Price-Level versus Inflation Targeting with Financial Market Imperfections

This paper compares price-level-path targeting (PT) with inflation targeting (IT) in a sticky-price, dynamic, general equilibrium model augmented with imperfections in both the debt and equity markets. Using a Bayesian approach, we estimate this model for the Canadian economy. We show that the model with both debt and equity market imperfections fits the data better and use it to compare PT versus the estimated current IT regime. We find that in general PT outperforms the current IT regime. However, the gain is lower when financial market imperfections are taken into account.Monetary policy framework; Inflation targets; Economic models

Time-varying capital requirements in a general equilibrium model of liquidity dependence

This paper attempts to quantify business cycle effects of bank capital requirements. The authors use a general equilibrium model in which financing of capital goods production is subject to an agency problem. At the center of this problem is the interaction between entrepreneurs' moral hazard and liquidity provision by banks as analyzed by Holmstrom and Tirole (1998). They impose capital requirements on banks and calibrate the regulation using the Basel II risk-weight formula. Comparing business cycle properties of the model under this procyclical regulation with those under hypothetical countercyclical regulation, the authors find that output volatility is about 25 percent larger under procyclical regulation and that this volatility difference implies a 1.7 percent reduction of the household's welfare. Even with more conservative parameter choices, the volatility and welfare differences under the two regimes remain nonnegligible.Bank capital ; Business cycles ; Bank reserves

Private equity premium in a general equilibrium model of uninsurable investment risk

This paper studies the quantitative properties of a general equilibrium model where a continuum of heterogeneous entrepreneurs are subject to aggregate as well as idiosyncratic risks in the presence of a borrowing constraint. The calibrated model matches the highly skewed wealth and income distributions of entrepreneurs. The authors provide an accurate solution to the model despite the significant nonlinearities that are absent in the economy with uninsurable labor income risk. The model is capable of generating the average private equity premium of roughly 3 percent and a low risk-free rate. The model also produces procyclicality of the risk-free rate and countercyclicality of the average private equity premium. The countercyclicality of the average equity premium is largely driven by tightening (loosening) of financing constraints during recessions (booms).Risk ; Private equity ; Business cycles

The Role of Debt and Equity Finance over the Business Cycle

The authors show that debt and equity issuance are procyclical for most listed U.S. firms. The procyclicality of equity issuance decreases monotonically with firm size. At the aggregate level, however, the authors' results are not conclusive: issuance is countercyclical for very large firms that, although few in number, have a large effect on the aggregate because of their enormous size. If firms use the standard one-period contract, then the shadow price of external funds is procyclical and the cyclicality decreases with firm size. This property generates equity to be procyclical and--as in the data--the procyclicality decreases with firm size. Other factors that cause equity to be procyclical in the model are a countercyclical price of risk and a countercyclical cost of equity issuance. The model (i) generates a countercyclical default rate, (ii) magnifies shocks, and (iii) generates a stronger cyclical response for small firms, whereas the model without equity does the exact opposite.Financial stability; Business fluctuations and cycles

In-line rheo-optical investigation of the dispersion of organoclay in a polymer matrix during twin-screw compounding

The dispersion mechanisms in a clay-based polymer nanocomposite (CPNC) during twin-screw extrusion are studied by in-situ rheo-optical techniques, which relate the CPNC morphology with its viscosity. This methodology avoids the problems associated with post extrusion structural rearrangement. The polydimethylsiloxane (PDMS) matrix, which can be processed at ambient and low temperatures, is used to bypass any issues associated with thermal degradation. Local heating in the first part of the extruder allows testing of the usefulness of low matrix viscosity to enhance polymer intercalation before applying larger stresses for clay dispersion. The comparison of clay particle sizes measured in line with models for the kinetics of particle dispersion indicates that larger screw speeds promote the break-up of clay particles, whereas smaller screw speeds favor the erosion of the clay tactoids. Thus, different levels of clay dispersion are generated, which do not simply relate to a progressively better PDMS intercalation and higher clay exfoliation as screw speed is increased. Reducing the PDMS viscosity in the first mixing zone of the screw facilitates dispersion at lower screw speeds, but a complex interplay between stresses and residence times at larger screw speeds is observed. More importantly, the results underline that the use of larger stresses is inefficient per se in dispersing clay if sufficient time is not given for PDMS to intercalate the clay galleries and thus facilitate tactoid disruption or erosion.The authors thank the FCT (Fundação para a Ciência e Tecnologia) for financial support under the framework of Strategic Funding grant UID/CTM/50025/2020. L.H. acknowledges funding from the FCT Investigator Programme through grant IF/00606/2014

