UK Business Investment: Long-Run Elasticities and Short-Run Dynamics

From neoclassical theory output, capital stock and the user cost are cointegrated; capital and investment also (multi)cointegrate through the capital accumulation identity. An investment equation is estimated on UK data using a new capital stock series and a long series for the weighted cost of capital. Assuming CES technology, the elasticity of substitution is well-determined and below unity. Over-identifying restrictions are accepted. The long-run parameter is robust to alternative specifications, but single-equation investment relationships may obscure the dynamics. The Johansen method is over-sized, but outperforms a single equation test for excluding the capital accumulation identity from the investment equation.investment, capital stock, identification, multicointegration

What lies beneath? A time-varying FAVAR model for the UK transmission mechanism

This paper uses a time-varying Factor Augmented VAR to investigate the evolving transmission of monetary policy and demand shocks in the UK. Simultaneous estimation of time-varying impulse responses of a large set of macroeconomic variables and disaggregated prices suggest that the response of inflation, money supply and asset prices to monetary policy and demand shocks has changed over the sample period. In particular, during the post-1992 inflation targeting period, monetary policy shocks started having a bigger impact on prices, a smaller impact on activity and began contributing more to overall volatility. In contrast, demand shocks had the largest impact on these variables before the 1990s. We also document changes in the response of disaggregated prices, with the median reaction to contractionary policy shocks becoming more negative and the distribution more dispersed post-1992. JEL Classification: C38, E44, E52Factor Augmented VAR, monetary policy, sign restrictions, timevarying coefficients, transmission mechanism

A Globally Consistent Stress Testing Approach

This paper describes an approach for stress testing banks that is consistent across economies and geographies, in contrast to common “macro scenario” driven approaches. The latter would require economic scenarios to be both equally likely (in a probabilistic sense) and equally stressful (in a conditional loss sense) across countries in order to be comparable. The paper proposes a three-pronged approach for stressing bank solvency, which incorporates recalibrating pre-crisis Basel capital assumptions, adapting the BIS “expected shortfall” approach for securities, and using granular data for income haircuts. Loan losses are quantified using a simple “multiples” approach, starting from expected outcomes, which is derived from the pre-crisis Basel technical proposal. The approach is practical, can be more granular or conducted at a high level, depending on data availability, and offers a simple way for regulators, investors or risk assessors to compare and contrast stresses in different banking systems. Of the eight bank defaults recorded globally during 2017, this approach would have given a better “rank ordering” for seven of them, indicating the approach adds value to traditional solvency metrics

Sovereign Debt Restructuring: A Modest Proposal

Many sovereigns, including weaker credits, have taken on substantial debt during the COVID-19 pandemic. This raises the prospect of future defaults and sovereign restructurings, which will be informed by debt-sustainability analysis. But when analyzing notable recent sovereign defaults, we find a pattern of serially correlated errors: the analysis at the time of the restructuring is too optimistic about future sovereign debt dynamics. In light of this, I propose that future sustainability analysis should be based on more pessimistic expectations. In turn, this implies that sovereign creditors should face larger losses in future restructurings

Have Macron’s Recent Labour Reforms Been as Impactful as Past German Reforms?

Structural reforms can sometimes take many years for the effects to be visible in economic data: but one area where impacts can manifest more swiftly is the labour market. In particular, Germany’s experience in the mid-2000s is often cited as a clear example of how macroeconomic dynamics can shift relatively swiftly if the reforms are effective. More recently, France has seen a number of structural reforms, driven by President Macron’s desire to revitalize the French economy after his 2016 election. This paper examines the macroeconomic impact of recent French labour market reforms, comparing and contrasting this impact against the German experience in the 2000s. If idiosyncratic policy changes were a significant driver of labour market dynamics, then empirical outcomes should be different for those countries experiencing policy changes, relative to their peers. Using a variety of different statistical techniques, we find that – while there is clear evidence of the German labour market outperforming its peers when the Hartz reforms were enacted – there is no sign of the French labour market doing so under Macron’s presidency

