Linear Approximation Methods and International Real Business Cycles with Incomplete Asset Markets

Most quantitative studies of international real business cycle (IRBC) models require the use of approximate solution methods. We solve an IRBC model with incomplete asset markets using King, Plosser and Rebelo's (1988) linear approximation method. We quantify the additional approximation error brought about by the existence of a unit root in the linear dynamic system and demonstrate that the symmetry of the model helps reduce this approximation error. A central finding is that the parametrizations which address the cross-country consumption correlation puzzle are precisely those where solutions may be least accurate.

"It" Happened, but Not Again: A Minskian Analysis of Japan's Lost Decade

This paper asks two questions. First, can we explain Japan's ongoing financial crisis by means of an institutional analysis similar to the one Hyman P. Minsky applied to the U.S. economy during the postwar period? Second, what are the implications of this analysis for what is going on in the Canadian and U.S. economies today. To answer the first question, we develop an interpretation of Japan's postwar history and particularly the evolution of its financial institutions that we believe fits Minsky's institutional analysis. We begin by identifying three broad periods in Japan's postwar economic history through 1990. We label the 1945 to 1972 period as "stable," thanks in part to tight regulation of the financial and trading system. By the early 1 970s and through the end of the decade, however, these systems were under severe strain for both internal and external reasons. Internally, Japan's largest companies were relying less on bank credit to finance investment and trade and more on retained earnings. This affected the financial system by reducing bank profitability and forcing banks to seek business elsewhere, notably in the real estate sector. Externally, Japan suffered from the collapse of the Bretton Woods exchange-rate system, increasing trade tensions with the United States that led to "forced" deregulation, and what were two very difficult oil shocks for a country unusually reliant on oil imports. During the last period, from 1980 to 1990, Japan's economy easily outperformed the OECD countries, leading to yet more pressure from abroad to deregulate and stimulate domestic demand. Ultimately, we suggest that the country's financial system was not able to adapt adequately to a rapidly changing domestic and international setting. This created a powder keg for ill-considered fiscal and monetary policy (surpluses and high interest rates) and fertile ground for the financial crisis that took root in 1990 and persists to some extent today. To answer the second question, we draw parallels between events leading up to Japan's 1990 stock market crash and events in the United States and Canada today, with particular emphasis on the current policy stance in both countries toward budget surpluses and inflation. We argue there are good reasons to be concerned that history may be about to repeat itself.

Investigation of the Role of Elastic Unitarity in High-Energy Scattering: Gribov's Theorem and the Froissart Bound

We re-examine V. Gribov's theorem of 1960 according to which the total cross-section cannot approach a finite non-zero limit with, at the same time, a diffraction peak having a finite slope. We are very close to proving by an explicit counter-example that elastic unitarity in the elastic region is an essential ingredient of the proof. By analogy, we raise the question of the saturation of the Froissart-Martin bound, for which no examples incorporating elastic unitarity exist at the present time.Comment: 11 pages, 1 figures, latex with sproc.st

Discussion of "Breakdown and groups" by P. L. Davies and U. Gather

Discussion of ``Breakdown and groups'' by P. L. Davies and U. Gather [math.ST/0508497]Comment: Published at http://dx.doi.org/10.1214/009053604000001138 in the Annals of Statistics (http://www.imstat.org/aos/) by the Institute of Mathematical Statistics (http://www.imstat.org

Yeasts

Yeasts are a group of eukaryotic microfungi with a well-defined cell wall whose growth is either entirely unicellular or a combination of hyphal and unicellular reproduction. The approximately 1500 known yeast species belong to two distinct fungal phyla, the Ascomycota and the Basidiomycota. Within each these phyla, yeasts can be found in several subphyla or classes, reflecting the enormous diversity of their evolutionary origins and biochemical properties. In nature, yeasts are found mainly in association with plants or animals but are also present in soil and aquatic environments. Yeasts grow rapidly and have simple nutritional requirements, for which reason they have been used as model systems in biochemistry, genetics and molecular biology. They were the first microorganisms to be domesticated for the production of beer, bread or wine, and they continue to be used for the benefit of humanity in the production of many important health care and industrial commodities, including recombinant proteins, biopharmaceuticals, biocontrol agents and biofuels. The best-known yeast is the species Saccharomyces cerevisiae, which may be regarded as the world’s foremost industrial microbe

Precautionary saving and portfolio allocation: DP by GMM

There is much research on consumption-savings problems with risky labor income and a constant interest rate and also on portfolio allocation with risky returns but nonstochastic labor income. Less is known quantitatively about the interaction between the two forms of risk. Under CRRA utility, undiversifiable income risk should be reflected in both savings rates and portfolio allocations. To quantify these effects in a model of consumption and portfolio choice, we adopt a semi-parametric projection method for solving dynamic programmes, based on generalized method of moments estimation of the parameters of approximate decision rules. We find that background income risk does affect optimal portfolios but that this effect may be difficult to detect empirically.portfolio theory, precautionary saving

Evidence accumulation in a Laplace domain decision space

Evidence accumulation models of simple decision-making have long assumed that the brain estimates a scalar decision variable corresponding to the log-likelihood ratio of the two alternatives. Typical neural implementations of this algorithmic cognitive model assume that large numbers of neurons are each noisy exemplars of the scalar decision variable. Here we propose a neural implementation of the diffusion model in which many neurons construct and maintain the Laplace transform of the distance to each of the decision bounds. As in classic findings from brain regions including LIP, the firing rate of neurons coding for the Laplace transform of net accumulated evidence grows to a bound during random dot motion tasks. However, rather than noisy exemplars of a single mean value, this approach makes the novel prediction that firing rates grow to the bound exponentially, across neurons there should be a distribution of different rates. A second set of neurons records an approximate inversion of the Laplace transform, these neurons directly estimate net accumulated evidence. In analogy to time cells and place cells observed in the hippocampus and other brain regions, the neurons in this second set have receptive fields along a "decision axis." This finding is consistent with recent findings from rodent recordings. This theoretical approach places simple evidence accumulation models in the same mathematical language as recent proposals for representing time and space in cognitive models for memory.Comment: Revised for CB

Extended Riemannian Geometry II: Local Heterotic Double Field Theory

We continue our exploration of local Double Field Theory (DFT) in terms of symplectic graded manifolds carrying compatible derivations and study the case of heterotic DFT. We start by developing in detail the differential graded manifold that captures heterotic Generalized Geometry which leads to new observations on the generalized metric and its twists. We then give a symplectic pre-NQ-manifold that captures the symmetries and the geometry of local heterotic DFT. We derive a weakened form of the section condition, which arises algebraically from consistency of the symmetry Lie 2-algebra and its action on extended tensors. We also give appropriate notions of twists-which are required for global formulations-and of the torsion and Riemann tensors. Finally, we show how the observed $\alpha'$-corrections are interpreted naturally in our framework.Comment: v2: 30 pages, few more details added, typos fixed, published versio