change in investorsentiment led to the collapse of the dot-com bubble and the Bush deficits were a welfare-improving policy response to this event. The cynical view holds instead that the Bush deficits led to the collapse of the dot-com bubble as the new administration tried to appropriate rents from foreign investors. We discuss the implications of each of these views for the future evolution of the US economy and, in particular, its net foreign asset position.

Angiotensin II receptor blockade in normotensive subjects: A direct comparison of three AT1 receptor antagonists.

Use of angiotensin (Ang) II AT1 receptor antagonists for treatment of hypertension is rapidly increasing, yet direct comparisons of the relative efficacy of antagonists to block the renin-angiotensin system in humans are lacking. In this study, the Ang II receptor blockade induced by the recommended starting dose of 3 antagonists was evaluated in normotensive subjects in a double-blind, placebo-controlled, randomized, 4-way crossover study. At 1-week intervals, 12 subjects received a single dose of losartan (50 mg), valsartan (80 mg), irbesartan (150 mg), or placebo. Blockade of the renin-angiotensin system was assessed before and 4, 24, and 30 hours after drug intake by 3 independent methods: inhibition of the blood pressure response to exogenous Ang II, in vitro Ang II receptor assay, and reactive changes in plasma Ang II levels. At 4 hours, losartan blocked 43% of the Ang II-induced systolic blood pressure increase; valsartan, 51%; and irbesartan, 88% (P<0.01 between drugs). The effect of each drug declined with time. At 24 hours, a residual effect was found with all 3 drugs, but at 30 hours, only irbesartan induced a marked, significant blockade versus placebo. Similar results were obtained when Ang II receptor blockade was assessed with an in vitro receptor assay and by the reactive rise in plasma Ang II levels. This study thus demonstrates that the first administration of the recommended starting dose of irbesartan induces a greater and longer lasting Ang II receptor blockade than that of valsartan and losartan in normotensive subjects.