Since credit lines in reality are far from being unlimited as in the …rst case, I introduce borrowing constraints in the social planner’s problem. I assume that total available international funds are bounded above. In this context it is shown that the constrained optimal contract implies partial suspension of convertibility of deposits. An ine¢cient bank run equilibrium reappears, provided that no extra credit is available for banks with a su¢ciently illiquid long term asset when facing a panic. However, if an international lender of last resort is able to provide extra funds at an interest rate which is bounded above by a ratio of long term to short term deposits, then the run equilibrium disappears. This last result shows the importance of institutions such as the IMF as a liquidity-based-bank- run preventing device in borrowing-constrained smallopeneconomies. This issue has been one of the central topics of the discussion about the international …nancial architecture since the occurrence of the Asian Crisis in 1997.
analyzing the properties of alternative monetary policy arrangements in a two- country setting assumed that prices are set one period in advance. They include the work of Obstfeld and Rogoff (2002) and Benigno and Benigno (2003), both using the assumption of producer currency pricing. Bacchetta and van Wincoop (2000), Sutherland (2003), Devereux and Engel (2003), and Corsetti and Pesenti (2005) use the same assumption in the context of economieswith local currency pricing. More recent frameworks have instead adopted the staggered price-setting struc- ture à la Calvo. Galí and Monacelli (2005), on which the analysis of this chapter is based, is an illustration of work along those lines for a smallopen economy. An extension of that framework, incorporating cost-push shocks, can be found in Clarida, Galí, and Gertler (2001). Kollmann (2002) considers a more general model of a smallopen economy with several sources of shocks, and carries out a numerical analysis of the welfare implications of alternative rules. Using a sim- ilar framework as a starting point, Monacelli (2005) shows that the introduction of imperfect pass-through generates a tradeoff between stabilization of domestic inﬂation and the output gap, leading to gains from commitment similar to those analyzed in chapter 5 for the closed economy.
This paper studies the interest-rate-driven business cycles of a smallopen economy (SOE). For than end a costly operated banking system is added to the standard real-business-cycles model. Banks are the only domestic agents considered worthy of credit in international capital markets. They borrow from the rest of the world and lend domestically in a competitive credit market. Existent quantitative models of business cycles in SOE’s indicate that interest-rate shocks are unable to cast the kind of output variability produced by productivity or terms-of-trade shocks. Contrary to this finding, it seems that the macroeconomic performances of several SOE’s are tightly related to international interest rates and capital flows. Neumeyer and Perri (1999) points out that the introduction of working capital needs may close the gap between the standard model’s predictions and the observed consequences of interest-rate shocks. This paper shows that a more careful analysis of the microfoundations of working capital may give rise to an intermediate position where working capital matters in explaining output fluctuations, but not as much as Neumayer and Perri suggest. For that end, the model is calibrated to the Argentinean economy.
To study the effects on credit availability, we first match each loan with the rel- evant bank balance-sheet variables and then aggregate all the different loans for each bank-firm pair in each month in order to construct a measure of total com- mitted lending from January 2008 to December 2008. By focusing on firms’ bor- rowing from multiple banks, we follow a difference-in-difference approach which compares lending to the same firm before (April, 2008) and after (July, 2008) the policy change among banks with different degrees of exposition to the sources of funds targeted by the policies (Jim´enez, Ongena, Peydr´o, Saurina, 2013). This allows us to identify the effects of the new reserve requirements on the average supply of loans, both on the intensive and the extensive margins, and the hetero- geneous effects of these changes among different firm and bank characteristics. In particular, on firms’ heterogeneity, we analyze whether the impact is different from firms with different ex-ante risk, and on banks’ heterogeneity, we analyze bank size, solvency and liquidity (Kashyap and Stein, 2000). Moreover, as we lose a significant number of firms imposing multiple banks loans, we also control for unobserved borrower fundamentals with industry fixed effects. Finally, we also analyze the period before (January to April 2008) and after (July to October 2008) to run a placebo test.
Elements of state-dependent pricing allow for endogenous variations in the degree of nominal rigidities. That is, when faced with large monetary shocks, ﬁrms may ﬁnd optimal to revise their pricing policies more often to accommodate the new state of the economy. In contrast, in models with time-dependent pricing, the rate at which nomi- nal prices incorporate changes in the state of the economy is constant and exogenous. Ireland (1997) is the ﬁrst to point out the role of endogenous nominal rigidities in the context of MB disinﬂations in closed economies. Ireland (1997) shows that when the economy faces large and fast disinﬂations, ﬁrms ﬁnd optimal to speed up price revisions; in turn, faster price changes imply that the size of the recession associated to large MB disinﬂations may be small. However, small disinﬂations may result costly if prices adjust slowly.
