Medium Term Business Cycles

Over the postwar, the U.S., Europe and Japan have experienced what may be thought of as medium frequency oscillations between persistent periods of robust growth and persistent periods of relative stagnation. These medium frequency movements, further, appear to bear some relation to the high frequency volatility of output. That is, periods of stagnation are often associated with significant recessions, while persistent booms typically are either free of recessions or are interrupted only by very modest downturns. In this paper we explore the idea of medium term cycles, which we define as reflecting the sum of the high and medium frequency variation in the data. We develop a methodology for identifying these kinds of fluctuations and then show that a number of important macroeconomic time series exhibit significant medium term cycles. The cycles feature strong procyclical movements in both disembodied and embodied technological change, research & development, and the efficiency of resource utilization. We then develop a model to explain the medium term cycle that features both disembodied and embodied endogenous technological change, along with countercyclical markups and variable factor utilization. The model is able to generate medium term fluctuations in output, technological change, and resource utilization that resemble the data, with a non-technological shock as the exogenous disturbance. In particular, the model offers a unified approach to explaining both high and medium frequency variation in aggregate business activity.BUSINESS CYCLE; ENDOGENOUS TECHNOLOGICAL CHANGE.

Finance, growth, and public policy

Development economists have long argued that modern financial markets are important to growth and that financial repression is a serious obstacle to progress in many developing countries. The authors consider the relationship between finance and growth and the appropriate role of government policy. Many economists have stressed how problems of asymmetric information and contract enforcement impede the functioning of financial markets in developing countries. In addition, they try to elaborate on these theories to make them relevant to policymakers. Information gaps and enforcement frictions introduce a premium in the cost of external funds. Factors such as the borrower's financial health, the efficiency of financial intermediation, and the ease of enforcing private financial contracts govern the size of this premium. How financial factors contribute to development may be understood along these lines. Financial contracts and institutions should be designed to minimize this premium.Banks&Banking Reform,Financial Intermediation,Environmental Economics&Policies,Economic Theory&Research,Health Economics&Finance

The Science of Monetary Policy: A New Keynesian Perspective

MONETARY POLICY; STABILIZATION; CREDIBILITY.

Cost of AIDS care in Mexico: what are its main individual predictors?

BACKGROUND: The Mexican government is offering universal access to antiretroviral (ARV) drugs. The cost of doing so, despite aggressive price negotiation with the pharmaceutical industry, remains high. Even with a low prevalence, about 150,000 Mexicans are estimated to be living with HIV and will require ARV treatment. Estimating the resources needed to fund this gap should consider how patient and provider characteristics affect health care costs. METHODS: Using a sample of patients from 11 facilities in three Mexican cities representing a large proportion of AIDS patients in the country, we developed a fixed-effect model, which by controlling the facilities and individual heterogeneity estimates predicted costs using patient demographic and socioeconomic characteristics as well as physician training. RESULTS: The estimated model explains about 45% of the variation in costs. Additional education is significantly and positively associated with cost. Increasing age is also associated with higher costs. CONCLUSIONS: Socioeconomic status and demographic characteristics explain an important proportion of variation in care costs for AIDS, despite AIDS being such a heterogeneous disease. Such characteristics will need to be taken into account when resource needs are estimated. A priority-setting process considering the principles of equity in the fair distribution of resources is needed to help reduce the social burden of HIV/AIDS in Mexico

External Constraints on Monetary Policy and the Financial Accelerator

We develop a small open economy macroeconomic model where financial conditions influence aggregate behavior. We use this model to explore the connection between the exchange rate regime and financial distress. We show that fixed exchange rates exacerbate financial crises by tying the hands of the monetary authorities. We then investigate the quantitative significance by first calibrating the model to Korean data and then showing that it does a reasonably good job of matching the Korean experience during its recent financial crisis. In particular, the model accounts well for the sharp increase in lending rates and the large drop in output, investment and productivity during the 1997-1998 episode. We then perform some counterfactual exercises to illustrate the quantitative significance of fixed versus floating rates both for macroeconomic performance and for welfare. Overall, these exercises imply that welfare losses following a financial crisis are significantly larger under fixed exchange rates relative to flexible exchange rates

Local Nodes in Global Networks: The Geography of Knowledge Flows in Biotechnology Innovation

