The Euro Changeover and Its Effects on Price Transparency, and Inflation. Mission Euro, Mission Accomplished!

Despite the expectations of economists that the euro changeover would have no effect on prices, we show that European consumers perceive the contrary. The data indicate that consumers based their perceptions about inflation on goods that are cheaper and more frequently purchased. We use this insight to develop and estimate a model of imperfect information that explains why these goods were subject to higher price growth after the changeover. The data indicate that some retailers, aware of the consumers' difficulties in adopting the new currency, used the changeover to increase profits by increasing prices. We also propose an explanation on why, contrary to common belief, this effect was smaller in more concentrated retail markets.euro, currency changeover, imperfect information, search costs, price setting

The Euro Changeover and its Effects on Price Transparency and Inflation.

Despite the expectations of economists that the euro changeover would have no effect on prices, we show that European consumers perceived the contrary. The data indicate that consumers based their perceptions about inflation on goods that are cheaper and more frequently purchased. We use this insight to develop and estimate a model of imperfect information that explains why these goods were subject to higher price growth after the changeover. The data indicate that some retailers, aware of the consumers' diffculties in adopting the new currency, used the changeover to increase profits by increasing prices. We also propose an explanation of why this effect was smaller in more concentrated retail markets.euro, currency changeover, imperfect information, search costs, price setting.

Asymmetric Information, Portfolio Managers, and Home Bias

We propose a model of delegated asset management in which individual investors are more informed about the domestic market than the foreign market and face uncertainty about quality of portfolio managers. The model shows that asymmetric information of individual investors results in home bias even if professional fund managers are equally well informed about all markets. Additionally, the model generates predictions about the size and the quality of mutual funds that are consistent with empirical studies: there are fewer mutual funds investing domestically, but their quality and market value are higher.Asymmetric Information, Portfolio Managers, and Home Bias

Dynamic collective choice with endogenous status quo

We analyze a bargaining situation in which preferences evolve over time and the previous agreement becomes the next status quo. The endogeneity of the status quo exacerbates the players' conflict of interest: Players disagree more often than under exogenous status quo. This leads to inefficiencies and status quo inertia. Under certain conditions, the negotiations can come to a complete gridlock: Players never reach an agreement. Gridlock can occur between players with arbitrarily similar preferences, provided they are sufficiently patient. In legislative settings, our model predicts polarization and explains why legislators may fail to react promptly to economic shocks.Loeper acknowledges the financial support from the Ministerio Economía y Competitividad (Spain), grants ECO-2013-42710-P, MDM-2014-0431, and Comunidad de Madrid, MadEco CM (S2015/HUM3444)

Dynamic pivotal politics

We analyze a dynamic extension of a parsimonious model of lawmaking in which preferences evolve over time and today’s policy becomes tomorrow’s status quo. Unlike in existing models of pivotal politics, policy makers’ voting behavior depends on the institutional environment and on their expectations about future economic and political shocks. Relative to sincere voting, the equilibrium behavior exhibits a strategic polarization effect, which increases with the degree of consensus required by the institution, the volatility of the policy environment, and the expected ideological polarization of the future policy makers. The equilibrium behavior also exhibits a strategic policy bias, which works against any exogenous policy bias embedded in the voting rule. Our analysis implies that the existing literature underestimates the inertial effect of checks and balances and overestimates the impact of institutional biases such as fiscally conservative budget procedures.Loeper gratefully acknowledges support from the Ministerio Economía y Competitividad (Spain), Grants No. RYC-2015-18326, No. ECO 2013-42710-P, No. MDM 2014-0431, and Comunidad de Madrid, MadEco-CM (S2015/HUM-3444

Application of orthostatic test and lower body negative pressure in investigation of circulatory reflexes in humans