In chapter two I investigate within a fully microfounded New Keynesian frame- work whether the incentive to improve the terms of trade can justify the existence of a monetary union. To this end I used a DSGE model where the world economy is constituted by smallopen countries that are split in two areas. Then I compare, in terms of welfare, two policy regimes. Under the first policy regime, in one area there is a common currency, while in the other area countries still retain their autonomous monetary policy. Under the second policy regime, there are two monetary unions. In the first regime where there is monetary independence, monetary policy can stabilize optimally the effects of country-specific shocks. However, in that case, single countries policy makers overlook the spillover effects produced on other countries welfare due to their attempt to improve their terms of trade. Moreover they do not realize how their joint action affects the world economy performance and the terms of trade across areas. This explains why the second regime may be preferable to the first one: being in a currency area entails not only a cost for not tailoring monetary policy to single country economic conditions, but even some gains associated with the improvement upon the conduct of national monetary policies. My results show that under markup shocks and plausible calibrations, there may be welfare gains from adopting a common currency.
beyond their possibilities in another state. In a context in which there is no possibility of default, asset transactions may not be carried out. However, if the agent had the possibility of defaulting in those states in which she does not have sufficient resources to fulfill her obligations and if in addition, these have a low probability of occurrence, the asset transactions would be possible. If this happens, the efficiency can be increased because the impact of the agent’s loss of anticipated profit is smaller due to having assumed a low probability of occurrence of an adverse state, (Zame, 1993). Therefore, by simply facing a punishment, if it is not too high in comparison to the profits in terms of welfare, the agent may be better off defaulting on her obligation in the bad state than staying out of the market. Thus, the default becomes voluntary, depending on the punishment imposed on the side in default.
The NOEM models use the infinitely-lived intertemporal optimizing representative-agent model. It is common knowledge [see Barro and Sala-i-Martin (1995), Chapter 3] that this model, for a smallopen economy with perfect access to the world capital market and a fixed rate of time preference, yields awkward consequences that are not tenable either from a theoretical or from an empirical point of view. In a closed economy, the real rate of interest is equal to the rate of time preference in steady state. If they are different, the stock of capital adjusts to make up the difference. In an open economy, the real rate of interest is equal to the international rate of interest in steady state. In this case there is no mechanism to make the adjustment between the international real rate and the rate of time preference. 1 The difference between the two rates, whether positive or negative, would imply consequences that are counterfactuals, unless an ad hoc endogenous risk premium is introduced in the model. 2
Should central banks target producer price inflation or consumer price inflation in the setting of monetary policy? Previous studies suggest that in order to avoid real in- determinacy and self-fulfilling fluctuations, the interest rate rule for openeconomies should react to producer price inflation. However, as this paper shows, the preference towards a particular inflation index crucially depends upon the timing assumption on money employed in the determinacy analysis. This timing assumption importantly determines the transactions-facilitating services of money. It is shown that the con- clusions of the existing literature, that advocate targeting producer price inflation, is a by-product of adopting end-of-period timing, i.e. what matters for transactions purposes is the money one leaves the goods market with. However, we find that the conditions for equilibrium determinacy change significantly once cash-in-advance tim- ing is adopted, i.e. what matters for current transactions is the money one enters the goods market with. Thus in stark contrast to previous studies, we show that under cash-in-advance timing, targeting consumer price inflation is preferable to targeting producer price inflation in preventing self-fulfilling expectations.
Table (3) presents the balance sheets of the foreign subsidiary, the parent bank and the consolidated group, under the assumption that the bank faces a regulatory limit on the FXNOP. For simplicity’s sake, we assume that the limit on the FXNOP is zero, which means that the bank is forced to fully hedge its foreign currency exposure. Provided that the subsidiary has a positive net-worth, its assets will be greater than its liabilities, thus creating a currency mismatch for the holding not permitted by the constrained FXNOP. To fully hedge this mismatch, the bank has to open a short-position in US dollars via the derivative markets or by issuing US denominated debt, and then use the proceedings to buy domestic currency assets. The balance sheet of the parent bank reported in Table (3) includes the short- position in US dollars on the liability side (SP US ), together with the correspon- ding domestic-currency asset (SP LC,US ). Because of the hedging, the net worth of the consolidated bank is now equal to the net worth of domestic assets plus the domestic-currency assets resulting from closing the FXNOP. Changes in the ex- change rate have no effect on the net worth of the consolidated bank. The capital ratio, however, fluctuates with exchange rate movements, as the value of the risk- weighted assets of the foreign subsidiary, now converted into domestic currency, varies with the exchange rate.
