The Case for Flexible Exchange Rates in a Great Recession

We analyze macroeconomic stabilization in a small open economy which faces a large recession in the rest of the world. We show analytically that for the economy to remain isolated from the external shock, the exchange rate must depreciate not only upfront, to offset the collapse in external demand, but also persistently to decouple domestic prices from deflation in the rest of the world. If monetary policy becomes constrained by the zero lower bound, the scope of exchange rate depreciation is limited and the economy is no longer isolated from the shock. Still, in this case there is a “benign coincidence”: fiscal policy is particularly effective in stabilizing economic activity. Under fixed exchange rates, instead, the impact of the external shock is particularly severe and the effectiveness of fiscal policy limited.External-demand multiplie

The Exchange Rate Insulation Puzzle

The notion that flexible exchange rates insulate a country from foreign shocks is well grounded in theory, from the classics (Meade, 1951; Friedman 1953), to the more recent open economy literature (Obstfeld and Rogoff, 2000). We confront it with new evidence from Europe. Specifically, we study how shocks that originate in the euro area spill over to its neighboring countries. We exploit the variation of the exchange rate regime across time and countries to assess whether the regime alters the spillovers: it does not - flexible exchange rates fail to provide insulation against euro area shocks. This result is robust across a number of specifications and holds up once we control for global financial conditions. We show that the workhorse open-economy model can account for the lack of insulation under a float, assuming that central banks respond to headline consumer price inflation. However, it remains puzzling that policy makers are ready to forego stabilization of economic activity to the extent we found in the data

Fixed on Flexible Rethinking Exchange Rate Regimes after the Great Recession

The zero lower bound problem during the Great Recession has exposed the limits of monetary autonomy, prompting a re-evaluation of the relative benefits of currency pegs and monetary unions (see e.g. Cook and Devereux, 2016). We revisit this issue from the perspective of a small open economy. While a peg can be beneficial when the recession originates domestically, we show that a float dominates in the face of deflationary demand shocks abroad. When the rest of the world is in a liquidity trap, the domestic currency depreciates in nominal and real terms even in the absence of domestic monetary stimulus (if domestic rates are also at the zero lower bound) - enhancing the country's competitiveness and insulating to some extent the domestic economy from foreign deflationary pressure

Sovereign risk and belief-driven fluctuations in the euro area

Sovereign risk premia in several euro area countries have risen markedly since 2008, driving up credit spreads in the private sector as well. We propose a New Keynesian model of a two-region monetary union that accounts for this "sovereign risk channel." The model is calibrated to the euro area as of mid-2012. We show that a combination of sovereign risk in one region and strongly procyclical fiscal policy at the aggregate level exacerbates the risk of belief-driven deflationary downturns. The model provides an argument in favor of coordinated, asymmetric fiscal stances as a way to prevent self-fulfilling debt crises. © 2013 International Monetary Fund

Artificially lit surface of Earth at night increasing in radiance and extent

This is the author accepted manuscript. The final version is available from AAAS via the DOI in this record.A central aim of the “lighting revolution” (the transition to solid-state lighting technology) is decreased energy consumption. This could be undermined by a rebound effect of increased use in response to lowered cost of light. We use the first-ever calibrated satellite radiometer designed for night lights to show that from 2012 to 2016, Earth’s artificially lit outdoor area grew by 2.2% per year, with a total radiance growth of 1.8% per year. Continuously lit areas brightened at a rate of 2.2% per year. Large differences in national growth rates were observed, with lighting remaining stable or decreasing in only a few countries. These data are not consistent with global scale energy reductions but rather indicate increased light pollution, with corresponding negative consequences for flora, fauna, and human well-being.This article is based upon work from COST Action ES1204 LoNNe, supported by COST (European Cooperation in Science and Technology). The authors acknowledge the funding received by ERA-PLANET (www.era-planet.eu) funded by the EC as part of H2020 (contract no. 689443). NOAA’s participation was funded by NASA’s VIIRS science program, contract number NNH15AZ01I. ASM’s contribution was funded by ORISON project (H2020-INFRASUPP-2015-2) Cities at Night

Value at Risk models with long memory features and their economic performance

We study alternative dynamics for Value at Risk (VaR) that incorporate a slow moving component and information on recent aggregate returns in established quantile (auto) regression models. These models are compared on their economic performance, and also on metrics of first-order importance such as violation ratios. By better economic performance, we mean that changes in the VaR forecasts should have a lower variance to reduce transaction costs and should lead to lower exceedance sizes without raising the average level of the VaR. We find that, in combination with a targeted estimation strategy, our proposed models lead to improved performance in both statistical and economic terms

Nonlinear pharmacokinetics of therapeutic proteins resulting from receptor mediated endocytosis

Receptor mediated endocytosis (RME) plays a major role in the disposition of therapeutic protein drugs in the body. It is suspected to be a major source of nonlinear pharmacokinetic behavior observed in clinical pharmacokinetic data. So far, mostly empirical or semi-mechanistic approaches have been used to represent RME. A thorough understanding of the impact of the properties of the drug and of the receptor system on the resulting nonlinear disposition is still missing, as is how to best represent RME in pharmacokinetic models. In this article, we present a detailed mechanistic model of RME that explicitly takes into account receptor binding and trafficking inside the cell and that is used to derive reduced models of RME which retain a mechanistic interpretation. We find that RME can be described by an extended Michaelis–Menten model that accounts for both the distribution and the elimination aspect of RME. If the amount of drug in the receptor system is negligible a standard Michaelis–Menten model is capable of describing the elimination by RME. Notably, a receptor system can efficiently eliminate drug from the extracellular space even if the total number of receptors is small. We find that drug elimination by RME can result in substantial nonlinear pharmacokinetics. The extent of nonlinearity is higher for drug/receptor systems with higher receptor availability at the membrane, or faster internalization and degradation of extracellular drug. Our approach is exemplified for the epidermal growth factor receptor system

Mating skew in Barbary macaque males: the role of female mating synchrony, female behavior, and male–male coalitions

A fundamental question of sexual selection theory concerns the causes and consequences of reproductive skew among males. The priority of access (PoA) model (Altmann, Ann NY Acad Sci 102:338–435, 1962) has been the most influential framework in primates living in permanent, mixed-sex groups, but to date it has only been tested with the appropriate data on female synchrony in a handful of species. In this paper, we used mating data from one large semi-free ranging group of Barbary macaques: (1) to provide the first test of the priority-of-access model in this species, using mating data from 11 sexually active females (including six females that were implanted with a hormonal contraceptive but who showed levels of sexual activity comparable to those of naturally cycling females) and (2) to determine the proximate mechanism(s) underlying male mating skew. Our results show that the fit of the observed distribution of matings with sexually attractive females to predictions of the PoA model was poor, with lower-ranking males mating more than expected. While our work confirms that female mating synchrony sets an upper limit to monopolization by high-ranking individuals, other factors are also important. Coalitionary activity was the main tactic used by males to lower mating skew in the study group. Coalitions were expressed in a strongly age-related fashion and allowed subordinate, post-prime males to increase their mating success by targeting more dominant, prime males. Conversely, females, while mating promiscuously with several males during a given mating cycle, were more likely to initiate their consortships with prime males, thus reducing the overall effectiveness of coalitions. We conclude that high-ranking Barbary macaque males have a limited ability to monopolize mating access, leading to a modest mating skew among them