Fiscal imbalances, inflation and sovereign default dynamics

Resumen: La cuestión central que este artículo busca responder es como la política monetaria puede afectar el comportamiento de equilibrio de primas por riesgo soberano y cesación de pagos. El artículo se basa en el modelo de “una-tasa-interés”. La deuda pública se hace riesgosa a causa de una política fiscal activa, como en Uribe (2006), reflejando la habilidad limitada de la autoridad fiscal para controlar el superávit primario. El problema de insolvencia es debido a una oleada de mala suerte (shocks negativos que afectan el superávit primario). Pero en contraste a los resultados de Uribe, a medida que aumenta el costo de la deuda soberana (que resulta de un excedente primario débil), la cesación de pagos se anticipa y es reflejada por una creciente prima de riesgo en el país y una probabilidad de cesación de pagos. La cesación de pagos se define como un incumplimiento de un acuerdo contractual y por ende la decisión es tomada por la autoridad fiscal. Mientras tanto, objetivos conflictivos entre la autoridad monetaria y fiscal juegan un rol importante en llevar a la autoridad fiscal a la cesación de pagos sobre sus pasivos. La característica de la política del gobierno necesaria para restaurar el equilibrio después de la cesación de pagos también es analizada.

The New Keynesian Monetary Model: Does it Show the Comovement Between Output and Inflation in the U.S.?

Published as article in: Journal of Economic Dynamics and Control (2008), 32(May), pp. 1466-1488.

Explosive Hyperinflation, Inflation Tax Laffer Curve and Modelling the use of Money

This paper analyzes the existence of an inflation tax Laffer curve (ITLC) in the context of two standard optimizing monetary models: a cash-in-advance model and a money in the utility function model. Agents’ preferences are characterized in the two models by a constant relative risk aversion utility function. Explosive hyperinflation rules out the presence of an ITLC. In the context of a cash-in-advance economy, this paper shows that explosive hyperinflation is feasible and thus an ITLC is ruled out whenever the relative risk aversion parameter is greater than one. In the context of an optimizing model with money in the utility function, this paper firstly shows that an ITLC is ruled out. Moreover, it is shown that explosive hyperinflations are more likely when the transactions role of money is more important. However, hyperinflationary paths are not feasible in this context unless certain restrictions are imposed.

Optimal Monetary Policy with Asymmetric Preferences for Output

Using a model of an optimizing monetary authority which has preferences that weigh inflation and unemployment, Ruge-Murcia (2003, 2004) finds empirical evidence that the authority has asymmetric preferences for unemployment. We extend this model to weigh inflation and output and show that the empirical evidence using these series also supports an asymmetric preference hypothesis, only in our case, preferences are asymmetric for output. We also find evidence that the monetary authority targets potential output rather than some higher output level as would be the case in an extended Barro and Gordon (1983) model.

Wide Screening of Phage-Displayed Libraries Identifies Immune Targets in Planta

Microbe-Associated Molecular Patterns and virulence effectors are recognized by plants as a first step to mount a defence response against potential pathogens. This recognition involves a large family of extracellular membrane receptors and other immune proteins located in different sub-cellular compartments. We have used phage-display technology to express and select for Arabidopsis proteins able to bind bacterial pathogens. To rapidly identify microbe-bound phage, we developed a monitoring method based on microarrays. This combined strategy allowed for a genome-wide screening of plant proteins involved in pathogen perception. Two phage libraries for high-throughput selection were constructed from cDNA of plants infected with Pseudomonas aeruginosa PA14, or from combined samples of the virulent isolate DC3000 of Pseudomonas syringae pv. tomato and its avirulent variant avrRpt2. These three pathosystems represent different degrees in the specificity of plant-microbe interactions. Libraries cover up to 26107 different plant transcripts that can be displayed as functional proteins on the surface of T7 bacteriophage. A number of these were selected in a bio-panning assay for binding to Pseudomonas cells. Among the selected clones we isolated the ethylene response factor ATERF-1, which was able to bind the three bacterial strains in competition assays. ATERF-1 was rapidly exported from the nucleus upon infiltration of either alive or heat-killed Pseudomonas. Moreover, aterf-1 mutants exhibited enhanced susceptibility to infection. These findings suggest that ATERF-1 contains a microbe-recognition domain with a role in plant defence. To identify other putative pathogen-binding proteins on a genome-wide scale, the copy number of selected-vs.-total clones was compared by hybridizing phage cDNAs with Arabidopsis microarrays. Microarray analysis revealed a set of 472 candidates with significant fold change. Within this set defence-related genes, including well-known targets of bacterial effectors, are over-represented. Other genes non-previously related to defence can be associated through this study with general or strain-specific recognition of Pseudomonas.