In the last three decades there have been several banking crises, including the current financial crisis, around the world affecting low-income and high-income countries alike. The costs, both social and fiscal, in resolving bank failures has led to a substantial debate over this role of the Lender of Last Resort (LOLR). The LOLR was originally conceived as a means to rescue banks experiencing liquidity problems and to prevent bank runs occurring. However, the role of the LOLR has been extended to rescuing insolvent institutions. Recent bailouts have involved, amongst other resolution policies, governments guaranteeing bank loans, buying equity and injecting capital, purchasing illiquid securities and non-performing loans at favourable prices. In these cases the government has injected real resources or become exposed to potential real losses. The ability of a government to absorb these losses is not unlimited, both because a government generally has competing uses for its resources but also must keep debt at a sustainable level. Lenient rescue policies have long been criticised for inducing an ex-ante moral hazard problem and excessive risk taking by banks as far back as Bagehot (1873). On the other hand, not having a LOLR at all can cause unnecessary social losses resulting from bank failures. This has become the rational extending the role of the Lender of Last Resort from the original role of liquidity provider to a role where it may rescue insolvent institutions. There is a well known tradeoff between the ability to deal with a crisis with a generous Lender of Last Resort and exacerbating moral hazard. This suggests that the optimum may lie somewhere inbetween.
ABSTRACT: This work evaluates the resistance to fatigue cracking of hot asphalt mixtures made with aggregates from construction and demolition debris. The mixtures were fabricated with 50% recycled aggregates to be used as road bases and binder courses in roads with low traffic volumes. For each mixture studied the fatigue law constants in deformation were obtained as well as the dynamic modulus. These results were compared to those obtained in hot asphalt mixtures elaborated with only virgin aggregates from quarries.
In the current economic situation, accounting, analysis and control of cash and cash equivalents play a particularly important role, since this type of assets is the most liquid. The article reveals the main groups of problems associated with a reliable reflection of cash in the financial statements of agricultural enterprises. Errors and violations are grouped according to the main criteria for the audit of financial statements. The article analyzes the dynamics of current liquidity of Russian enterprises over the past 22 years. The program of internal cash flow audit aimed at preventive controls has been proposed to agricultural enterprises. The main factors affecting the occurrence of cash gaps in agriculture have been identified. The disadvantages of main methods to reduce cash gaps are considered. The analysis of the volume of loans issued to economic entities, as well as the dynamics of receivables of economic subjects of the Russian Federation, including overdue ones, has been carried out. To eliminate the arising cash shortfalls, it was proposed to use a modified method of forecasting cash flows, adapted to the peculiarities of agricultural enterprises and organizations. The article has a practical orientation and will be useful not only for students, but also for practicing accountants and auditors.
Taking this into account, the goal of this research is to provide evidence about the link between sectoral exports and sectoral RER. Considering RER affects differentially sectoral exports, and the fact that relevant RER varies among sectors, we built sectoral indicators of RER for each one of the six sectors analyzed. To perform this analysis, we use Johansen cointegration methodology (1988). As estimators of sectoral competitiveness we developed effective sectoral RER (SRER) indicators following the methodology developed by the Instituto de Pesquisa Económica Aplicada (IPEA) from Brazil. The SRER construction was made by weighting prices according to countries share in bilateral trade of each sector (exports plus imports), for the average of the 2006-2009 period. Then, we analyze the possible link between some sectors’ exports and its sectoral RER. Sectors were chosen taking into account two factors: on the one hand, its weight in total exports, and on the other, the export category to which they belong. Six products were chosen: beef, leather, dairy, chemical, metallurgical and plastic.
When referring to Micro and Small Cap Stocks, we are talking about shares of companies that are generally in the low spectrum of the market when classified by their market value (market capitalization). Tags as Micro, Small, Mid, Big or Huge Cap are subjective and relative to the stock market in which they trade and tend to change over time along with the evolution of the entire financial ecosystem. For the purposes of this investigation, we would be using the current classification for the US Stock Market: Micro-Caps (Less than $300MM), Small-Caps ($300MM – $2B), Mid-Caps ($2B-$10B) and Big-Caps ($10B and greater) and would be infer this measures for the previous periods making an inference based on their proportional size against the total size of the market, thereby we avoid any size bias derived associated to the growth of the economy.
