Country portfolios in open economy macro models

This paper develops a simple approximation method for computing equilibrium portfolios in dynamic general equilibrium open economy macro models. The method is widely applicable, simple to implement, and gives analytical solutions for equilibrium portfolio positions in any combination or types of asset. It can be used in models with any number of assets, whether markets are complete or incomplete, and can be applied to stochastic dynamic general equilibrium models of any dimension, so long as the model is amenable to a solution using standard approximation methods. We first illustrate the approach using a simple two-asset endowment economy model, and then show how the results extend to the case of any number of assets and general economic structure.Econometric models ; Equilibrium (Economics) - Mathematical models ; Macroeconomics - Econometric models ; Monetary policy

Financial globalization and monetary policy

Recent data show substantial increases in the size of gross external asset and liability positions. The implications of these developments for optimal conduct of monetary policy are analyzed in a standard open economy model which is augmented to allow for endogenous portfolio choice. The model shows that monetary policy takes on new importance due to its impact on nominal asset returns. Nevertheless, the case for price stability as an optimal monetary rule remains. In fact, it is reinforced. Even without nominal price rigidities, price stability is optimal because it enhances the risk sharing properties of nominal bonds. --Portfolio Choice,International Risk Sharing,Exchange Rate

Country Portfolio Dynamics

This paper presents a general approximation method for characterizing timevarying equilibrium portfolios in a two-country dynamic general equilibrium model. The method can be easily adapted to most dynamic general equilibrium models, it applies to environments in which markets are complete or incomplete, and it can be used for models of any dimension. Moreover, the approximation provides simple, easily interpretable closed form solutions for the dynamics of equilibrium portfolios.Country portfolios, solution methods.

Resolving the electron temperature discrepancies in HII Regions and Planetary Nebulae: kappa-distributed electrons

The measurement of electron temperatures and metallicities in H ii regions and Planetary Nebulae (PNe) has-for several decades-presented a problem: results obtained using different techniques disagree. What it worse, they disagree consistently. There have been numerous attempts to explain these discrepancies, but none has provided a satisfactory solution to the problem. In this paper, we explore the possibility that electrons in H ii regions and PNe depart from a Maxwell-Boltzmann equilibrium energy distribution. We adopt a "kappa-distribution" for the electron energies. Such distributions are widely found in Solar System plasmas, where they can be directly measured. This simple assumption is able to explain the temperature and metallicity discrepancies in H ii regions and PNe arising from the different measurement techniques. We find that the energy distribution does not need to depart dramatically from an equilibrium distribution. From an examination of data from Hii regions and PNe it appears that kappa ~ 10 is sufficient to encompass nearly all objects. We argue that the kappa-distribution offers an important new insight into the physics of gaseous nebulae, both in the Milky Way and elsewhere, and one that promises significantly more accurate estimates of temperature and metallicity in these regions.Comment: 16 pages, 11 figures, 2 tables, published in Ap

The Infrared Emission from the Narrow Line Region

We present models for the mid- and far- infrared emission from the Narrow Line Region (NLR) of Active Galactic Nuclei (AGN). Using the MAPPINGS III code we explore the effect of typical NLR parameters on the spectral characteristics of the IR emission. These include useful IR emission line ratio diagnostic diagrams for the determination of these parameters, as well as Star formation--AGN mixing diagnostics. We also examine emission line to continuum correlations which would assist in separating the IR emission arising from the NLR from that coming from the inner torus. We find for AGN like NGC 1068 and NGC 4151 that the NLR only contributes ~10% to the total IRAS 25 mum flux, and that other components such as a dusty torus are necessary to explain the total AGN IR emission.Comment: 15 pages, 12 figures, accepted for publication in A&A. Paper with full resolution figures available at http://www.mpa-garching.mpg.de/~brent/publications/bgrovesnlrIRpaper.pd

Economic growth and financial statement verification

We use a proprietary data set of financial statements collected by banks to examine whether economic growth is related to the use of financial statement verification in debt financing. Exploiting the distinct economic growth and contraction patterns of the construction industry over the years 2002–2011, our estimates reveal that banks reduced their collection of unqualified audited financial statements from construction firms at nearly twice the rate of firms in other industries during the housing boom period before 2008. This reduction was most severe in the regions that experienced the most significant construction growth. These trends reversed during the subsequent housing crisis in 2008–2011 when construction activity contracted. Moreover, using bank‐ and firm‐level data, we find a strong negative (positive) relation between audited financial statements during the growth period, and subsequent loan losses (construction firm survival) during the contraction period. Collectively, our results reveal that macroeconomic fluctuations produce temporal shifts in the overall level of financial statement verification and temporal shifts in verification are related to bank loan portfolio quality and borrower performance.Accepted manuscrip