Theoretical notes on bubbles and the current crisis

We explore a view of the crisis as a shock to investor sentiment that led to the collapse of a bubble or pyramid scheme in financial markets. We embed this view in a standard model of the financial accelerator and explore its empirical and policy implications. In particular, we show how the model can account for: (i) a gradual and protracted expansionary phase followed by a sudden and sharp recession; (ii) the connection (or lack of connection!) between financial and real economic activity and; (iii) a fast and strong transmission of shocks across countries. We also use the model to explore the role of fiscal policy.bubbles, dynamic inefficiency, financial accelerator, credit constraints, financial crisis, pyramid schemes.

Theoretical notes on bubbles and the current crisis

We explore a view of the crisis as a shock to investor sentiment that led to the collapse of a bubble or pyramid scheme in financial markets. We embed this view in a standard model of the financial accelerator and explore its empirical and policy implications. In particular, we show how the model can account for: (i) a gradual and protracted expansionary phase followed by a sudden and sharp recession; (ii) the connection (or lack of connection!) between financial and real economic activity and; (iii) a fast and strong transmission of shocks across countries. We also use the model to explore the role of fiscal policy. JEL Classification: E32, E44, G01, O40bubbles, credit constraints, financial accelerator, financial crisis, pyramid schemes

Enforcement problems and secondary markets

There is a large and growing literature that studies the effects of weak enforcement institutions on economic performance. This literature has focused almost exclusively on primary markets, in which assets are issued and traded to improve the allocation of investment and consumption. The general conclusion is that weak enforcement institutions impair the workings of these markets, giving rise to various inefficiencies. But weak enforcement institutions also create incentives to develop secondary markets, in which the assets issued in primary markets are retraded. This paper shows that trading in secondary markets counteracts the effects of weak enforcement institutions and, in the absence of further frictions, restores efficiency.Enforcement, default, secondary markets, sovereign risk, weak law enforcement

Sovereign Risk and Secondary Markets

Conventional wisdom says that, in the absence of sufficient default penalties, sovereign risk constrains credit and lowers welfare. We show that this conventional wisdom rests on one implicit assumption: that assets cannot be retraded in secondary markets. Once this assumption is relaxed, there is always an equilibrium in which sovereign risk is stripped of its conventional effects. In such an equilibrium, foreigners hold domestic debts and resell them to domestic residents before enforcement. In the presence of (even arbitrarily small) default penalties, this equilibrium is shown to be unique. As a result, sovereign risk neither constrains welfare nor lowers credit. At most, it creates some additional trade in secondary markets. The results presented here suggest a change in perspective regarding the origins of sovereign risk and its remedies. To argue that sovereign risk constrains credit, one must show both the insufficiency of default penalties and the imperfect workings of secondary markets. To relax credit constraints created by sovereign risk, one can either increase default penalties or improve the workings of secondary markets.

Understanding bubbly episodes

bubbles, dynamic inefficiency, economic growth, financial frictions, pyramid schemes

Sovereign risk and secondary markets

Conventional wisdom views the problem of sovereign risk as one of insufficient penalties. Foreign creditors can only be repaid if the government enforces foreign debts. And this will only happen if foreign creditors can effectively use the threat of imposing penalties to the country. Guided by this assessment of the problem, policy prescriptions to reduce sovereign risk have focused on providing incentives for governments to enforce foreign debts. For instance, countries might want to favor increased trade ties and other forms of foreign dependence that make them vulnerable to foreign retaliation thereby increasing the costs of default penalties.Sovereign risk, secondary markets, default penalties, commitment, international risk sharing, international borrowing

Enforcement Problems and Secondary Markets

There is a large and growing literature that studies the effects of weak enforcement institutions on economic performance. This literature has focused almost exclusively on primary markets, in which assets are issued and traded to improve the allocation of investment and consumption. The general conclusion is that weak enforcement institutions impair the workings of these markets, giving rise to various inefficiencies. But weak enforcement institutions also create incentives to develop secondary markets, in which the assets issued in primary markets are retraded. This paper shows that trading in secondary markets counteracts the effects of weak enforcement institutions and, in the absence of further frictions, restores efficiency.

Economic Growth with Bubbles

We develop a stylized model of economic growth with bubbles. In this model, financial frictions lead to equilibrium dispersion in the rates of return to investment. During bubbly episodes, unproductive investors demand bubbles while productive investors supply them. Because of this, bubbly episodes channel resources towards productive investment raising the growth rates of capital and output. The model also illustrates that the existence of bubbly episodes requires some investment to be dynamically inefficient: otherwise, there would be no demand for bubbles. This dynamic inefficiency, however, might be generated by an expansionary episode itself.

Theoretical Notes on Bubbles and the Current Crisis

We explore a view of the crisis as a shock to investor sentiment that led to the collapse of a bubble or pyramid scheme in financial markets. We embed this view in a standard model of the financial accelerator and explore its empirical and policy implications. In particular, we show how the model can account for: (i) a gradual and protracted expansionary phase followed by a sudden and sharp recession; (ii) the connection (or lack of connection!) between financial and real economic activity and; (iii) a fast and strong transmission of shocks across sectors and countries. We also use the model to explore the role of fiscal policy

Eficiencia de soluciones irrigadoras sobre la permeabilidad dentinaria del canal radicular in vitro

El presente estudio es de tipo experimental cuyo objetivo fue determinar la eficiencia de las soluciones irrigadoras sobre la permeabilidad dentinaria del canal radicular In vitro. Se recolectaron 48 premolares unirradiculares con un máximo de 06 meses de haber sido extraído para el estudio, a los cuales se les realizo surcos sobre las caras vestibular y lingual de cada premolar y se midió la raíz para dividirla por tercios, posteriormente se les realizo el tratamiento de conductos con la técnica apico-coronal, dividiéndolos en tres grupos de 16 premolares unirradiculares: grupo A: Hipoclorito de Sodio al 5% + EDTA al 17%; grupo B: Hipoclorito de Sodio al 5% + EDTA al 10% gel y grupo C: suero fisiológico. Posteriormente todas las piezas dentarias fueron seccionadas y metalizadas para su lectura en el microscopio electrónico de barrido. Se encontró diferencia significativa en la permeabilidad dentinaria del canal radicular In vitro en el grupo donde se empleó Hipoclorito de sodio al 5% + EDTA al 17% versus solución irrigadora del Hipoclorito de sodio al 5% + EDTA al 10% gel presentando un (p = 0.0302). Concluyendo que el grupo de hipoclorito de sodio al 5% + EDTA al 10% gel es más eficiente sobre la permeabilidad dentinaria del canal radicular In vitro.This experimental study whose objective was to determine the efficiency of irrigating solutions on the root canal dentin permeability in vitro. 48 single-rooted premolars were collected with up to 06 months after being removed for the study, which I underwent grooves on the buccal and lingual of each premolar faces and the root was measured to be divided in thirds subsequently they underwent treatment duct with apico-coronal technique, dividing them into three groups of 16 single-rooted premolars: group A: Sodium Hypochlorite 5% + 17% EDTA, group B: Sodium Hypochlorite 5% + 10% EDTA gel and group C: saline. Later, all the teeth were sectioned and metallic for reading in the scanning electron microscope. Significant difference was found in dentin permeability of root canal In vitro in the group where Sodium hypochlorite was used 5% + 17% EDTA versus irrigating solution of sodium hypochlorite 5% + 10% EDTA gel presenting a (p = 0.0302). Concluding that the group of sodium hypochlorite 5% + 10% EDTA gel is more efficient on the root canal dentin permeability in vitro.Tesi