The results presented in this paper are in line with the current body of empirical evidence and the theoretical discussion regarding the effects of aggregate fluctuations on household welfare. In a middle-income country like Argentina, even deep crises have essentially no negative effect on schooling outcomes (if anything, they have counter- cyclical effects), but can result in a decline in health status as witnessed by the increase in maternal and infant mortality and low birth weight. In terms of Ferreira and Schady’s (2009) framework, substitution effects seem to limit potential school dropout, while income effects appear to dominate for health outcomes. As in Baird et al. (2009), these results are asymmetric over the business cycle: Downturns exhibit much larger effects (in absolute value) than positive shocks. Also as in Baird et al. (2009), the estimated effects of aggregate fluctuations are partially due to the presence of a very large contraction (2001-2002) in the period under analysis.
was lower than data from premature newborns without significant respiratory disease on spontaneous breathing . Another consideration is the instrumentation used to measure the resistance in our study. When it is measured in a Y–piece, the resistive component of instrumental air- way is included. De la Cruz et al. described in 21 patients that under these conditions the peak inspiratory pressure needed to ventilate the infant’s lungs is overestimated compared with actual airway pressure. It would be difficult to correct this overestimation since measurements with a tracheal catheter would be really challenging (or even con- traindicated) insmall infants .
characteristics and those with unfavourable characteristics alike. The results for the subgroup with unfavourable characteristics must be interpreted with a considerable degree of caution. In various instances, very few economieswith unfavourable characteristics hosted United States FDI, especially when it comes to efficiency-seeking FDI in machinery and electrical equipment. Nonetheless, two results for the subgroup with unfavourable characteristics should be noted. First, on average, the link between FDI and economic growth is more pronounced in industries in which FDI is considered efficiency seeking. Second, the difference in median growth rates is considerably higher in electrical equipment than in machinery, notably in the case of schooling as indicator for locational attractiveness. The latter result suggests that it is more difficult for host economieswith relatively low secondary school enrolment ratios to reap positive growth effects of FDI in machinery, which, according to table 3, is more demanding than electrical equipment in terms of requiring complementary human capital in the host economies. At the same time, the higher labour intensity and the lower technology intensity of electrical equipment renders it easier for less advanced developing economies to benefit from FDI in this industry.
The left-hand side of Table 3.11, Panel B shows the results for downgrades. Prior rating in this case indicates that the worse the initial rating (higher values for the prior rating variable), the higher the increment of abnormal liquidity, but only for price impact measures. This result is in accordance with institutional investor’s behavior, because they are more involved in the case of credit quality deteriorations. In this case, we can also see differences in bonds, starting at the speculative level. The effect that we observe indicates that there is a higher liquidity impact when it deals with speculative debt, despite the prior rating level effect. Therefore, to be included in a negative perspective implies an increase in abnormal liquidity levels. This result is in opposition to those for the pre-LBD period, which suggests that market participants, once the financial crisis arrives in the market, take into account the information content provided by credit rating agencies. On the other hand, when the deteriorated rating is large, we can see a positive and significant effect of the jump size on abnormal liquidityin all the measures, except on the number of trades. With respect to fallen angels, a further decrease inliquidity after the announcement is reflected in some measures. This finding suggests that the activity around these bonds decreases, which may be related to the fact that they are regarded as eligible bonds by investors who are not forced to sell downgraded bonds.
On the supply side, it has been argued that the industry is characterized by the presence of economies of scale which produces a concentration of the industry by a small number of firms. Previous work has found the presence of economies of scale. García and Rodríguez (2003) and Meléndez (2004) for the case of Mexico, and Apella and Maceira (2004) for the case of Argentina. The presence or not of economies of scale is very important for public policy decisions. If there are economies of scale, few PFM should exist and all fees should be regulated as proposed by Meléndez (2004). If there are not economies of scale, new firms could enter the market and compete to attract customers from other PFM. In this case, the authorities should work to eliminate any barriers to entry that may exist, and make it easier for consumers to transfer their account to any PFM they want and to improve the decision-making process of workers by more and better information (Aguilera, 2004) or to develop a system in which informed and prepared people decide on behalf of the workers the specific PFM that will best suit their profile (Valdés, 2004).