Optimal feedback control rules sensitive to controlled endogenous risk-aversion

The objective of this paper is to correct and improve the results obtained by Van der Ploeg (1984a, 1984b) and utilized in the theoretical literature related to feedback stochastic optimal control sensitive to constant exogenous risk-aversion (see, Jacobson, 1973, Karp, 1987 and Whittle, 1981, 1989, 1990, among others) or to the classic context of risk-neutral decision-makers (see, Chow, 1973, 1976a, 1976b, 1977, 1978, 1981, 1993). More realistic and attractive, this new approach is placed in the context of a time-varying endogenous risk-aversion which is under the control of the decision-maker. It has strong qualitative implications on the agent's optimal policy during the entire planning horizon.

Detection of testosterone administration based on the carbon isotope ratio profiling of endogenous steroids: international reference populations of professional soccer players.

BACKGROUND AND OBJECTIVES: The determination of the carbon isotope ratio in androgen metabolites has been previously shown to be a reliable, direct method to detect testosterone misuse in the context of antidoping testing. Here, the variability in the 13C/12C ratios in urinary steroids in a widely heterogeneous cohort of professional soccer players residing in different countries (Argentina, Italy, Japan, South Africa, Switzerland and Uganda) is examined. METHODS: Carbon isotope ratios of selected androgens in urine specimens were determined using gas chromatography/combustion/isotope ratio mass spectrometry (GC-C-IRMS). RESULTS: Urinary steroids in Italian and Swiss populations were found to be enriched in 13C relative to other groups, reflecting higher consumption of C3 plants in these two countries. Importantly, detection criteria based on the difference in the carbon isotope ratio of androsterone and pregnanediol for each population were found to be well below the established threshold value for positive cases. CONCLUSIONS: The results obtained with the tested diet groups highlight the importance of adapting the criteria if one wishes to increase the sensitivity of exogenous testosterone detection. In addition, confirmatory tests might be rendered more efficient by combining isotope ratio mass spectrometry with refined interpretation criteria for positivity and subject-based profiling of steroids.

Preferential assembly of epithelial sodium channel (ENaC) subunits in Xenopus oocytes: role of furin-mediated endogenous proteolysis.

The epithelial sodium channel (ENaC) is preferentially assembled into heteromeric alphabetagamma complexes. The alpha and gamma (not beta) subunits undergo proteolytic cleavage by endogenous furin-like activity correlating with increased ENaC function. We identified full-length subunits and their fragments at the cell surface, as well as in the intracellular pool, for all homo- and heteromeric combinations (alpha, beta, gamma, alphabeta, alphagamma, betagamma, and alphabetagamma). We assayed corresponding channel function as amiloride-sensitive sodium transport (I(Na)). We varied furin-mediated proteolysis by mutating the P1 site in alpha and/or gamma subunit furin consensus cleavage sites (alpha(mut) and gamma(mut)). Our findings were as follows. (i) The beta subunit alone is not transported to the cell surface nor cleaved upon assembly with the alpha and/or gamma subunits. (ii) The alpha subunit alone (or in combination with beta and/or gamma) is efficiently transported to the cell surface; a surface-expressed 65-kDa alpha ENaC fragment is undetected in alpha(mut)betagamma, and I(Na) is decreased by 60%. (iii) The gamma subunit alone does not appear at the cell surface; gamma co-expressed with alpha reaches the surface but is not detectably cleaved; and gamma in alphabetagamma complexes appears mainly as a 76-kDa species in the surface pool. Although basal I(Na) of alphabetagamma(mut) was similar to alphabetagamma, gamma(mut) was not detectably cleaved at the cell surface. Thus, furin-mediated cleavage is not essential for participation of alpha and gamma in alphabetagamma heteromers. Basal I(Na) is reduced by preventing furin-mediated cleavage of the alpha, but not gamma, subunits. Residual current in the absence of furin-mediated proteolysis may be due to non-furin endogenous proteases.

Both Sides of the Story: Skill-biased Technological Change, Labour Market Frictions, and Endogenous Two-Sided Heterogeneity

This paper presents a stylised framework to examine how skill-biased technological change and labour market frictions affect the relationship between economic expansion and unskilled unemployment. The first part of the analysis focuses on the investment decisions in skill-acquisition and technology adoption activities faced by workers and firms in response to the introduction of an innovative technology. The second part examines how endogenous two-sided heterogeneity in the labour market affects the macroeconomic outcomes in terms of unemployment, technological diffusion, and economic expansion. To conclude, the framework is used to discuss the effects of alternative forms of policy intervention on agents' investment decisions and on the macroeconomic outcomes.

