Asymmetric Sovereign Risk: Implications for Climate Change Preparation

Sovereign risk exhibits significantly asymmetric reactions to its determinants across the conditional distribution of credit spreads. This aspect, previously overlooked in the literature, carries relevant policy implications. Countries with elevated risk levels are disproportionately affected by climate change vulnerability compared to their lower-risk counterparts, especially in the short term. Factors such as inflation, natural resource rents, and the debt-to-GDP ratio exert different effects between low and high-risk spreads as well. Real growth and terms of trade have a stable but modest impact across the spread distribution. Notably, investing in climate change preparedness proves effective in mitigating vulnerability to climate change, in terms of sovereign risk, particularly for countries with low spreads and long-term debt (advanced economies), where readiness and vulnerability tend to counterbalance each other. However, for countries with high spreads and short-term debt, additional measures are essential as climate change readiness alone is insufficient to offset vulnerability effects in this case. Results also demonstrate that the actual occurrence of natural disasters is less influential than vulnerability to climate change in determining spreads

Global effects of US uncertainty: real and financial shocks on real and financial markets

We estimate the effects of financial, macroeconomic and policy uncertainty from the United States on the dynamics of credit growth, stock prices, economic activity, bond yields and inflation in five of the main receptors of US foreign direct investment from 1950 to 2019: The United Kingdom, The Netherlands, Ireland, Canada and Switzerland. Our multicounty approach allows us to clearly identify the effects of the different sources of uncertainty by imposing natural contemporaneous exogenity restrictions which cannot be used in a single-country perspective, frequently undertaken by the literature. It also considers international common cycle factors that have been previously identified and which are key to adequately measure the dynamics of the effects of uncertainty shocks on financial and real markets, on a global basis (...

Interdependent Capital Structure Choices and the Macroeconomy

This study shows that capital structure choices of US corporations are interdependent across time. We follow a two-step estimation approach. First, using a large cross-section of firms we estimate year-by-year average capital structure choices, i.e., the average firm’s percentage of new funding that is secured through debt, its term composition, and the percentage of new equity represented by retained earnings. Second, these time series are included in a Factor Augmented Vector Autoregressive model in which three factors representing real economic activity, expected future funding conditions, and prices, are included. We test for the interdependence between optimal capital structure decisions and for the influence exerted by macroeconomic conditions on these decisions. Results show there is a hierarchical order in which firms make capital structure decisions. They first decide on the share of debt out of total new funding they will hire. Conditional on this they decide on the term of their debt and on their earnings retention policy. Of outmost importance, macroeconomic factors are key for making capital structure decisions

Sovereign Risk and Economic Complexity: Machine Learning Insights on Causality and Prediction

We investigate how a country’s economic complexity influences its sovereign yield spread with respect to the US. We analyze various maturities across 28 countries, consisting of 16 emerging and 12 advanced economies. Notably, a one-unit increase in the economic complexity index is associated to a reduction of about 87 basis points in the 10-year yield spread (p<0.01). However, this effect is largely non-significant for maturities under 3 years and, when significant (p<0.1), the reduction is around 54 bps. This suggests that economic complexity affects not only the level of the sovereign yield spreads but also the curve slope. Our first set of models utilizes Advanced causal machine learning tools, allowing us to control for a large set of potential confounders. This is crucial given our relatively small dataset of countries and roughly 15 years of data, as well as the low frequency of annual variables. In the second part of our analysis, we shift our focus to economic complexity’s predictive power. Our findings reveal that econòmic complexity is a robust predictor of sovereign spreads at 5-year and 10-year maturities, ranking among the top three predictors, alongside inflation and institutional factors like the rule of law. We also discuss the potential mechanisms through which economic complexity reduces sovereign risk and emphasize its role as a long-run determinant of productivity, output and income stability, and the likelihood of fiscal crises

Risk Spillovers between Global Corporations and Latin American Sovereigns: Global Factors Matter

We study volatility spillovers between the corporate sector’s and Latin American countries’ CDS. Daily data from October 14 2006 to August 23 2021 are employed. Spillovers are computed both for the raw data and for filtered series which factor out the effect of global common factors on the various CDS series. Results indicate that most spillovers occur within groups, i.e., within countries and within global corporations. However, considerable spillovers are also registered from LAC sovereigns to corporations and vice versa. Interesting differences are encountered between filtered and unfiltered data. Specifically, spillovers from countries to corporations are overestimated (in about 4.3 percentage points) and spillovers from corporations to sovereigns are underestimated (in about 5.8 percentage points) when unfiltered data is used. This result calls for a revision of results obtained from studies that do not consider the role of global common factors on system spillovers. Like in most related studies, spillovers show considerable time-variation, being larger during times of financial or economic distress. When looking at total system spillovers over time, those corresponding to unfiltered series are always larger than those corresponding to filtered series. The difference between the two time-series is largest in times of distress, indicating that global factors play a major role in times of crises. Similar conclusions are derived from network analysis

Does economic complexity reduce the probability of a fiscal crisis?

