Are Indexed Bonds a Remedy for Sudden Stops?

Recent policy proposals call for setting up a benchmark indexed bond market to prevent "Sudden Stops". This paper analyzes the macroeconomic implications of these bonds using a general equilibrium model of a small open economy with financial frictions. In the absence of indexed bonds, negative shocks to productivity or to the terms of trade trigger Sudden Stops through a debt-deflation mechanism. This paper establishes that whether indexed bonds can help to prevent Sudden Stops depends on the "degree of indexation", or the percentage of the shock reflected in the return. Quantitative analysis calibrated to a typical emerging economy suggests that indexation can improve macroeconomic conditions only if the level of indexation is less than a critical value due to the imperfect nature of the hedge provided by these bonds. When indexation is higher than this critical value (as with full-indexation), "natural debt limits" become tighter, leading to higher precautionary savings. The increase in the volatility of the trade balance that accompanies the introduction of indexed bonds outweighs the improvement in the covariance of the trade balance with income, increasing consumption volatility. Additionally, we find that at high levels of indexation, the borrowing constraint can become suddenly binding following a positive shock, triggering a debt-deflation.Indexed Bonds, Degree of Indexation

Review of "Emerging Markets Resilience and Growth Amid Global Turmoil by M. Ayhan Kose and Eswar S. Prasad"

Emerging Markets Resilience and Growth amid Global Turmoil provides an excellent contribution to the literature. The book covers a variety of important topics on emerging market economies and offers invaluable information for a wide range of audience; from academics to policy makers as well as anyone interested in learning about these countries. The vast amount of information provided in the book is, then, used to shed light on an important question: What explains the resilience of emerging market economies observed during and in the aftermath of the global financial crisis? This review presents a brief summary of the book and a discussion about its implications for future research.

ECONOMIC SIGNIFICANCE OF TOURISM IN THE ECONOMIC GROWTH OF TURKEY

Tourism, since Second World War has shown significant progress and its contribution to economic development. It will be considered that tourism sector will be a major sector in the globalization of economic development process. In Turkey tourism sector has shown great progress since 1980. The contribution of foreign currency helped to reduce foreign debt and unemployment even if the country was having economic problems. In this study, firstly the significance of tourism and the contribution of this sector to economic development are studied. Secondly, an econometric model concerning the relationship between tourism and economic development are constructed. The accuracy of this model is tested by statistical method.Tourism, Turkish Economy, Economic Growth, Regressions with ARIMA models.

Dual-band, double-negative, polarization-independent metamaterial for the visible spectrum

We present the first dual-band negative index metamaterial that operates in the visible spectrum. The optimized four-functional-layer metamaterial structure exhibits the first double-negative (i.e., simultaneously negative permittivity and permeability) band in the red region of the visible spectrum with a figure of merit of 1.7 and the second double-negative band in the green region of the visible spectrum with a figure of merit of 3.2. The optical behavior of the proposed structure is independent of the polarization of the incident field. This low-loss metamaterial structure can be treated as a modified version of a fishnet metamaterial structure with an additional metal layer of different thickness in a single functional layer. The additional metal layer extends the diluted plasma frequency deep into the visible spectrum above the second order magnetic resonance of the structure, hence provides a dual band operation with simultaneously negative effective permittivity and permeability. Broadband metamaterials with multiple negative index bands may be possible with the same technique by employing higher order magnetic resonances. The structure can be fabricated with standard microfabrication techniques that have been used to fabricate fishnet metamaterial structures.Comment: 26 Pages, 6 Figures, 2 Tables, 2 Medi

Plasmonic Superlens Imaging Enhanced by Incoherent Active Convolved Illumination

We introduce a loss compensation method to increase the resolution of near-field imaging with a plasmonic superlens that relies on the convolution of a high spatial frequency passband function with the object. Implementation with incoherent light removes the need for phase information. The method is described theoretically and numerical imaging results with artificial noise are presented, which display enhanced resolution of a few tens of nanometers, or around one-fifteenth of the free space wavelength. A physical implementation of the method is designed and simulated to provide a proof-of-principle, and steps toward experimental implementation are discussed

