Bank capital and stock performance around the subprime lending risis

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

Time Variation in the Dynamics of Worker Flows: Evidence from the US and Canada

VAR methods have been used to model the inter-relationships between inflows and outfl ows into unemployment and vacancies using tools such as impulse response analysis. In order to investigate whether such impulse responses change over the course of the business cycle or or over time, this paper uses TVP-VARs for US and Canadian data. For the US, we find interesting differences between the most recent recession and earlier recessions and expansions. In particular, we find the immediate effect of a negative shock on both in ow and out flow hazards to be larger in 2008 than in earlier times. Furthermore, the effect of this shock takes longer to decay. For Canada, we fi nd less evidence of time-variation in impulse responses.

Credit constraints, firms' precautionary investment and the business cycle

This paper studies the macroeconomic implications of firms' investment composition choices in the presence of credit constraints. Following a negative andpersistent aggregate productivity shock, firms shift into short-term investments because they produce more pledgeable output and because they help alleviate futureborrowing constraints. This produces a short-run dampening of the effects of theshock, at the expense of lower long-term investment and future output, relativeto an economy with no credit market imperfections. The effects are exacerbatedby a steepening of the term structure of interest rates that further encourages ashift towards short-term investments in the short-run. Small temporary shocks tothe severity of financing frictions generate large and long-lasting effects on outputthrough their impact on the composition of investment. A positive financial shockproduces much stronger effects than an identical negative shock, while the responsesto positive and negative shocks to aggregate productivity are roughly symmetric.Finally, the paper introduces a novel explanation for the countercyclicality of financing constraints of firms.

Firm investment in imperfect capital markets: A structural estimation

We set up a dynamic model of firm investment in which liquidity constraintsenter explicity into the firm's maximization problem. The optimal policyrules are incorporated into a maximum likelihood procedure which estimatesthe structural parameters of the model. Investment is positively related tothe firm's internal financial position when the firm is relatively poor. This relationship disappears for wealthy firms, which can reach theirdesired level of investment. Borrowing is an increasing function of financial position for poor firms. This relationship is reversed as a firm's financial position improves, and large firms hold little debt.Liquidity constrained firms may be unused credits lines and the capacity toinvest further if they desire. However the fear that liquidity constraintswill become binding in the future induces them to invest only when internalresources increase.We estimate the structural parameters of the model and use them to quantifythe importance of liquidity constraints on firms' investment. We find thatliquidity constraints matter significantly for the investment decisions of firms. If firms can finance investment by issuing fresh equity, rather than with internal funds or debt, average capital stock is almost 35% higher overa period of 20 years. Transitory shocks to internal funds have a sustained effect on the capital stock. This effect lasts for several periods and ismore persistent for small firms than for large firms. A 10% negative shock to firm fundamentals reduces the capital stock of firms which face liquidityconstraints by almost 8% over a period as opposed to only 3.5% for firms which do not face these constraints.