Higher economic complexity of a country reduces the probability of suffering a fiscal crisis between 46% and 57%. Along with institutional factors, complexity is shown to be sufficient to describe the risk of facing episodes of fiscal distress. On the contrary, the role of variables frequently emphasized by the literature and policy markets, such as the debt-output ratio, real growth, inflation, terms of trade or fiscal balance, is very modest or insignificant. Development strategies that aim for greater economic complexity also promise to reduce countries’ fiscal vulnerabilit

US uncertainty shocks, credit, production, and prices: The case of fourteen Latin American countries

The extant literature has examined the impact of United States’ uncertainty shocks on developed and large emerging market economies. However, this research has not accounted for global cycles in production, credit, and prices, which can influence the estimates of the effects of US uncertainty on the rest of the world. The effects of uncertainty in highly indebted emerging open economies, which depend heavily on US financial and real conditions, have not been studied. We analyze the effects of uncertainty shocks on 14 Latin American countries (LACs) of various sizes and various levels of dependence on US financial and real flows. Latin America is a highly indebted and heterogeneous region that is sensitive to US economic and financial conditions, particularly uncertainty, in its various dimensions: real, financial, and policy related (including monetary policy). Our results show that the effects of real and financial uncertainty are more significant and long lasting than the effects of economic and monetary policy uncertainty, as measured by the use of uncertainty-related key words. All forms of uncertainty have a larger and more persistent impact on the gross domestic product of countries than the impact on credit and prices. In general, uncertainty in the US depresses economic activity in Latin America, although there is significant heterogeneity in the effects, which warrants detailed analysis of individual countries when considering policy implementation and portfolio diversificatio

Resultados clínicos de la artroplastia unicompartimental de rodilla en un hospital universitario

Se ha realizado un estudio retrospectivo de 25 artroplastias unicompartimentales de rodilla intervenidas de 1989 a 2008, En 15 casos (16 prótesis) se obtuvieron datos completos para su estudio. Once artroplastias se realizaron en mujeres y 5 en hombres con una edad media de 65 años. El tiempo de seguimiento fue de 65 meses (rango 14-202). Analizamos el rango de movilidad, la necesidad de cirugía de revisión y la puntuación en el Knee Society Store. Hubo de casos de infección superficial resueltos favorablemente y ningún caso de infección profunda. La cirugía de revisión fue necesaria en el 37,5% de pacientes en una media de tiempo de 37'5 meses (rango 18-128). Los resultados fueron similares a aquellos que hicieron que se abandonara la técnica en los años 90.Unicompartmental knee arthroplasty appeared at the 70s as an alternative to the proximal tibial osteotomy in young patients with pain and medial or lateral compartment osteoarthritis of the knee. At the 90s this technique began to be abandoned because the clinical results were not the expected. In the last years, lots of articles have been published showing results that can be compared with the total knee arthroplasty thanks to the news designs and the improve of the surgical technique. A retrospective study was made of the 25 unicompartmental knee arthroplasties performed in our hospital, with a mean follow up of 65 months. We analysed the range of mobility, the need of revision surgery and the Knee Society Score, getting similar results to that that made abandon the technique in the 90s

Ab initio study of the influence of nanoscale doping inhomogeneities in the phase separated state of La1−x_{1-x}Cax_{x}MnO3_3

The chemical influence in the phase separation phenomenon that occurs in perovskite manganites is discussed by means of ab initio calculations. Supercells have been used to simulate a phase separated state, that occurs at Ca concentrations close to the localized to itinerant crossover. We have first considered a model with two types of magnetic ordering coexisting within the same compound. This is not stable. However, a non-isotropic distribution of chemical dopants is found to be the ground state. This leads to regions in the system with different effective concentrations, that would always accompany the magnetic phase separation at the same nanometric scale, with hole-rich regions being more ferromagnetic in character and hole-poor regions being in the antiferromagnetic region of the phase diagram, as long as the system is close to a phase crossover.Comment: 8 pages, 7 figures, 1 tabl

Involvement of PKR and RNase L in translational control and induction of apoptosis after Hepatitis C polyprotein expression from a Vaccinia virus recombinant

BACKGROUND: Hepatitis C virus (HCV) infection is of growing concern in public health with around 350 million chronically infected individuals worldwide. Although the IFN-α/rivabirin is the only approved therapy with 10–30% clinical efficacy, the protective molecular mechanism involved during the treatment is still unknown. To analyze the effect of HCV polyprotein expression on the antiviral response of the host, we developed a novel vaccinia virus (VV)-based delivery system (VT7-HCV7.9) where structural and nonstructural (except part of NS5B) proteins of HCV ORF from genotype 1b are efficiently expressed and produced, and timely regulated in mammalian cell lines. RESULTS: Regulated transcript production and viral polypeptide processing was demonstrated in various cell lines infected with the recombinant VT7-HCV7.9, indicating that the cellular and viral proteolytic machineries are functional within these cells. The inducible expression of the HCV polyprotein by VV inhibits the synthesis of both host and viral proteins over the time and also induces apoptosis in HeLa and HepG2-infected cells. These effects occur accompanying with the phosphorylation of the translation initiation factor eIF-2α. In cells co-infected with VT7-HCV7.9 and a recombinant VV expressing the dominant negative eIF-2α-S51A mutant in the presence of the inductor isopropyl-thiogalactoside (IPTG), protein synthesis is rescued. The IFN-inducible protein kinase PKR is responsible for the translational block, as demonstrated with PKR-/- and PKR+/+ cell lines. However, apoptosis induced by VT7-HCV7.9 is mediated by the RNase L pathway, in a PKR-independent manner. CONCLUSION: These findings demonstrate the antiviral relevance of the proteins induced by interferon, PKR and RNase L during expression from a VV recombinant of the HCV polyprotein in human cell lines. HCV polyprotein expression caused a severe cytopathological effect in human cells as a result of inhibition of protein synthesis and apoptosis induction, triggered by the activation of the IFN-induced enzymes PKR and RNase L systems. Thus, the virus-cell system described here highlights the relevance of the IFN system as a protective mechanism against HCV infection