The literature on innovation and interactive learning has tended to emphasize the importance of local networks, inter-firm collaboration and knowledge flows as the principal source of technological dynamism. More recently, however, this view has come to be challenged by other perspectives that argue for the importance of non-local knowledge flows. According to this alternative approach, truly dynamic economic regions are characterized both by dense local social interaction and knowledge circulation, as well as strong inter-regional and international connections to outside knowledge sources and partners. This paper offers an empirical examination of these issues by examining the geography of knowledge flows associated with innovation in biotechnology. We begin by reviewing the growing literature on the nature and geography of innovation in biotechnology research and the commercialization process. Then, focusing on the Canadian biotech industry, we examine the determinants of innovation (measured through patenting activity), paying particular attention to internal resources and capabilities of the firm, as well as local and global flows of knowledge and capital. Our study is based on the analysis of Statistics Canada’s 1999 Survey of Biotechnology Use and Development, which covers 358 core biotechnology firms. Our findings highlight the importance of in-house technological capability and absorptive capacity as determinants of successful innovation in biotechnology firms. Furthermore, our results document the precise ways in which knowledge circulates, in both embodied and disembodied forms, both locally and globally. We also highlight the role of formal intellectual property transactions (domestic and international) in promoting knowledge flows. Although we document the importance of global networks in our findings, our results also reveal the value of local networks and specific forms of embedding. Local relational linkages are especially important when raising capital—and the expertise that comes with it—to support innovation. Nevertheless, our empirical results raise some troubling questions about the alleged pre-eminence of the local in fostering innovation

Monetary Policy Rules and Macroeconomic Stability: Evidence and some Theory

We estimate a forward-looking monetary policy reaction function for the postwar U.S. economy, pre- and post-October 1979. Our results point to substantial differences in the estimated rule across periods. In particular, interest rate policy in the Volcker-Greenspan period appears to have been much mors sensitive to changes in expected inflation than in the pre-Volcker period.BUSINESS CYCLES ; MONETARY POLICY

Endogenous Technology Adoption and R&D as Sources of Business Cycle Persistence

We examine the hypothesis that the slowdown in productivity following the Great Recession was in significant part an endogenous response to the contraction in demand that induced the downturn. We motivate, develop and estimate a model with an endogenous TFP mechanism that allows for costly development and adoption of technologies. Our main finding is that a significant fraction of the post-Great Recession fall in productivity was an endogenous phenomenon, suggesting that demand factors played an important role in the post-crisis slowdown of capacity growth. More generally, we provide insight into why recoveries from financial crises may be so slow

Leptin-induced endothelium-dependent vasorelaxation of peripheral arteries in lean and obese rats: role of nitric oxide and hydrogen sulfide.

Published onlineJournal ArticleResearch Support, Non-U.S. Gov'tAdipose tissue hormone leptin induces endothelium-dependent vasorelaxation mediated by nitric oxide (NO) and endothelium-derived hyperpolarizing factors (EDHF). Previously it has been demonstrated that in short-term obesity the NO-dependent and the EDHF-dependent components of vascular effect of leptin are impaired and up-regulated, respectively. Herein we examined the mechanism of the EDHF-dependent vasodilatory effect of leptin and tested the hypothesis that alterations of acute vascular effects of leptin in obesity are accounted for by chronic hyperleptinemia. The study was performed in 5 groups of rats: (1) control, (2) treated with exogenous leptin for 1 week to induce hyperleptinemia, (3) obese, fed highly-palatable diet for 4 weeks, (4) obese treated with pegylated superactive rat leptin receptor antagonist (PEG-SRLA) for 1 week, (5) fed standard chow and treated with PEG-SRLA. Acute effect of leptin on isometric tension of mesenteric artery segments was measured ex vivo. Leptin relaxed phenylephrine-preconstricted vascular segments in NO- and EDHF-dependent manner. The NO-dependent component was impaired and the EDHF-dependent component was increased in the leptin-treated and obese groups and in the latter group both these effects were abolished by PEG-SRLA. The EDHF-dependent vasodilatory effect of leptin was blocked by either the inhibitor of cystathionine γ-lyase, propargylglycine, or a hydrogen sulfide (H2S) scavenger, bismuth (III) subsalicylate. The results indicate that NO deficiency is compensated by the up-regulation of EDHF in obese rats and both effects are accounted for by chronic hyperleptinemia. The EDHF-dependent component of leptin-induced vasorelaxation is mediated, at least partially, by H2S.The study was supported by the EU Project “The equipment of innovative laboratories doing research on new medicines used in the therapy of civilization and neoplastic diseases” within the Operational Program Development of Eastern Poland 2007 - 2013, Priority Axis I Modern Economy, Operations I.3 Innovation Promotion. The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript