Understanding the Dynamics of the US External Position

This paper studies the dynamics of the U.S. external position for the past 35 years, and examines alternative paths for future external adjustment. We develop a new present value expression for the external position that embeds the restrictions of international solvency and can be easily empirically evaluated with time series methods. Our empirical model accounts for almost all the variations in the U.S. external position between 1973 and 2008. We estimate that most of the quarter-by-quarter changes in the U.S. external position over this period are due to news about future returns and trade flows, but over long horizons the changes reflect prior expectations about how the U.S. would meet its international financial obligations. Importantly, we identify the expectations embedded in the current U.S. external position that contain relevant information about the future adjustment paths. These expectations indicate that the half-lives for future adjustment paths towards U.S. external balance are at least 13 years and involve a significant real depreciation of the dollar.Capital Flows, External Imbalances, International Debt, International Solvency

The effectiveness of different asset types as a hedge against inflation

Rationale The current period of high inflation makes it difficult for investors to maintain their profitability targets in real terms. Against this background, it is important to analyse the returns on different types of assets recorded in this and past inflationary episodes. Takeaways •In the past, both commodities and inflation-linked bonds have generated positive real returns during inflationary periods, while conventional sovereign bonds and general stock market indices have yielded negative real returns. •In the current inflationary episode energy-related assets have generated the highest returns, while in the United States residential real estate has also performed well. •In the recent period, both in the euro area and the United States investors have increased their holdings in investment funds specialising in inflation-linked bonds, and have reduced their holdings in conventional bond and equity funds

Exchange rate regime and external adjustment : an empirical investigation for the U.S

Este trabajo analiza la relación entre la posición externa neta de Estados Unidos y el régimen de tipo de cambio. Se detecta una ruptura estructural en la posición externa neta de Estados Unidos al final del sistema de tipo de cambio fijo de Bretton Woods, que modificó tanto la media como la varianza de la serie. En promedio, Estados Unidos pasó de una posición acreedora a una deudora y la varianza de la posición externa aumentó durante el período de tipo de cambio flexible. Este aumento se debe en gran medida al componente de valoración en el ajuste externo, que representa el 54 % de la varianza de la posición externa de Estados Unidos durante el período de tipo de cambio flexible, pero solo el 29 % durante el período con tipo de cambio fijo. También se demuestra que el régimen de tipo de cambio afecta principalmente al componente de valoración en el ajuste de desequilibrios externos. Existe también evidencia de otra ruptura estructural en la posición externa neta de Estados Unidos en el momento de la introducción del euro. Finalmente, hay implicaciones de valoración de activos procedentes de la relación entre el régimen de tipo de cambio y el proceso de ajuste externo, ya que los desequilibrios externos tienen capacidad explicativa sobre la evolución futura del tipo de cambio una vez se tiene en cuenta el régimen cambiarioThis paper analyses the relationship between the U.S. net external position and the exchange rate regime. I find a structural break in the U.S. net external position at the end of the Bretton Woods system of fixed exchange rates that changed both the mean and variance of the series. On average, the U.S. changed from a creditor to a debtor position and the variance of the external position increased during the floating period. This increase is to a large extent due to the valuation component of external adjustment, which accounts for 54% of the variance of the U.S. external position during the floating period but only 29% during the fixed exchange rate period. Further analysis shows that the exchange rate regime mainly affects the valuation channel of external adjustment. There is also evidence of another structural break in the U.S. external position around the time of the introduction of the euro. Finally, I document asset pricing implications from the relationship between the exchange rate regime and the external adjustment process, as external imbalances predict future exchange rate developments once the exchange rate regime is taken into accoun

External adjustment with a common currency: the case of the euro area

This paper analyzes the behaviour of the external adjustment path for the four main economies in the euro area. I find a structural break in the behaviour of the net external position at the time of the introduction of the euro for France, Italy and Spain, pointing out that the inception of the common currency changed their external adjustment process. Germany does not show this structural break, being its external position more affected by other events such as the country reunification in 1989. I also fi nd that France and Italy will adjust the net external position mainly through the valuation component, while Germany and Spain will restore their external balance mostly through the trade component. The common currency area could have exacerbated Germany’s net creditor position as the evolution of the euro has reacted to the external adjustment needs of debtor countries such as Italy and Spain.Este trabajo analiza el comportamiento de la posición financiera externa de las cuatro principales economías de la zona del euro, y si la introducción de la moneda única ha modifi cado su evolución. Se documenta una ruptura estructural en el comportamiento de la posición externa neta de Francia, Italia y España en el momento de la introducción del euro, que señala que la creación de la moneda única cambió el proceso de ajuste externo en estos países. Alemania, sin embargo, no experimentó esta ruptura estructural y su posición externa se ha visto más afectada por otros eventos, como la reunificación del país en 1989. Los resultados empíricos muestran que Francia e Italia ajustarán sus desequilibrios externos principalmente por medio del componente de valoración, mientras que en Alemania y España primará el componente de comercio. El área monetaria común puede haber fomentado el incremento en la posición acreedora de Alemania, ya que el comportamiento de la moneda única ha estado condicionado por las necesidades de ajuste externo de países deudores como Italia y España

