Online Appendix to "Firm-Specific Capital, Nominal Rigidities and the Business Cycle"

Online appendix for the Review of Economic Dynamics article

Firm-Specific Capital, Nominal Rigidities and the Business Cycle

Macroeconomic and microeconomic data paint conflicting pictures of price behavior. Macroeconomic data suggest that inflation is inertial. Microeconomic data indicate that firms change prices frequently. We formulate and estimate a model which resolves this apparent micro - macro conflict. Our model is consistent with post-war U.S. evidence on inflation inertia even though firms re-optimize prices on average once every 1.5 quarters. The key feature of our model is that capital is firm-specific and pre-determined within a period.

Firm-specific capital, nominal rigidities and the business cycle

Macroeconomic and microeconomic data paint conflicting pictures of price behavior. Macroeconomic data suggest that inflation is inertial. Microeconomic data indicate that firms change prices frequently. We formulate and estimate a model which resolves this apparent micro - macro conflict. Our model is consistent with post-war U.S. evidence on inflation inertia even though firms re-optimize prices on average once every 1.5 quarters. The key feature of our model is that capital is firm-specific and predetermined within a period.Business cycles ; Macroeconomics ; Microeconomics

Firm-specific capital, nominal rigidities, and the business cycle

Macroeconomic and microeconomic data paint conflicting pictures of price behavior. Macroeconomic data suggest that inflation is inertial. Microeconomic data indicate that firms change prices frequently. We formulate and estimate a model which resolves this apparent micro - macro conflict. Our model is consistent with post-war U.S. evidence on inflation inertia even though firms re-optimize prices on average once every 1.5 quarters. The key feature of our model is that capital is firm-specific and predetermined within a period.Inflation (Finance) ; Monetary policy ; Business cycles

The permanent income hypothesis revisited

Measured aggregate U.S. consumption does not behave like a martingale. This paper develops and tests two variants of the permanent income model that are consistent with this fact. In both variants, we assume agents make decisions on a continuous time basis. According to the first variant, the martingale hypothesis holds in continuous time and serial persistence in measured consumption reflects only the effects of time aggregation. We investigate this variant using both structural and atheoretical econometric models. The evidence against these models is far from overwhelming. This suggests that the martingale hypothesis may yet be a useful way to conceptualize the relationship between aggregate quarterly U.S. consumption and income. According to the second variant of the permanent income model, serial persistence in measured consumption reflects the effects of exogenous technology shocks and time aggression. In this model, continuous time consumption does not behave like a martingale. We find little evidence against this variance of the permanent income model. It is difficult, on the basis of aggregate quarterly U.S. data, to convincingly distinguish between the different continuous time models considered in the paper.Consumption (Economics) ; Income

Elemental spatial and temporal association formation in left temporal lobe epilepsy

The mesial temporal lobe (MTL) is typically understood as a memory structure in clinical settings, with the sine qua non of MTL damage in epilepsy being memory impairment. Recent models, however, understand memory as one of a number of higher cognitive functions that recruit the MTL through their reliance on more fundamental processes, such as “self-projection” or “association formation”. We examined how damage to the left MTL influences these fundamental processes through the encoding of elemental spatial and temporal associations. We used a novel fMRI task to image the encoding of simple visual stimuli, either rich or impoverished, in spatial or spatial plus temporal information. Participants included 14 typical adults (36.4 years, sd. 10.5 years) and 14 patients with left mesial temporal lobe damage as evidenced by a clinical diagnosis of left temporal lobe epilepsy (TLE) and left MTL impairment on imaging (34.3 years, sd. 6.6 years). In-scanner behavioral performance was equivalent across groups. In the typical group whole-brain analysis revealed highly significant bilateral parahippocampal activation (right > left) during spatial associative processing and left hippocampal/parahippocampal deactivation in joint spatial-temporal associative processing. In the left TLE group identical analyses indicated patients used MTL structures contralateral to the seizure focus differently and relied on extra-MTL regions to a greater extent. These results are consistent with the notion that epileptogenic MTL damage is followed by reorganization of networks underlying elemental associative processes. In addition, they provide further evidence that task-related fMRI deactivation can meaningfully index brain function. The implications of these findings for clinical and cognitive neuropsychological models of MTL function in TLE are discussed

