The Euro as an International Currency: explaining puzzling first evidence from the foreign exchange markets

This paper presents evidence that the bid-ask spreads in euro rates increased relative to the corresponding bid-ask spreads in the German mark (DM) prior to the creation of the currency union. This comes with a decrease in transaction volume in the euro rates relative to the previous DM rates. The starkest example is the DM(euro)/yen rate in which the spread has risen by almost two-thirds while the volume decreased by more than one third. This outcome is surprising because the common currency concentrated market liquidity in fewer external euro rates and higher volume tends to be associated with lower spreads. We propose a microstructure explanation based on a change in the information environment of the FX market. The elimination of many cross currency pairs increased the market transparency for order flow imbalances in the dealership market. It is argued that higher market transparency adversely affects the inventory risk sharing efficiency of the dealership market and induces the observed euro spread increase and transaction volume shortfall.

Less of a Puzzle: a new look at the forward forex market

The two-country monetary model is extended to include a consumption externality with habit persistence. The model is simulated using the artificial economy methodology. The 'puzzles' in the forward market are re-examined. The model is able to account for: (a) the low volatility of the forward discount; (b) the higher volatility of expected forward speculative profit; (c) the even higher volatility of the spot return; (d) the persistence in the forward discount; (e) the martingale behavior of spot exchange rates; and (f) the negative covariance between the expected spot return and expected forward speculative profit. It is unable to account for the forward market bias because the volatility of the expected spot return is too large relative to the volatility of the expected forward speculative profit.

Fixed versus Flexible: lessons from EMS order Flow

We extend the literature on regime-dependent volatility in two ways. First, our microstructural model provides a qualitatively new explanation. Second, we test implications of our model using Europe's recent shift to rigidly fixed rates (EMS to EMU). In the model, shocks to order flow induce more volatility under flexible rates because the elasticity of speculative demand is (endogenously) low, leading to pronounced portfolio-balance effects. New data on FF/DM transactions show that order flow had persistent effects on the exchange rate before EMU parities were announced. After announcement, the FF/DM rate was decoupled from order flow, as the model predicts.

Demographic Change, Social Security Systems, and Savings

Abstract In theory, improvements in healthy life expectancy should generate increases in the average age of retirement, with little effect on savings rates. In many countries, however, retirement incentives in social security programs prevent retirement ages from keeping pace with changes in life expectancy, leading to an increased need for life-cycle savings. Analyzing a cross-country panel of macroeconomic data, we find that increased longevity raises aggregate savings rates in countries with universal pension coverage and retirement incentives, though the effect disappears in countries with pay-as-you-go systems and high replacement rates.

The relationship of clinical and inflammatory markers to outcome in stable patients with cystic fibrosis

Decreased survival in patients with cystic fibrosis has been related to FEV1, BMI, and infection with Burkholderia cepacia complex (BCC). We have assessed the relationship of blood, sputum, and urine inflammatory markers to lung function, BMI, colonization with B cenocepacia (Bc), and patient survival. Thirty-nine stable cystic fibrosis (CF) patients (10 with Bc) were enrolled in a study to determine the effect of alpha-1-antitrypsin on airways inflammation. Pre-treatment measurements were used in this study. Demographics, sputum microbiology, heart rate, oxygen saturation, lung function were recorded. Blood samples were obtained for white blood count (WBC), C-Reactive Protein (CRP), and plasma neutrophil elastase/AAT complexes (pNEC). Neutrophil elastase (NE), neutrophil elastase/AAT complexes (sNEC), interleukin-8 (IL-8), TNF-receptor 1 (sTNFr), and myeloperoxidase (MPO) were measured in sputum and urinary desmosine concentration determined. Patients with Bc had significantly higher levels of pNEC, 332?±?91.4 ng/ml (mean?±?SEM) versus 106?±?18.2 ng/ml (P?=?0.0005) and sNEC, 369?±?76.6 ng/ml versus 197?±?36.0 ng/ml compared to those who were not. Five deaths were reported at the end of 1 year, (four with Bc) (P?=?0.011). Patients who subsequently died had significantly lower lung function FEV1, 1.2?±?0.2 L versus 2.0?±?0.1 L (P?=?0.03) and FVC, 2?±?0.3 L versus 3.1?±?0.2 L (P?=?0.01), compared to those that survived. There was significantly higher NE activity, 3.6?±?1.6 U/ml versus 1.5?±?0.6 U/ml (P?=?0.03), pNEC, 274?±?99 ng/ml versus 142?±?30 ng/ml (P?=?0.05), MPO, 163?±?62 mcg/ml versus 54?±?6.9 mcg/ml (P?=?0.03), and urinary desmosines 108?±?19.9 pM/mg creatinine versus 51.1?±?3.3 pM/mg creatinine (P?=?0.001), in those patients who subsequently died compared to those that survived. These data suggest there is increased neutrophil degranulation in patients infected with Bc and these patients have a poor outcome.

The role of advanced glycation end products in retinal microvascular leukostasis

PURPOSE: A critical event in the pathogenesis of diabetic retinopathy is the inappropriate adherence of leukocytes to the retinal capillaries. Advanced glycation end-products (AGEs) are known to play a role in chronic inflammatory processes, and the authors postulated that these adducts may play a role in promoting pathogenic increases in proinflammatory pathways within the retinal microvasculature. METHODS: Retinal microvascular endothelial cells (RMECs) were treated with glycoaldehyde-modified albumin (AGE-Alb) or unmodified albumin (Alb). NFkappaB DNA binding was measured by electromobility shift assay (EMSA) and quantified with an ELISA: In addition, the effect of AGEs on leukocyte adhesion to endothelial cell monolayers was investigated. Further studies were performed in an attempt to confirm that this was AGE-induced adhesion by co-incubation of AGE-treated cells with soluble receptor for AGE (sRAGE). Parallel in vivo studies of nondiabetic mice assessed the effect of intraperitoneal delivery of AGE-Alb on ICAM-1 mRNA expression, NFkappaB DNA-binding activity, leukostasis, and blood-retinal barrier breakdown. RESULTS: Treatment with AGE-Alb significantly enhanced the DNA-binding activity of NFkappaB (P = 0.0045) in retinal endothelial cells (RMECs) and increased the adhesion of leukocytes to RMEC monolayers (P = 0.04). The latter was significantly reduced by co-incubation with sRAGE (P <0.01). Mice infused with AGE-Alb demonstrated a 1.8-fold increase in ICAM-1 mRNA when compared with control animals (P <0.001, n = 20) as early as 48 hours, and this response remained for 7 days of treatment. Quantification of retinal NFkappaB demonstrated a threefold increase with AGE-Alb infusion in comparison to control levels (AGE Alb versus Alb, 0.23 vs. 0.076, P <0.001, n = 10 mice). AGE-Alb treatment of mice also caused a significant increase in leukostasis in the retina (AGE-Alb versus Alb, 6.89 vs. 2.53, n = 12, P <0.05) and a statistically significant increase in breakdown of the blood-retinal barrier (AGE Alb versus Alb, 8.2 vs. 1.6 n = 10, P <0.001). CONCLUSIONS: AGEs caused upregulation of NFkappaB in the retinal microvascular endothelium and an AGE-specific increase in leukocyte adhesion in vitro was also observed. In addition, increased leukocyte adherence in vivo was demonstrated that was accompanied by blood-retinal barrier dysfunction. These findings add further evidence to the thinking that AGEs may play an important role in the pathogenesis of diabetic retinopathy.