Celem niniejszego opracowania jest przedstawienie dotychczasowych osiągnięć na polu aplikacji zmiennego pola grawitacyjnego do oceny progu tolerancji na działanie przeciążeń (±Gz) lub diagnostyki autonomicznego układu nerwowego (ANS) pod kątem zaburzeń adaptacji układu krążenia do pozycji pionowej. Integralność odpowiedzi ANS bada się, stosując między innymi takie testy prowokacyjne, jak test pionizacyjny (HUT/HDT) lub pod/nadciśnienie wokół dolnej połowy ciała (LBNP/LBPP). Dzięki swojej prostocie, łatwości wykonania i pełnej kontroli nad siłą bodźca HUT stał się często stosowaną próbą kliniczną w badaniach hipotonii ortostatycznej. Ocena LBNP jest intensywnie wykorzystywana w medycynie lotniczej do określania krążeniowych mechanizmów regulacyjnych. W badaniach klinicznych metodykę tę stosuje się jako bodziec powodujący powtarzalne odpowiedzi hemodynamiczne na przesunięcie płynów fizjologicznych w kierunku głowa–nogi. Próba prowadzona w pozycji leżącej pozwala uniknąć wpływów mięśniowych oraz układu przedsionkowego i badać czystą odpowiedź krążeniową. Gwałtowna i/lub wielokrotna zmiana zwrotu działającego w długiej osi ciała wektora grawitacji w krótkim horyzoncie czasowym może spowodować utratę świadomości (G-LOC). Z dotychczasowych badań wynika, że tolerancja na przeciążenie maleje, jeśli przed bodźcem +Gz zastosuje się próbę odwrotnej pionizacji (HDT, –Gz) — efekt push-pull.The aim of this paper is to present methods applied in analysis of tolerance to gravitational acceleration (±Gz) changes and diagnostics of the dysfunction of the autonomic nervous system (ANS) concerning cardiovascular system adaptation to the vertical body position. The head-up tilt test (HUT), head-down tilt test (HDT), and lower body negative/positive (LBNP/LBPP) pressure are widely used for evaluation of integrated ANS reflexes. Due to its simplicity, ease of application and full control over the level of excitation, HUT has become a frequently used clinical test in orthostatic hypotony. LBNP is widely used in aviation medicine to study cardiovascular regulation. In clinics, the method is applied as a reliable procedure to study results of the shift of physiological fluids in the head–legs direction. Due to the supine patient position during the test, muscle contraction (pump) and vestibular influences can be avoided and a pure cardiovascular reflex is observed. Abrupt and/or fast repeatable changes in the direction of gravitational acceleration (±Gz) can result in loss of consciousness (G-LOC). Recent results suggest that tolerance to +Gz is reduced when preceded by HDT (–Gz) (push-pull effect)

Gridlock and inefficient policy instruments

Why do rational politicians choose inefficient policy instruments? Environmental regulation, for example, often takes the form of technology standards and quotas even when cost-effective Pigou taxes are available. To shed light on this puzzle, we present a stochastic game with multiple legislative veto players and show that inefficient policy instruments are politically easier to repeal than efficient instruments. Anticipating this, heterogeneous legislators agree more readily on an inefficient policy instrument. We describe when inefficient instruments are likely to be chosen, and predict that they are used more frequently in (moderately) polarized political environments and in volatile economic environments. We show conditions under which players strictly benefit from the availability of the inefficient instrument.Harstad’s part of the research received funding from the European Research Council (ERC) under the European Union’s Horizon 2020 Research and Innovation Program (Grant 683031). Antoine Loeper gratefully acknowledges the support of the Fundación Ramón Areces, of the Ministerio de Economía y Competitividad (Spain), grants RYC-2015-18326, ECO 2016-75992-P, and MDM 2014-0431, and of the Comunidad de Madrid, grant MadEco-CM (S2015/HUM-3444)

Gridlock and inefficient policy instruments

Why do rational politicians choose inefficient policy instruments? Environmental regulation, for example, often takes the form of technology standards and quotas even when cost-effective Pigou taxes are available. To shed light on this puzzle, we present a stochastic game with multiple legislative veto players and show that inefficient policy instruments are politically easier than efficient instruments to repeal. Anticipating this, heterogeneous legislators agree more readily on an inefficient policy instrument. We describe when inefficient instruments are likely to be chosen, and predict that they are used more frequently in (moderately) polarized political environments and in volatile economic environments. We show conditions under which players strictly benefit from the availability of the inefficient instrument

Asymmetric Information, Portfolio Managers, and Home Bias

We propose a model of delegated asset management that can explain the following empirical regularities observed in international markets: (i) the presence of home bias, (ii) the lower proportion of mutual funds investing domestically, and (iii) the higher ability and market value of mutual funds investing domestically. In the model, heterogeneous fund managers choose whether to specialize in domestic or foreign assets. Individual investors are uncertain about managers' abilities to generate abnormal returns, and they are more informed about domestic markets than foreign markets. As a result, they are better able to evaluate the ability of managers who specialize in domestic assets. This makes domestic investments less risky and generates home bias. Home bias is magnified by the managers' specializations: since ability is rewarded more in the domestic market, higher ability managers invest domestically, making domestic assets more attractive to the investors