Theory of coherent active convolved illumination for superresolution enhancement

Recently an optical amplification process called the plasmon injection scheme was introduced as an effective solution to overcoming losses in metamaterials. Implementations with near-field imaging applications have indicated substantial performance enhancements even in the presence of noise. This powerful and versatile compensation technique, which has since been renamed to a more generalized active convolved illumination, offers new possibilities of improving the performance of many previously conceived metamaterial-based devices and conventional imaging systems. In this work, we present the first comprehensive mathematical breakdown of active convolved illumination for coherent imaging. Our analysis highlights the distinctive features of active convolved illumination, such as selective spectral amplification and correlations, and provides a rigorous understanding of the loss compensation process. These features are achieved by an auxiliary source coherently superimposed with the object field. The auxiliary source is designed to have three important properties. First, it is correlated with the object field. Second, it is defined over a finite spectral bandwidth. Third, it is amplified over that selected bandwidth. We derive the variance for the image spectrum and show that utilizing the auxiliary source with the above properties can significantly improve the spectral signal-to-noise ratio and resolution limit. Besides enhanced superresolution imaging, the theory can be potentially generalized to the compensation of information or photon loss in a wide variety of coherent and incoherent linear systems including those, for example, in atmospheric imaging, time-domain spectroscopy, ${\cal PT}$ symmetric non-Hermitian photonics, and even quantum computing.Comment: revised, more details and references adde

Putting the Brakes on Sudden Stops: The Financial Frictions-Moral Hazard Tradeoff of Asset Price Guarantees

The hypothesis that Sudden Stops to capital inflows in emerging economies may be caused by global capital market frictions, such as collateral constraints and trading costs, suggests that Sudden Stops could be prevented by offering price guarantees on the emerging-markets asset class. Providing these guarantees is a risky endeavor, however, because they introduce a moral-hazard-like incentive similar to those that are also viewed as a cause of emerging markets crises. This paper studies this financial frictions-moral hazard tradeoff using an equilibrium asset-pricing model in which margin constraints, trading costs, and ex-ante price guarantees interact in the determination of asset prices and macroeconomic dynamics. In the absence of guarantees, margin calls and trading costs create distortions that produce Sudden Stops driven by occasionally binding credit constraints and Irving Fisher's debt-deflation mechanism. Price guarantees contain the asset deflation by creating another distortion that props up the foreign investors' demand for emerging markets assets. Quantitative simulation analysis shows the strong interaction of these two distortions in driving the dynamics of asset prices, consumption and the current account. Price guarantees are found to be effective for containing Sudden Stops but at the cost of introducing potentially large distortions that could lead to 'overvaluation' of emerging markets assets.

Are Asset Price Guarantees Useful for Preventing Sudden Stops?: A Quantitative Investigation of the Globalization Hazard-Moral Hazard Tradeoff

The globalization hazard hypothesis maintains that the current account reversals and asset price collapses observed during 'Sudden Stops' are caused by global capital market frictions. A policy implication of this view is that Sudden Stops can be prevented by offering global investors price guarantees on emerging markets assets. These guarantees, however, introduce a moral hazard incentive for global investors, thus creating a tradeoff by which price guarantees weaken globalization hazard but strengthen international moral hazard. This paper studies the quantitative implications of this tradeoff using a dynamic stochastic equilibrium asset-pricing model. Without guarantees, distortions induced by margin calls and trading costs cause Sudden Stops driven by Fisher's debt-deflation mechanism. Price guarantees prevent this deflation by introducing a distortion that props up foreign demand for assets. Non-state-contingent guarantees contain Sudden Stops but they are executed often and induce persistent asset overvaluation. Guarantees offered only in high-debt states are executed rarely and prevent Sudden Stops without persistent asset overvaluation. If the elasticity of foreign asset demand is low, price guarantees can still contain Sudden Stops but domestic agents obtain smaller welfare gains at Sudden Stop states and suffer welfare losses on average in the stochastic steady state.

Emerging Market Business Cycles Revisited: Learning about the Trend

We build an equilibrium business cycle model in which agents cannot perfectly distinguish between the permanent and transitory components of TFP shocks and learn about those components using the Kalman filter. Calibrated to Mexico, the model predicts a higher variability of consumption relative to output and a strongly negative correlation between the trade balance and output for a wide range of variability and persistence of permanent shocks vis-a-vis the transitory shocks. Moreover, our estimation for Mexico and Canada suggests more severe informational frictions in emerging markets than in developed economies.emerging markets, business cycles, learning, Kalman filter

Hyperbolic metamaterial as a tunable near-field spatial filter for the implementation of the active plasmon injection loss compensation scheme

We present how to physically realize the auxiliary source described in the recently introduced active plasmon injection loss compensation scheme for enhanced near-field superlensing. Particularly, we show that the characteristics of the auxiliary source described in the active plasmon injection scheme including tunable narrow-band and selective amplification via convolution can be realized by using a hyperbolic metamaterial functioning as a near-field spatial filter. Besides loss compensation, the proposed near-field spatial filter can be useful for real-time high resolution edge detection.Comment: 8 pages, 8 figure