Efficacy and safety of avacincaptad pegol in patients with geographic atrophy (GATHER2) : 12-month results from a randomised, double-masked, phase 3 trial

Geographic atrophy is an advanced form of dry age-related macular degeneration that can lead to irreversible vision loss and high burden of disease. We aimed to assess efficacy and safety of avacincaptad pegol 2 mg in reducing geographic atrophy lesion growth.GATHER2 is a randomised, double-masked, sham-controlled, 24-month, phase 3 trial across 205 retina clinics, research hospitals, and academic institutions globally. To be eligible, patients had to be aged 50 years or older with non-centrepoint-involving geographic atrophy and best corrected visual acuity between 20/25 and 20/320 in the study eye. Eligible patients were randomly assigned (1:1) to monthly avacincaptad pegol 2 mg administered as a 100 μL intravitreal injection or sham for the first 12 months. Randomisation was performed using an interactive response technology system with stratification by factors known to be of prognostic importance in age-related macular degeneration. Patients, investigators, study centre staff, sponsor personnel, and data analysts were masked to treatment allocation. The primary endpoint was geographic atrophy lesion size measured by fundus autofluorescence at baseline, month 6, and month 12. Efficacy and safety analyses were done in the modified intention-to-treat and safety populations, respectively. This trial is registered with ClinicalTrials.gov, NCT04435366.Between June 22, 2020, and July 23, 2021, 1422 patients were screened for eligibility, of whom 448 were enrolled and randomly assigned to avacincaptad pegol 2 mg (n=225) or sham (n=223). One patient in the sham group did not receive study treatment and was excluded from analyses. There were 154 (68%) female patients and 71 (32%) male patients in the avacincaptad pegol 2 mg group, and 156 (70%) female patients and 66 (30%) male patients in the sham group. From baseline to month 12, the mean rate of square-root-transformed geographic atrophy area growth was 0·336 mm/year (SE 0·032) with avacincaptad pegol 2 mg and 0·392 mm/year (0·033) with sham, a difference in growth of 0·056 mm/year (95% CI 0·016-0·096; p=0·0064), representing a 14% difference between the avacincaptad pegol 2 mg group and the sham group. Ocular treatment-emergent adverse events in the study eye occurred in 110 (49%) patients in the avacincaptad pegol 2 mg group and 83 (37%) in the sham group. There were no endophthalmitis, intraocular inflammation, or ischaemic optic neuropathy events over 12 months. To month 12, macular neovascularisation in the study eye occurred in 15 (7%) patients in the avacincaptad pegol 2 mg group and nine (4%) in the sham group, with exudative macular neovascularisation occurring in 11 (5%) in the avacincaptad pegol 2 mg group and seven (3%) in the sham group.Monthly avacincaptad pegol 2 mg was well tolerated and showed significantly slower geographic atrophy growth over 12 months than sham treatment, suggesting that avacincaptad pegol might slow disease progression and potentially change the trajectory of disease for patients with geographic atrophy.Iveric Bio, An Astellas Company

Anticipating Unemployment: Savings Evidence from Denmark * (Preliminary and Incomplete)

Abstract This paper studies the savings behavior of workers faced with costly job loss. Using Danish administrative data on income, savings, and employment from 1983 to 2010, I find cumulative earnings losses of more than $20,000 five years after a layoff. Income losses are smaller, around 13 percent of pre-layoff income, and there is no evidence of an expenditure loss. Under a number of specifications, the data reveal higher savings in the years before a mass layoff among displaced workers than those in the same firm who keep their job, consistent with worker foresight about the idiosyncratic probability of losing their job. JEL Classification: J63, D91, E2

Financial Risk and Unemployment

Abstract There is a strong correlation between the corporate interest rate (BAA rated), and its spread relative to Treasuries, and the unemployment rate. We model how interest rates and potential default rates impact equilibrium unemployment in a Diamond-Mortesen-Pissarides model. We calibrate the model using US data without targeting business cycle statistics. Volatility in the corporate interest rate can explain about 80% of the volatility of unemployment, vacancies, and market tightness. Simulating the Great Recession shows the model can account for much of the rise in unemployment. Without Fed action, unemployment would have been 6% higher. JEL Classification:E22, E24, E32, E44, J41, J63, J6