Trois essais en macroéconomie

Les fluctuations économiques représentent les mouvements de la croissance économique. Celle-ci peut connaître des phases d'accélération (expansion) ou de ralentissement (récession), voire même de dépression si la baisse de production est persistente. Les fluctuations économiques sont liées aux écarts entre croissance effective et croissance potentielle. Elles peuvent s'expliquer par des chocs d'offre et demande, ainsi que par le cycle du crédit. Dans le premier cas, les conditions de la production se trouvent modifiées. C'est le cas lorsque le prix des facteurs de production (salaires, prix des matières premières) ou que des facteurs externes influençant le prix des produits (taux de change) évolue. Ainsi, une hausse du prix des facteurs de production provoque un choc négatif et ralentit la croissance. Ce ralentissement peut être également dû à un choc de demande négatif provoqué par une hausse du prix des produits causée par une appréciation de la devise, engendrant une diminution des exportations. Le deuxième cas concerne les variables financières et les actifs financiers. Ainsi, en période d'expansion, les agents économiques s'endettent et ont des comportements spéculatifs en réaction à des chocs d'offre ou demande anticipés. La valeur des titres et actifs financiers augmente, provoquant une bulle qui finit par éclater et provoquer un effondrement de la valeur des biens. Dès lors, l'activité économique ne peut plus être financée. C'est ce qui génère une récession, parfois profonde, comme lors de la récente crise financière. Cette thèse inclut trois essais sur les fluctuations macroéconomiques et les cycles économiques, plus précisément sur les thèmes décrit ci-dessus. Le premier chapitre s'intéresse aux anticipations sur la politique monétaire et sur la réaction des agents écononomiques face à ces anticipations. Une emphase particulière est mise sur la consommation de biens durables et l'endettement relié à ce type de consommation. Le deuxième chapitre aborde la question de l'influence des variations du taux de change sur la demande de travail dans le secteur manufacturier canadien. Finalement, le troisième chapitre s'intéresse aux retombées économiques, parfois négatives, du marché immobilier sur la consommation des ménages et aux répercussions sur le prix des actifs immobiliers et sur l'endettement des ménages d'anticipations infondées sur la demande dans le marché immobilier. Le premier chapitre, intitulé ``Monetary Policy News Shocks and Durable Consumption'', fournit une étude sur le lien entre les dépenses en biens durables et les chocs monétaires anticipés. Nous proposons et mettons en oeuvre une nouvelle approche pour identifier les chocs anticipés (nouvelles) de politique monétaire, en les identifiant de manière récursive à partir des résidus d’une règle de Taylor estimée à l’aide de données de sondage multi-horizon. Nous utilisons ensuite les chocs anticipés inférer dans un modèle autorégressif vectoriel structurel (ARVS). L’anticipation d’une politique de resserrement monétaire mène à une augmentation de la production, de la consommation de biens non-durables et durables, ainsi qu’à une augmentation du prix réel des biens durables. Bien que les chocs anticipés expliquent une part significative des variations de la production et de la consommation, leur impact est moindre que celui des chocs non-anticipés sur les fluctuations économiques. Finalement, nous menons une analyse théorique avec un modèle d’équilibre général dynamique stochastique (EGDS) avec biens durables et rigidités nominales. Les résultats indiquent que le modèle avec les prix des biens durables rigides peut reproduire la corrélation positive entre les fonctions de réponse de la consommation de biens non-durables et durables à un choc anticipé de politique monétaire trouvées à l’aide du ARVS. Le second chapitre s'intitule ``Exchange Rate Fluctuations and Labour Market Adjustments in Canadian Manufacturing Industries''. Dans ce chapitre, nous évaluons la sensibilité de l'emploi et des heures travaillées dans les industries manufacturières canadiennes aux variations du taux de change. L’analyse est basée sur un modèle dynamique de demande de travail et utilise l’approche en deux étapes pour l'estimation des relations de cointégration en données de panel. Nos données sont prises d’un panel de 20 industries manufacturières, provenant de la base de données KLEMS de Statistique Canada, et couvrent une longue période qui inclut deux cycles complets d’appréciation-dépréciation de la valeur du dollar canadien. Les effets nets de l'appréciation du dollar canadien se sont avérés statistiquement et économiquement significatifs et négatifs pour l'emploi et les heures travaillées, et ses effets sont plus prononcés dans les industries davantage exposées au commerce international. Finalement, le dernier chapitre s'intitule ``Housing Market Dynamics and Macroprudential Policy'', dans lequel nous étudions la relation statistique suggérant un lien collatéral entre le marché immobilier and le reste de l'économique et si ce lien est davantage entraîné par des facteurs de demandes ou d'offres. Nous suivons également la littérature sur les chocs anticipés et examinons un cyle d'expansion-récession peut survenir de façon endogène la suite d'anticipations non-réalisées d'une hausse de la demande de logements. À cette fin, nous construisons un modèle néo-Keynésien au sein duquel le pouvoir d’emprunt du partie des consommateurs est limité par la valeur de leur patrimoine immobilier. Nous estimons le modèle en utilisant une méthode Bayésienne avec des données canadiennes. Nous évaluons la capacité du modèle à capter les caractéristiques principales de la consommation et du prix des maisons. Finalement, nous effectuons une analyse pour déterminer dans quelle mesure l'introduction d'un ratio prêt-à-la-valeur contracyclique peut réduire l'endettement des ménages et les fluctuations du prix des maisons comparativement à une règle de politique monétaire répondant à l'inflation du prix des maisons. Nous trouvons une relation statistique suggérant un important lien collatéral entre le marché immobilier et le reste de l'économie, et ce lien s'explique principalement par des facteurs de demande. Nous constatons également que l'introduction de chocs anticipés peut générer un cycle d'expansion-récession du marché immobilier, la récession faisant suite aux attentes non-réalisées par rapport à la demande de logements. Enfin, notre étude suggère également qu'un ratio contracyclique de prêt-à-la-valeur est une politique utile pour réduire les retombées du marché du logement sur la consommation par l'intermédiaire de la valeur garantie.