The oxidation chemistry of the xylenes and related aromatic hydrocarbons

The research was concerned with obtaining kinetic data and product information for the oxidation chemistry of the isomeric xylenes and benzyl radicals at 753K.A trace amount (0.01 % for kinetic study, 0.5% for product study) of each xylene was separately added to slowly reacting mixtures of H₂ + O₂ in aged boric-acid-coated Pyrex reaction vessels at 753K and 500 Torr total pressure. From measurements of the relative loss of H₂ and hydrocarbon rate constants for the reactions of the radicals H and H0₂ with each xylene were obtained.H + Xylene → Productsk=1.3* 10⁹ 1 mol¯¹ S¯¹ (p-xylene), 1.4*10⁹ I mol¯¹ S¯¹ (m-xylene), 1.8* 10⁹ 1 mol¯¹ S¯¹ (a-xylene).HO₂ + Xylene → Productsk=9.4*10⁴ I mol¯¹ S¯¹ (p-xylene), 1.03*10⁵ 1 mol¯¹ S¯¹ (m-xylene), 1.2*10⁵ 1 mol¯¹ S¯¹ (o-xylene).A detailed examination of the reaction products was carried out over a wide range of mixture composition. The major aromatic products from the oxidation of the xylenes were the isomeric tolualdehydes, toluene and a-xylylcne oxide (from a-xylene). These were found to be similar to the products formed from the oxidation of toluene at 753K. From examination of the products available it was also possible to obtain more detailed rate constants for the attack of H radicals at each xylene giving specific products.H + Xylene → Methylbenzylk=7.3*10⁸ 1 mol¯¹ s¯¹ (p-xylene), 8.3*10⁸ 1 mol¯¹ s¯¹ (m-xylene), 1.2*10⁹ 1 mol¯¹ s¯¹ (o-xylene).H + Xylene → Toluenek=5.6*10⁸ 1 mol¯¹ s¯¹ (for all three xylenes).H + Xylene → CH₃-C₆H₃-CH₃k=9.1 * 10⁶ I mol¯¹ s¯¹ (p-xylene), 8.4 * 10⁶ I mol¯¹ s¯¹ (m-xylene), 9* 10⁵ I mol¯¹ s¯¹ (a-xylene).In the case of H0₂ + RH, thermochemical considerations lead to the conclusion that both abstraction from and addition to the ring will be considerably less energetically favourable than the equivalent reaction of H atoms. Consequently k(HO₂₊xylene) should be taken to be the rate constant forHO₂ + Xylene → Methylbenzyl.The decomposition of neopentylbenzene in the presence of oxygen and propene at 753K and a total pressure of 60Torr in an aged boric-acid-coated Pyrex reaction vessel was used to determine rate constant" for the reactions between H0₂ and benzyl radicals.The decomposition of neopentylbenzene at 753K produced t-butyl and benzyl radicals. The t-butyl radicals react with O₂ to produce HO₂ radicals. The presence of propene was used to determine the concentration of HO₂ radicals by monitoring the rate of production of propylene oxide. From measurement of the yields of benzaldehyde and toluene yields, and the rate of production of propylene oxide, rate constants for the reactions of HO₂ with benzyl radicals producing benzaldehyde and toluene were determined as 4.36* 10⁹ I mol¯¹ s¯¹ and 8.44* 10⁸ I mol¯¹ s¯¹ respectively at 753K.A detailed examination of the products produced from the decomposition of neopentylbenzene in the presence of oxygen showed that the primary products were benzaldehyde, toluene, i-butene and 2-methyl-l-phenylprop-l-ene.The key features highlighted in this research are the similarity in the oxidation chemistry between the xylenes and toluene and the importance of the reactions of the benzyl radical in the oxidation of methyl-substituted benzenes

Dynamic reorganization of the middle fusiform gyrus: long-term bird expertise predicts decreased face selectivity

What is the functional relationship between face-selective and expertise-predicated object-selective regions in the human middle fusiform gyrus? In two separate fMRI experiments, superior behaviorally-measured bird expertise predicts both higher middle fusiform gyrus selectivity for birds and, concomitantly, lower selectivity for faces. This finding suggests a long-term dynamic reorganization of the neural mechanisms underlying the visual recognition of faces and non-face

A two-level Markov model for packet loss in UDP/IP-based real-time video applications targeting residential users

The packet loss characteristics of Internet paths that include residential broadband links are not well understood, and there are no good models for their behaviour. This compli- cates the design of real-time video applications targeting home users, since it is difficult to choose appropriate error correction and concealment algorithms without a good model for the types of loss observed. Using measurements of residential broadband networks in the UK and Finland, we show that existing models for packet loss, such as the Gilbert model and simple hidden Markov models, do not effectively model the loss patterns seen in this environment. We present a new two-level Markov model for packet loss that can more accurately describe the characteristics of these links, and quantify the effectiveness of this model. We demonstrate that our new packet loss model allows for improved application design, by using it to model the performance of forward error correction on such links