Two Species of Vortices in a massive Gauged Non-linear Sigma Model

Non-linear sigma models with scalar fields taking values on $\mathbb{C}\mathbb{P}^n$ complex manifolds are addressed. In the simplest $n=1$ case, where the target manifold is the $\mathbb{S}^2$ sphere, we describe the scalar fields by means of stereographic maps. In this case when the $\mathbb{U}(1)$ symmetry is gauged and Maxwell and mass terms are allowed, the model accommodates stable self-dual vortices of two kinds with different energies per unit length and where the Higgs field winds at the cores around the two opposite poles of the sphere. Allowing for dielectric functions in the magnetic field, similar and richer self-dual vortices of different species in the south and north charts can be found by slightly modifying the potential. Two different situations are envisaged: either the vacuum orbit lies on a parallel in the sphere, or one pole and the same parallel form the vacuum orbit. Besides the self-dual vortices of two species, there exist BPS domain walls in the second case. Replacing the Maxwell contribution of the gauge field to the action by the second Chern-Simons secondary class, only possible in $(2+1)$-dimensional Minkowski space-time, new BPS topological defects of two species appear. Namely, both BPS vortices and domain ribbons in the south and the north charts exist because the vacuum orbit consits of the two poles and one parallel. Formulation of the gauged $\mathbb{C}\mathbb{P}^2$ model in a Reference chart shows a self-dual structure such that BPS semi-local vortices exist. The transition functions to the second or third charts break the $\mathbb{U}(1)\times\mathbb{S}\mathbb{U}(2)$ semi-local symmetry, but there is still room for standard self-dual vortices of the second species. The same structures encompassing $N$ complex scalar fields are easily generalized to gauged $\mathbb{C}\mathbb{P}^N$ models.Comment: 39 pages, 23 figures (extended version), to be published in JHE

Dissecting zero modes and bound states on BPS vortices in Ginzburg-Landau superconductors

In this paper the zero modes of fluctuation of cylindrically symmetric self-dual vortices are analyzed and described in full detail. These BPS topological defects arise at the critical point between Type II and Type I superconductors, or, equivalently, when the masses of the Higgs particle and the vector boson in the Abelian Higgs model are equal. In addition, novel bound states of Higss and vector bosons trapped by the self-dual vortices at their core are found and investigated.Comment: 29 pages, 51 figure

Looping the Loop of Pseudotranslation: "L’écumoire, ou Tanzaï et Néadarné: Histoire Japonoise", by Claude-Prosper Jolyot de Crébillon (1734)

La pseudotraduccion, es decir, el original que se presenta al lector so capa de traducción, ha estado presente en la literatura europea a lo largo de los últimos diez siglos, con ejemplos tan destacados como el Quijote o las Lettres persanes de Montesquieu. L’écumoire, o Tanzaï et Néadarné: Histoire japonoise, de Crébillon, pasaría por ser una más de las muchas pseudotraducciones de ‘cartas de extranjeros’ que tan de moda estuvieron en el siglo XVIII, de no ser por el muy especial marco paratextual que rodea la narración, presentada como una polipseudotraducción sucesiva de seis idiomas.Pseudotranslation, i. e. an original text presented to the readers as a translation, has been present in European literature throughout the last ten centuries, with such prominent examples as Don Quixote or the Lettres persanes by Montesquieu. L’écumoire, or Tanzaï et Néadarné: Histoire japonois, by Crébillon, would have been yet another of the many pseudotranslations of ‘foreigners’ letters’ that were in vogue back in the 18th century, had it not been for the extremely peculiar paratextual framework of the narration, which is presented as a poli-pseudotranslation from six different languages

Inflation expectation indicators based on financial instrument prices

Artículo de revistaThis article shows how indicators of agents’ inflation expectations can be derived from the prices of various financial instruments and presents the estimates obtained for the euro area and the United States. The results show that these metrics have reacted to economic and monetary decisions made in recent years, and that, on average, expected inflation is lower and less volatile in the euro area than in the United States. Moreover, since end-2016 there has been a marked rise in the probability of observing longterm inflation rates above 2% in the United States, coinciding with the likely change in the country’s economic policy stance. Changes in the indicators for the euro area have been less pronounced over this period, although a marked drop in the probability of low or negative inflation rates has been observe

Box 4. Drivers of recent developments in euro area long-term interest rates

Artículo de revistaThis early-release box was published on 28 Marc