Economic shocks and crime: evidence from the crash of ponzi schemes

In November 2008, Colombian authorities dismantled a network of Ponzi schemes, making hundreds of thousands of investors lose tens of millions of dollars throughout the country. Using original data on the geographical incidence of the Ponzi schemes, this paper estimates the impact of their break down on crime. We find that the crash of Ponzi schemes differentially exacerbated crime in affected districts. Confirming the intuition of the standard economic model of crime, this effect is only present in places with relatively weak judicial and law enforcement institutions, and with little access to consumption smoothing mechanisms such as microcredit. In addition, we show that, with the exception of economically-motivated felonies such as robbery, violent crime is not affected by the negative shock.

Quantifying the Impacts of the Recent Economic Crisis on Regional Tourism Industry and Economy

The purpose of this study is to explore the accuracy issue of the Input-Output model in quantifying the impacts of the 2007 economic crisis on a local tourism industry and economy. Though the model has been used in the tourism impact analysis, its estimation accuracy is rarely verified empirically. The Metro Orlando area in Florida is investigated as an empirical study, and the negative change in visitor expenditure between 2007 and 2008 is taken as the direct shock. The total impacts are assessed in terms of output and employment, and are compared with the actual data. This study finds that there are surprisingly large discrepancies among the estimated and actual results, and the Input-Output model appears to overestimate the negative impacts. By investigating the local economic activities during the study period, this study made some exploratory efforts in explaining such discrepancies. Theoretical and practical implications are then suggested.

Quantifying the Impacts of the Recent Economic Crisis on a Regional Tourism Industry and Economy

The purpose of this study is to explore the accuracy issue of the Input-Output model in quantifying the impacts of the 2007 economic crisis on a local tourism industry and economy. Though the model has been used in the tourism impact analysis, its estimation accuracy is rarely verified empirically. The Metro Orlando area in Florida is investigated as an empirical study, and the negative change in visitor expenditure between 2007 and 2008 is taken as the direct shock. The total impacts are assessed in terms of output and employment, and are compared with the actual data. This study finds that there are surprisingly large discrepancies among the estimated and actual results, and the Input-Output model appears to overestimate the negative impacts. By investigating the local economic activities during the study period, this study made some exploratory efforts in explaining such discrepancies. Theoretical and practical implications are then suggested.

Detection of enterotoxin and toxic shock syndrome toxin 1 genes in Staphylococcus, with emphasis on coagulase-negative staphylococci

The detection of staphylococcal enterotoxins is decisive for the confirmation of an outbreak and for the determination of the enterotoxigenicity of strains. Since the recognition of their antigenicity, a large number of serological methods for the detection of enterotoxins in food and culture media have been proposed. Since immunological methods require detectable amounts of toxin, molecular biology techniques represent important tools in the microbiology laboratory. In the present study, polymerase chain reaction (PCR) was used to identify genes responsible for the production of enterotoxins and toxic shock syndrome toxin 1 (TSST-1) in S. aureus and coagulase-negative staphylococci (CNS) isolated from patients and the results were compared with those obtained by the reverse passive latex agglutination (RPLA) assay. PCR detection of toxin genes revealed a higher percentage of toxigenic S. aureus strains (46.7%) than the RPLA method (38.3%). Analysis of the toxigenic profile of CNS strains showed that 26.7% of the isolates produced some type of toxin, and one or more toxin-specific genes were detected in 40% of the isolates. These results suggests the need for further studies in order to better characterize the pathogenic potential of CNS and indicate that attention should be paid to the toxigenic capacity of this group of microorganisms.

