Inflation Targeting and Debt: Lessons from Brazil

Studying the recent experience of Brazil the paper explains how default risk is at the centre of the mechanism through which an emerging market central bank that targets inflation might lose control of inflation--in other words of the mechanism through which the economy might move from a regime of 'monetary dominance' to one of 'fiscal dominance'. The literature, from Sargent and Wallace (1981) to the modern fiscal theory of the price level has discussed how an unsustainable fiscal policy may hinder the effectiveness of monetary policy, to the point that an increase in interest rates can have a perverse effect on inflation. We show that the presence of default risk reinforces the possibility that a vicious circle might arise, making the fiscal constraint on monetary policy more stringent.

The Transmission Mechanism of Monetary Policy in Europe: Evidence from Banks' Balance Sheets

Available studies on asymmetries in the monetary transmission mechanism within Europe are invariably based on macro-economic evidence: such evidence is abundant but often contradictory. This paper takes a different route by using micro-economic data. We use the information contained in the balance sheets of individual banks (available from the BankScope database) to implement a case-study on the response of banks in France, Germany, Italy and Spain to a monetary tightening. The episode we study occurred during 1992, when monetary conditions were tightened throughout Europe. Evidence on such tightening is provided by the uniform squeeze in liquidity, which affected all banks in our sample. We study the first link in the transmission chain by analysing the response of bank loans to the monetary tightening. Our experiment provides evidence on the importance of the Europe and thus on one possibly important source of asymmetries in the monetary transmission mechanism. We do not find evidence of a significant response of bank loans to the monetary tightening, which occurred during 1992, in any of the four European countries we have considered. However we find significant differences both across countries and across banks of different dimensions in the factors that allow them to shield the supply of loans from the squeeze in liquidity.

Looking for Contagion: Evidence from the ERM

This paper applies a full-information technique to test for the presence of contagion across the money markets of ERM member countries. We show that whenever it is possible to estimate a model for interdependence, a test for contagion based on a full information technique is more powerful. We test for the presence of contagion after having identified episodes of country-specific shocks, whose effects on other European markets are significantly different from those predictable from the estimated channels of interdependence. Using data on three-months interest rate spreads on German rates for seven countries over the period 1988-1992, we are unable to reject the null of contagion. Our evidence suggest that contagion within the ERM was a general phenomenon, not limited to a subset of weaker countries, the exception in the sample being France. Our results are mute as to the question of what lies behind these episodes of contagion; they show, however, that it is not always true that one only detects contagion when one applies poor statistical techniques.

High-ranking alleviates male local competition in lek mating systems

Territoriality entails demanding social interactions with competing individuals, typically males. Variation in quality of males can be predicted to affect the spatial arrangement of territories. We present a model aimed at understanding the spatial properties of territories on leks, where the presence of a hierarchy in a population of males leads to the clustering of individuals around high-ranking \u2018hotshot\u2019 males. The hierarchy results in a decrease in the number of nearest neighbors interacting directly with high-ranking males, with potential socio-sexual benefits for such males

Tumour sublines with different metastatic capacity induce similar blood coagulation changes in the host.

This paper is aimed at investigating how metastatic tumour growth influenced the haemostatic system of the host. Blood platelet count, blood fibrinogen level, the activated partial thromboplastin time (APTT) and the prothrombin time (PT) were determined at various intervals during growth and metastasis of a murine fibrosarcoma (mFS6) or one of its sublines with different metastatic capacity. Progressive thrombocytopenia and increase in fibrinogen level were observed during development of the tumour in all the animal groups studied, irrespective of the metastatic potential of the various sublines. No significant changes were observed in the PT or APTT values. These data support the concept that primary rather than metastatic growth influences the haemostatic system of tumour-bearing animals

Structure and dynamics of concentration fluctuations in a non-equilibrium dense colloidal suspension

Linearised fluctuating hydrodynamics describes effectively the concentration non-equilibrium fluctuations (NEF) arising during a diffusion process driven by a small concentration gradient. However, fluctuations in the presence of large gradients are not yet fully understood. Here we study the giant concentration NEF arising when a dense aqueous colloidal suspension is allowed to diffuse into an overlying layer of pure water. We use differential dynamic microscopy to determine both the statics and the dynamics of the fluctuations for several values of the wave-vector q. At small q, NEF are quenched by buoyancy, which prevents their full development and sets an upper timescale to their temporal relaxation. At intermediate q, the mean squared amplitude of NEF is characterised by a power law exponent -4, and fluctuations relax diffusively with diffusion coefficient D1. At large q, the amplitude of NEF vanishes and equilibrium concentration fluctuations are recovered, enabling a straightforward determination of the osmotic compressibility of the suspension during diffusion. In this q-range we also find that the relaxation of the fluctuations occurs with a diffusion coefficient D2 significantly different from D1. Both diffusion coefficients exhibit time-dependence with D1 increasing monotonically (by about 15%) and D2 showing the opposite behaviour (about 17% decrease). At equilibrium, the two coefficients coincide as expected. While the decrease of D2 is compatible with a diffusive evolution of the concentration profile, the increase of D1 is still not fully understood and may require considering nonlinearities that are neglected in current theories for highly stressed colloids

The Immediate Challenges for the European Central Bank

This paper discusses a number of issues that the newly constituted Board of the ECB will face early on. We show how conducting a European monetary policy is very different from living under the protective umbrella of the Bundesbank. We discuss voting on the ECB Board and argue that the ability to communicate to the public will be a critical factor for the success of the new institution. We also ask how a single monetary policy -- a common change in the interest rate controlled by the ECB -- is transmitted to the economy of the member countries. We show that the monetary process differs significantly inside EMU: initially disinflation episode could thus fall very unequally on a few member countries because they have a combination of financial structure that spreads a monetary contraction widely structure that is relatively inflexible. This process, moreover, is sure to evolve of the financial industry restructuring that is already underway and will be accentuated by the common money. Furthermore, as the Lucas principle suggests, the wage-price process itself will adapt to the changing focus of European monetary policy.