Endogenous Price Flexibility and Optimal Monetary Policy

Much of the literature on optimal monetary policy uses models in which the degree of nominal price flexibility is exogenous. There are, however, good reasons to suppose that the degree of price flexibility adjusts endogenously to changes in monetary conditions. This paper extends the standard New Keynesian model to incorporate an endogenous degree of price flexibility. The model shows that endogenising the degree of price flexibility tends to shift optimal monetary policy towards complete inflation stabilisation, even when shocks take the form of cost-push disturbances. This contrasts with the standard result obtained in models with exogenous price flexibility, which show that optimal monetary policy should allow some degree of inflation volatility in order to stabilise the welfarerelevant output gap.

Does the euro dominate Central and Eastern European money markets?

The so-called German Dominance Hypothesis (GDH) claimed that Bundesbank policies were transmitted into other European Monetary System (EMS) interest rates during the pre-euro era. We reformulate this hypothesis for the Central and Eastern European (CEE) countries that are on the verge of accessing the eurozone. We test this \Euro Dominance Hypothesis (EDH)" in a novel way using a global vector autoregressive (GVAR) approach that combines country-speci c error correction models in a global system. We nd that euro area monetary policies are transmitted into CEE interest rates which provides evidence for monetary integration between the eurozone and CEE countries. Our framework also allows for introducing global monetary shocks to provide empirical evidence regarding the e ects of the recent nancial crisis on monetary integration in Europe.

Money and Liquidity

John Hardman Moore outlines his joint research with Nobu Kiyotaki on the macroeconomic questions to do with the nature of money and liquidity, and the interplay between the financial system and the aggregate economy.

The marginal utility of money: A modern Marshallian approach to consumer choice

We reformulate neoclassical consumer choice by focusing on lambda, the marginal utility of money. As the opportunity cost of current expenditure, lambda is approximated by the slope of the indirect utility function of the continuation. We argue that lambda can largely supplant the role of an arbitrary budget constraint in partial equilibrium analysis. The result is a better grounded, more flexible and more intuitive approach to consumer choice.

Productivity shocks and aggregate fluctuations in an estimated endogenous growth model with human capital

Employing an endogenous growth model with human capital, this paper explores how productivity shocks in the goods and human capital producing sectors contribute to explaining aggregate fluctuations in output, consumption, investment and hours. Given the importance of accounting for both the dynamics and the trends in the data not captured by the theoretical growth model, we introduce a vector error correction model (VECM) of the measurement errors and estimate the model’s posterior density function using Bayesian methods. To contextualize our findings with those in the literature, we also assess whether the endogenous growth model or the standard real business cycle model better explains the observed variation in these aggregates. In addressing these issues we contribute to both the methods of analysis and the ongoing debate regarding the effects of innovations to productivity on macroeconomic activity.

Financial crisis and quantitative easing: can broad money tell us anything?

When Bank of England (and the Federal Reserve Board) introduced their quantitative easing (QE) operations they emphasised the effects on money and credit, but much of their empirical research on the effects of QE focuses on long-term interest rates. We use a flow of funds matrix with an independent central bank to show the implications of QE and other monetary developments, and argue that the financial crisis, the fiscal expansion and QE are likely to have constituted major exogenous shocks to money and credit in the UK which could not be digested immediately by the usual adjustment mechanisms. We present regressions of a reduced form model which considers the growth of nominal spending as determined by the growth of nominal money and other variables. These results suggest that money was not important during the Great Moderation but has had a much larger role in the period of the crisis and QE. We then use these estimates to illustrate the effects of the financial crisis and QE. We conclude that it would be useful to incorporate money and/or credit in wider macroeconometric models of the UK economy.

Endogenous opioid peptides in parasympathetic, sympathetic and sensory nerves in the guinea-pig heart.