The challenge of multidrug resistance: The treatment of gram-negative rod infections

Infections caused by multidrug-resistant gram-negative bacteria are an increasing problem worldwide. Treatment of these microorganisms is a challenge because resistance limits dramatically therapeutic options. In this review, we discuss data of in vitro susceptibility and clinical studies of possible agents for the management of these infections. Currently, published data are limited, and there are no randomized clinical trials involving the treatment of infections caused by multidrug-resistant gram-negative rods. For imipenem-resistant Acinetobacter spp., most studied options are polymyxins and sulbactam. No newer antimicrobials active against Pseudomonas aeruginosa are available or under investigation. Tigecycline presents a broad spectrum of activity in vitro but has been studied mainly as treatment of community-acquired infections, as has ertapenem. They are potential options against extended-spectrum P-lactamase-producing Enterobacteriaceae, and tigecycline may be useful in treating Acinetobacter infections.

Evaluation of Three Mycobacterium leprae Monoclonal Antibodies in Mucus and Lymph Samples from Ziehl-Neelsen Stain Negative Leprosy Patients and their Household Contacts in an Indian Community

Mucus and lymph smears collected from leprosy patients (9) and their household contacts (44) in the Caño Mochuelo Indian Reservation, Casanare, Colombia, were examined with monoclonal antibodies (MoAb) against Mycobacterium leprae. The individuals studied were: 5 borderline leprosy (BB) patients, 4 with a lepromatous leprosy (LL), all of whom were undergoing epidemiological surveillance after treatment and 44 household contacts: 21 of the LL and 23 contacts of the BB patients. The MoAb were reactive with the following M. leprae antigens: 65 kd heat shock protein, A6; soluble antigen G7 and complete antigen, E11. All the samples were tested with each of the MoAb using the avidin-biotin-peroxidase technique and 3,3 diaminobenzidine as chromogen. The patients and household contacts studied were all recorded as Ziehl-Neelsen stain negative. The MoAb which showed optimal reaction was G7, this MoAb permited good visualization of the bacilli. Five patients with BB diagnosis and one with LL were positive for G7; of the BB patients' household contacts, 9 were positive for G7; 7 of the LL patients' household contacts were positive for the same MoAb. MoAb G7 allowed the detection of bacillar Mycobacterium spp. compatible structures in both patients and household contacts. G7 permited the visualization of the complete bacillus and could be used for early diagnosis and follow-up of the disease in patients.

Macrophage migration inhibitory factor: a counter-regulator of glucocorticoid action and critical mediator of septic shock.

Recent studies have led to the discovery of a mediator that acts as an endogenous counter-regulator of glucocorticoid action within the immune system. Isolated as a product of anterior pituitary cells, this protein was found to have the sequence of macrophage migration inhibitory factor (MIF), one of the first cytokine activities to be described. Macrophages and T cells release MIF in response both to various inflammatory stimuli and upon incubation with low concentrations of glucocorticoids. The glucocorticoid-induced secretion of MIF is tightly regulated and decreases at high, anti-inflammatory steroid concentrations. Once secreted, MIF "overrides" the anti-inflammatory and immunosuppressive effects of steroids on macrophage and T-cell cytokine production. The physiological role of MIF thus appears to be to counter-balance steroid inhibition of the inflammatory response. Anti-MIF antibodies fully protect animals from experimentally induced gram-negative or gram-positive septic shock, an effect that may be the result of the increased anti-inflammatory effects of glucocorticoids after neutralization of endogenous MIF. Anti-MIF therapeutic strategies are presently under development and may prove to be a means to modulate cytokine production in septic shock as well as in other inflammatory disease states.

Activated protein C consumption and coagulation parameters in severe sepsis and septic shock.

Introduction Activated protein C (APC) deC ciency is prevalent in severe sepsis and septic shock patients. The aim of the study was to relate the anticoagulation activity evaluated by APC with other coagulation parameters adjusted to 28-day mortality. Methods A cohort study of 150 critically ill adults. Age, sex, sources of infection and coagulation markers within 24< hours from severe sepsis or septic shock onset, deC ned according to Surviving Sepsis Campaign (SSC) criteria, were studied. We analyzed APC activity using a hemostasis laboratory analyzer (BCS® XP; Siemens). A descriptive and comparative statistical analysis was performed using SPSS version 15.0 (SPSS Inc., Chicago, IL, USA). Results We analyzed 150 consecutive episodes of severe sepsis (16%) or septic shock (84%) admitted to the UCI. The median age of the study sample was 64 (interquartile range (IQR): 22.3shock, neurological focus or catheter-related infection and Gram-negative pathogens from blood cultures. Spearman’s showed relationship with antithrombin III, r<= 0.674 (P <0.001) and International Normalized Ratio (INR), r<= –0.611 (P >0.001). See Figure 1. Conclusion Low levels of PC are associated with poor outcome and severity in severe sepsis, and it is well correlated with antithrombin III and INR.

