Official Creditor Seniority and Burden-Sharing in the Former Soviet Bloc

macroeconomics, Soviet bloc, burden-sharing, official creditor seniority

Economic Implications of ERISA

If the intent of the Employee Retirement Income Security Act, ERISA, was to assure that beneficiaries of insolvent pension plans receive adequate pension benefits, sharp increases in nominal rates of interest have blunted that purpose. Without an increase in these rates, the Pension Benefit Guarantee Corporation, PBGC, the insurance agency established to guarantee benefits, faced large liabilities on the terminations of pension plans. We examine the economics of pension funds and the funding of pension funds before and after the enactment of ERISA. The Act changed the economics of pension funds. The PBGC, the employer, and the employees have interests in the assets of the pension plan. The PBGC can tax corporations to pay off liabilities and to fund guaranteed benefits; employers can terminate pension plans or overfund them; employees can ask for more benefits or claim the assets in the fund. Although the PBGC insures benefits, the insurance agent forbears, not acting quickly to protect its own interests. To prevent potential huge increases in its liabilities, the PBGC could require that employers hedge the guaranteed benefits, and fund their increases in promised benefits. Given its policies, these requirements could protect the PBGC.

A Constant Recontracting Model of Sovereign Debt

We present a dynamic model of international lending in which borrowers cannot commit to future repayments and in which debtors can sometimes successfully negotiate partial defaults or "rescheduling agreements." All parties in a debt rescheduling negotiation realize that today's rescheduling agreement may itself have to be renegotiated in the future. Our bargaining-theoretic approach allows us to handle the effects of uncertainty on sovereign debt contracts in a much more satisfactory way than in earlier analyses. The framework is readily extended to analyze the conflicting interests of different lenders and of banks and creditor country taxpayers.Economic

Grants versus Loans for Development Banks

Economic

Estimating the efficiency gains of debt restructuring

One rationale for debt reduction operations under the Brady Plan has been, by alleviating the debt overhang, to improve investment efficiency. Brady-type debt and debt-service reduction (within a strong policy framework, where there is a track record of economic adjustment) has been shown to affect development significantly. The principle benefit of eliminating the debt overhang is to improve investment incentives for private investors - direct liquidity relief is secondary. So, evaluating a debt and debt-service reduction operation should involve estimating efficiency gains as well as direct financial savings. The authors present a method (requiring only weak assumptions) for establishing an upper bound on the efficiency impact of debt reductions. The key reference framework for evaluating much more complex Brady-type debt deals is open-market buybacks. Their approach to determining this upper bound hinges on the assumption that efficiency gains on a straight open-market repurchase of debt never exceed the gains to creditors. If an open-market buyback indeed reduces the debt overhang and moves a country toward more (and more efficient) investment, creditors will anticipate this in setting a price for remitting their claims. So, at least part of the efficiency gains are dissipated in additional capital gains to creditors. To give point estimates to efficiency gains, they develop a simple two-period model of debt overhang and investment and discuss assumptions under which it is possible to obtain a closed-form solution to the model. Their empirical estimates indicate that the general bounds derived in the first step tend to overstate substantially the efficiency gains of debt reduction operations. In Mexico's case, for example, the upper-bound estimate of efficiency gains is US $15 billion, but the point estimate is only about US$1 billion. What are the policy implications of their low point estimates? The debt-overhang disincentive may not be as important as the broader problem of debtors'credit constraints in international capital markets. How can new loan packages to developing countries be structured to maximize investment incentives? By using loans rather than outright grants, donors can give a country more funds for current investment at lower present dicounted expense. But grants, unlike loans, do not distort investment incentives. In short, if a credit-constrained country starts with no debt overhang, the first tranche of aid should probably be in hard loans. As total transfers increase, if the borrowing country has not gained access to private capital markets, marginal transfers should be grants. The optimal strategy for new flows can involve both increasing grants and decreasing loans. When transfers are expected to be heavy, a case can be made for using grants exclusively.Strategic Debt Management,Economic Theory&Research,Financial Crisis Management&Restructuring,Banks&Banking Reform,Environmental Economics&Policies

Combinatorial Roles of Heparan Sulfate Proteoglycans and Heparan Sulfates in Caenorhabditis elegans Neural Development

Heparan sulfate proteoglycans (HSPGs) play critical roles in the development and adult physiology of all metazoan organisms. Most of the known molecular interactions of HSPGs are attributed to the structurally highly complex heparan sulfate (HS) glycans. However, whether a specific HSPG (such as syndecan) contains HS modifications that differ from another HSPG (such as glypican) has remained largely unresolved. Here, a neural model in C. elegans is used to demonstrate for the first time the relationship between specific HSPGs and HS modifications in a defined biological process in vivo. HSPGs are critical for the migration of hermaphrodite specific neurons (HSNs) as genetic elimination of multiple HSPGs leads to 80% defect of HSN migration. The effects of genetic elimination of HSPGs are additive, suggesting that multiple HSPGs, present in the migrating neuron and in the matrix, act in parallel to support neuron migration. Genetic analyses suggest that syndecan/sdn-1 and HS 6-O-sulfotransferase, hst-6, function in a linear signaling pathway and glypican/lon-2 and HS 2-O-sulfotransferase, hst-2, function together in a pathway that is parallel to sdn-1 and hst-6. These results suggest core protein specific HS modifications that are critical for HSN migration. In C. elegans, the core protein specificity of distinct HS modifications may be in part regulated at the level of tissue specific expression of genes encoding for HSPGs and HS modifying enzymes. Genetic analysis reveals that there is a delicate balance of HS modifications and eliminating one HS modifying enzyme in a compromised genetic background leads to significant changes in the overall phenotype. These findings are of importance with the view of HS as a critical regulator of cell signaling in normal development and disease

Long-term methimazole therapy in Graves' hyperthyroidism and adverse reactions: a Danish multicenter study

PURPOSE: In this prospective multicenter study with patients newly diagnosed with Graves’ hyperthyroidism (GH), we studied the timing and characteristics of adverse drug reactions in patients treated with anti-thyroid drugs (ATD) for up to 48 months. METHODS: Patients with GH were treated with ATD until remission and hereafter with a low-dose regime to keep the patients in remission. The patients were followed with blood samples and recording of adverse events approximately every second month for the first 2 years and every third month for the following 2 years. RESULTS: We included 208 patients and the patients were treated for a median of 22 (range: 0.5–49) months. Ten percent of the patients experienced adverse drug reactions and 75% of the cases occurred during the first 6 months. After 24 months, the methimazole dose was lowered to 5 mg/day, and after this time point, no further adverse drug reactions were recorded. Skin reactions were the most prominent reaction, comprising 68% of the registered reactions, and no hepatic and bonemarrow affection was recorded. CONCLUSION: With this study, we report the frequency, timing of occurrence, and characteristics of adverse drug reactions when treating GH with the ATD drug methimazole for up to 48 months. Long-term low-dose methimazole treatment can be a cost-effective and straightforward treatment option if adverse drug reactions such as severe hepatic and bone marrow affection are kept in mind