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

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.

Reinventing the De Mayo reaction: synthesis of 1,5-diketones or 1,5-ketoesters via visible light [2+2] cycloaddition of beta-diketones or beta-ketoesters with styrenes

[EN] A visible light mediated De Mayo reaction between 1,3-diketones and styrenes following a [2+2] cycloaddition pathway via a photosensitization mechanism gives access to 1,5-diketones. The reaction has been applied to substituted styrenes and aryl- and alkyl-substituted ketones. Moreover, the method converts -ketoesters, -amido esters, and -cyano ketones. Seven membered rings, a frequent structural motif of natural products, are also accessible using this methodology.This work was supported by the Deutsche Forschungsgemein-schaft DFG (GRK 1626, Chemical Photocatalysis). L. M. thanks the Alexander von Humboldt foundation for a postdoctoral fellowship. R. M.-H. thanks the DAAD for a short-term research grant. We thank Ms Regina Hoheisel (University of Regensburg) for her assistance in cyclic voltammetry measurements.Martínez-Haya, R.; Marzo, L.; König, B. (2018). 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