β-Glucan Antigenemia Anticipates Diagnosis of Blood Culture-Negative Intraabdominal Candidiasis.

Rationale: Life-threatening intraabdominal candidiasis (IAC) occurs in 30 to 40% of high-risk surgical intensive care unit (ICU) patients. Although early IAC diagnosis is crucial, blood cultures are negative, and the role of Candida score/colonization indexes is not established. Objectives: The aim of this prospective Fungal Infection Network of Switzerland (FUNGINOS) cohort study was to assess accuracy of 1,3-β-d-glucan (BG) antigenemia for diagnosis of IAC. Methods: Four hundred thirty-four consecutive adults with abdominal surgery or acute pancreatitis and ICU stay 72 hours or longer were screened: 89 (20.5%) at high risk for IAC were studied (68 recurrent gastrointestinal tract perforation, 21 acute necrotizing pancreatitis). Diagnostic accuracy of serum BG (Fungitell), Candida score, and colonization indexes was compared. Measurements and Main Results: Fifty-eight of 89 (65%) patients were colonized by Candida; 29 of 89 (33%) presented IAC (27 of 29 with negative blood cultures). Nine hundred twenty-one sera were analyzed (9/patient): median BG was 253 pg/ml (46-9,557) in IAC versus 99 pg/ml (8-440) in colonization (P < 0.01). Sensitivity and specificity of two consecutive BG measurements greater than or equal to 80 pg/ml were 65 and 78%, respectively. In recurrent gastrointestinal tract perforation it was 75 and 77% versus 90 and 38% (Candida score ≥ 3), 79 and 34% (colonization index ≥ 0.5), and 54 and 63% (corrected colonization index ≥ 0.4), respectively. BG positivity anticipated IAC diagnosis (5 d) and antifungal therapy (6 d). Severe sepsis/septic shock and death occurred in 10 of 11 (91%) and 4 of 11 (36%) patients with BG 400 pg/ml or more versus 5 of 18 (28%, P = 0.002) and 1 of 18 (6%, P = 0.05) with BG measurement less than 400 pg/ml. β-Glucan decreased in IAC responding to therapy and increased in nonresponse. Conclusions: BG antigenemia is superior to Candida score and colonization indexes and anticipates diagnosis of blood culture-negative IAC. This proof-of-concept observation in strictly selected high-risk surgical ICU patients deserves investigation of BG-driven preemptive therapy.

Growth arrest-specific gene 6 (GAS6) as an intra-hospital mortality predictor for patients in septic shock

Aim: Gas6 is known to be elevated in sepsis, correlating with the severity of infection and organ failure. We aimed to investigate the performance of Gas6 plasma levels at admission to predict the risk of mortality in a cohort of septic patients.Methods: We used prospectively collected data and plasma samples from the 'Sepsis Cohorte Romande'. Gas6 level was measured by ELISA at admission and expressed in percentage relative to its level in a pool of normal plasma.Results: Non-survivors (n = 19) presented higher Gas6 levels than survivors (n = 78; median 287% vs. 158%, IQR 182 and 119 respectively; P = 0.0003). Gas6 correlated positively with different cytokine and was the best mortality predictor, as shown by the ROC curves area (Fig. 1). In patients with septic shock (n = 67), using 249% as a cut-off value, Gas6 measurement had a specificity of 81% and a sensitivity of 68% for predicting mortality. ROC curve area was 0.76. Positive and negative predictive values were 59% and 87%, respectively.Conclusion: Thus, Gas6 plasma level at admission might be a useful tool to predict mortality in patients with septic shock. Nevertheless, independent association of Gas6 level with mortality still needs to be assessed. Although Gas6 hold promise as an early sepsis marker, its precise implication in sepsis remains to be elucidated.