Research has suggested that exogenous opioid substances can have direct effects on cardiac muscle or influence neurotransmitter release via presynaptic modulation of neuronal inputs to the heart. In the present study, multiple-labelling immunohistochemistry was employed to determine the distribution of endogenous opioid peptides within the guinea-pig heart. Approximately 40% of cardiac ganglion cells contained immunoreactivity for dynorphin A (1-8), dynorphin A (1-17) and dynorphin B whilst 20% displayed leu-enkephalin immunoreactivity. Different populations of opioid-containing ganglion cells were identified according to the co-existence of opioid immunoreactivity with immunoreactivity for somatostatin and neuropeptide Y. Immunoreactivity for prodynorphin-derived peptides was observed in many sympathetic axons in the heart and was also observed, though to a lesser extent, in sensory axons. Leu-enkephalin immunoreactivity was observed in occasional sympathetic and sensory axons. No immunoreactivity was observed for met-enkephalin-arg-gly-leu or for beta-endorphin. These results demonstrate that prodynorphin-derived peptides are present in parasympathetic, sympathetic and sensory nerves within the heart, but suggest that only the prodynorphin gene is expressed in guinea-pig cardiac nerves. This study has shown that endogenous opioid peptides are well placed to regulate cardiac function via both autonomic and sensory pathways.

Optimal progressive taxation in a model with endogenous skill supply.

This paper examines whether efficiency considerations require that optimal labour income taxation is progressive or regressive in a model with skill heterogeneity, endogenous skill acquisition and a production sector with capital-skill complementarity. We find that wage inequality driven by the resource requirements of skill-creation implies progressive labour income taxation in the steady-state as well as along the transition path from the exogenous to optimal policy steady-state. We find that these results are explained by a lower labour supply elasticity for skilled versus unskilled labour which results from the introduction of the skill acquisition technology.

Unemployment and Endogenous Reallocation over the Business Cycle

This paper studies unemployed workers’ decisions to change occupations, and their impact on fluctuations in aggregate unemployment and its underlying duration distribution. We develop an analytically and computationally tractable stochastic equilibrium model with heterogenous labor markets. In this model three different types of unemployment arise: search, rest and reallocation unemployment. We document new evidence on unemployed workers’ gross occupational mobility and use it to calibrate the model. We show that rest unemployment is the main driver of unemployment fluctuations over the business cycle and causes cyclical unemployment to be highly volatile. The resulting unemployment duration distribution generated by the model responds realistically to the business cycle, creating substantial longer-term unemployment in downturns. Finally, rest unemployment also makes our model simultaneously consistent with procyclical occupational mobility of the unemployed, countercyclical job separations into unemployment and a negatively-sloped Beveridge curve.

Money Cycles

Operating overheads are widespread and lead to concentrated bursts of activity. To transfer resources between active and idle spells, agents demand financial assets. Futures contracts and lotteries are unsuitable, as they have substantial overheads of their own.We show that money – under efficient monetary policy – is a liquid asset that leads to efficient allocations. Under all other policies, agents follow inefficient “money cycle” patterns of saving, activity, and inactivity. Agents spend their money too quickly – a “hot potato effect of inflation”. We show that inflation can stimulate inefficiently high aggregate output.

Effects of infused fructose on endogenous glucose production, gluconeogenesis, and glycogen metabolism.

To determine the mechanisms that prevent an increase in gluconeogenesis from increasing hepatic glucose output, six healthy women were infused with [1-13C]fructose (22 mumol.kg-1.min-1), somatostatin, insulin, and glucagon. In control experiment, non-13C-enriched fructose was infused at the same rate without somatostatin, and [U-13C]glucose was infused to measure specifically plasma glucose oxidation. Endogenous glucose production (EGP, [6,6-2H]glucose), net carbohydrate oxidation (CHOox, indirect calorimetry), and fructose oxidation (13CO2) were measured. EGP rate did not increase after fructose infusion with (13.1 +/- 1.2 vs. 12.9 +/- 0.3 mumol.kg-1.min-1) and without (10.3 +/- 0.5 vs. 9.7 +/- 0.5 mumol.kg-1.min-1) somatostatin, despite the fact that gluconeogenesis increased. Nonoxidative fructose disposal, corresponding mainly to glycogen synthesis, was threefold net glycogen deposition, the latter calculated as fructose infusion minus CHOox (14.8 +/- 1.1 and 4.3 +/- 2.0 mumol.kg-1.min-1). It is concluded that 1) the mechanism by which EGP remains constant when gluconeogenesis from fructose increases is independent of changes in insulin and 2) simultaneous breakdown and synthesis of glycogen occurred during fructose infusion.