Film blowing of PHB-based systems for home compostable food packaging

One of the routes to minimize the environmental impact of plastics waste is the use of bio-sourced and biodegradable alternatives, particularly for packaging applications. Although Polyhydroxyalkanoates (PHA) are attractive candidates for food packaging, they have poor processability, particularly for extrusion film blowing. Thus, one relatively successful alternative has been blending PHA with a biodegradable polymer. This work proposes film blowing of a co-extruded Poly (hydroxybutyrate) (PHB) layer with a poly butylene adipate-co-terephtalate (PBAT) layer to enhance bubble stability, mechanical and barrier properties. Co-extrusion is detailed, together with the different strategies followed to improve adhesion between film layers and the PHB content in the films. Films with thicknesses below 50 micron and elongation at break beyond 500 % were consistently produced.This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No. 774088. LH also acknowledges funding from the Portuguese Foundation for Science and Technology Investigator Programme through grant IF/00606/2014

LL-37 boosts immunosuppressive function of placenta-derived mesenchymal stromal cells

Background: Although promising for graft-versus-host disease (GvHD) treatment, MSC therapy still faces important challenges. For instance, increasing MSC migratory capacity as well as potentializing immune response suppression are of interest. For GvHD management, preventing opportunistic infections is also a valuable strategy, since immunocompromised patients are easy targets for infections. LL-37 is a host defense peptide (HDP) that has been deeply investigated due to its immunomodulatory function. In this scenario, the combination of MSC and LL-37 may result in a robust combination to be clinically used. Methods: In the present study, the effects of LL-37 upon the proliferation and migratory capacity of human placenta-derived MSCs (pMSCs) were assessed by MTT and wound scratch assays. The influence of LL-37 over the immunosuppressive function of pMSCs was then investigated using CFSE cell division kit. Flow cytometry and real-time PCR were used to investigate the molecular mechanisms involved in the effects observed. Results: LL-37 had no detrimental effects over MSC proliferation and viability, as assessed by MTT assay. Moreover, the peptide promoted increased migratory behavior of pMSCs and enhanced their immunomodulatory function over activated human PBMCs. Strikingly, our data shows that LL-37 treatment leads to increased TLR3 levels, as shown by flow cytometry, and to an increased expression of factors classically related to immunosuppression, namely IDO, IL-10, TGF-β, IL-6, and IL-1β. Conclusions: Taken together, our observations may serve as groundwork for the development of new therapeutic strategies based on the combined use of LL-37 and MSCs, which may provide patients not only with an enhanced immunosuppression regime, but also with an agent to prevent opportunistic infections

Modelling the test, trace and quarantine strategy to control the COVID-19 epidemic in the state of São Paulo, Brazil.

Testing for detecting the infection by SARS-CoV-2 is the bridge between the lockdown and the opening of society. In this paper we modelled and simulated a test-trace-and-quarantine strategy to control the COVID-19 outbreak in the State of São Paulo, Brasil. The State of São Paulo failed to adopt an effective social distancing strategy, reaching at most 59% in late March and started to relax the measures in late June, dropping to 41% in 08 August. Therefore, São Paulo relies heavily on a massive testing strategy in the attempt to control the epidemic. Two alternative strategies combined with economic evaluations were simulated. One strategy included indiscriminately testing the entire population of the State, reaching more than 40 million people at a maximum cost of 2.25 billion USD, that would reduce the total number of cases by the end of 2020 by 90%. The second strategy investigated testing only symptomatic cases and their immediate contacts - this strategy reached a maximum cost of 150 million USD but also reduced the number of cases by 90%. The conclusion is that if the State of São Paulo had decided to adopt the simulated strategy on April the 1st, it would have been possible to reduce the total number of cases by 90% at a cost of 2.25 billion US dollars for the indiscriminate strategy but at a much smaller cost of 125 million US dollars for the selective testing of symptomatic cases and their contacts