The Relationship Between Financial Risk Premia and Macroeconomic Volatility: Issues and Perspectives on the Run-Up to the Turmoil

This note sketches the issues that arise while interpreting the relation between macroeconomic volatility and financial risk premia from the perspective of the standard consumption-based asset pricingmodel. The relation arises from the fact that all assets are priced by the same "pricingkernel", given by the inter-temporal marginal rate of substitution in consumption of the representative investor. Since the pricing kernel is a function of aggregate consumption, financial risk premia are positively related to consumption growth volatility. Therefore, from the perspective of this workhorse often employed in the academic debate, the persistent reduction in macroeconomic volatility can be considered a cause for the low average risk premia prevailing during the so-called Great Moderation, namely the period preceding the recent turmoil in financial markets. We challenge this view by shedding light on the issues that generate an inconsistent interpretation of the model outcomes. In particular, since the consumption-based model is geared towards asset prices consistent with macroeconomic fundamentals, we argue that it is not suited for interpreting current developments where underestimation of risk may have subsidized asset prices. In particular, according to the evidence for the Great Moderation, the model view suffers from observational equivalence.

Distortionary tax instruments and implementable monetary policy

We introduce distortionary taxes on consumption, labor and capital income into a New Keynesian model with Calvo pricing and nominal bonds. We study the relation between tax instruments and optimal monetary policy by computing simple rules for monetary and fiscal policy when one tax instrument at a time varies, while the other two are fixed at their steady-state level. The optimal rules maximize the second-order approximation to intertemporal utility. Three results emerge: (a) when prices are sticky, perfect inflation stabilization is optimal independently from the tax instrument adopted; (b) the optimal degree of responsiveness of monetary policy to output varies depending on which tax instrument induces fluctuations in the average tax rate; (c) when prices are flexible, fiscal rules that prescribe unexpected variations in the price level to support debt changes are always welfare-maximizing.

A welfare perspective on the fiscal-monetary policy mix: The role of alternative fiscal instruments

The need of fiscal consolidation is likely to dominate the policy agenda in the next decade; starting from statistical evidence on the conduct of fiscal policy in the EMU area over the last decade, this paper addresses the optimality of alternative fiscal consolidation strategies. We explore the welfare properties. In this paper we explore the welfare properties of debt-targeting fiscal policy implemented through, alternatively, distortionary taxation on consumption, labour and capital income or productive and wasteful government expenditure. We build a general equilibrium model with various distortions in order to evaluate the welfare ranking of alternative fiscal policy configurations under different monetary policy regimes. Our results show the welfare superiority of fiscal adjustments based on productive government expenditure, whereas the use of a capital income tax rate as fiscal instruments yields the highest welfare loss.

Equidistribution of the Fekete points on the sphere

The Fekete points are the points that maximize a Vandermonde-type determinant that appears in the polynomial Lagrange interpolation formula. They are well suited points for interpolation formulas and numerical integration. We prove the asymptotic equidistribution of the Fekete points in the sphere. The way we proceed is by showing their connection with other array of points, the Marcinkiewicz-Zygmund arrays and the interpolating arrays, that have been studied recently

The LHC di-photon excess and Gauge Coupling Unification in Extra Z′Z^\prime Heterotic-String Derived Models

The di-photon excess observed at the LHC can be explained as a Standard Model singlet that is produced and decays by heavy vector-like colour triplets and electroweak doublets in one-loop diagrams. The characteristics of the required spectrum are well motivated in heterotic-string constructions that allow for a light $Z^\prime$. Anomaly cancellation of the $U(1)_{Z^\prime}$ symmetry requires the existence of the Standard Model singlet and vector-like states in the vicinity of the $U(1)_{Z^\prime}$ breaking scale. In this paper we show that the agreement with the gauge coupling data at one-loop is identical to the case of the Minimal Supersymmetric Standard Model, owing to cancellations between the additional states. We further show that effects arising from heavy thresholds may push the supersymmetric spectrum beyond the reach of the LHC, while maintaining the agreement with the gauge coupling data. We show that the string inspired model can indeed account for the observed signal and discuss the feasibility of obtaining viable scalar mass spectrum.Comment: 26 pages. 11 figures. Published versio

Equidistribution of the Fekete points on the sphere

The Fekete points are the points that maximize a Vandermonde-type determinant that appears in the polynomial Lagrange interpolation formula. They are well suited points for interpolation formulas and numerical integration. We prove the asymptotic equidistribution of the Fekete points in the sphere. The way we proceed is by showing their connection with other array of points, the Marcinkiewicz-Zygmund arrays and the interpolating arrays, that have been studied recently

The Multiplier-Effects of Non-Wasteful Government Expenditure

Macroeconomic literature has traditionally regarded public expenditure as yielding no utility per se to any agent in the economy. In line with a few previous contributions (Linneman and Schabert 2004, Bouakez and Rebei 2007) we build a New Keynesian DSGE model with real and nominal rigidities and distortionary fiscal policy rules, calibrated on the Euro-area (1990:Q1-2008:Q4), where part of public spending is allowed to either Edgeworth complement or substitute private consumption by affecting its marginal utility. We show that the the interaction between the share of usefulness of public spending and the specification of fiscal and monetary policy rules is able to deliver private consumption multipliers which are in line with the empirical findings for the Euro-Area.

AS101: An overview on a leading tellurium-based prodrug

Inorganic chemistry holds a central role in the management of several diseases both from the diagnostic as well as from the therapeutic point of view. Various platinum drugs are approved at the global or local level for cancer treatment while other transition metals are used for different therapeutic applications or diagnosis. However, even semimetals i.e., the elements which lie on the diagonal connecting boron to polonium are being used in medicine where some compounds with therapeutic properties have been approved by the Food and drugs Administration (FDA) and the European Medicinal Agency (EMA). In the last decades growing attention has been devoted towards tellurium for the preparation of pharmacologically active agents. In this context, Ammonium trichloro(dioxoethylene-O,O′)tellurate (AS101) emerged as a reference tellurium-based compound. This Te(IV) compound is well tolerated in animal models and its peculiar reactivity towards thiol residues of enzymes such as cysteine proteases is at the heart of its pharmacological effects. Actually, AS101 entered several clinical trials due to its good tolerability. In this mini-review the main chemical and biological aspects of this promising metalloid-based drug are briefly summarized and the outcomes as well as future perspectives for the design of improved Te-based compounds are discussed