Bulls, Bears and Excess Volatility: can currency intervention help?

Asset mis-pricing may reflect investor psychology, with excess volatility arising from switches of sentiment. For a floating exchange rate where fundamentals follow a random walk, we show that excess volatility can be generated by the repeated entry and exit of currency 'bulls' and 'bears' with switches driven by 'draw-down' trading rules. We argue that non-sterilised intervention - in support of 'monitoring band' - can reduce excess volatility by coordinating beliefs in line with policy. Strategic complementarity in the foreign exchange market suggests that sterilised intervention may also play a coordinating role

Co-ordination failure, moral hazard and sovereign bankruptcy procedures

We study a model of sovereign debt crisis that combines problems of creditor co-ordination and debtor moral hazard. Solving the sovereign debtor’s incentives leads to excessive ‘rollover failure’ by creditors when sovereign default occurs. We discuss how the incidence of crises might be reduced by international sovereign bankruptcy procedures, involving ‘contractibility’ of sovereign debtor’s payoffs, suspension of convertibility in a ‘discovery’ phase and penalties in case of malfeasance. In relation to the current debate, this is more akin to the IMF’s Sovereign Debt Restructuring Mechanism than the Collective Action Clauses promoted by others

The Future of Agent-Based Modeling

In this paper, I elaborate on the role of agent-based (AB) modeling for macroeconomic research. My main tenet is that the full potential of the AB approach has not been realized yet. This potential lies in the modular nature of the models, which is bought by abandoning the straitjacket of rational expectations and embracing an evolutionary perspective. I envisage the foundation of a Modular Macroeconomic Science, where new models with heterogeneous interacting agents, endowed with partial information and limited computational ability, can be created by recombining and extending existing models in a unified computational framework

Tracing the ancestry of modern bread wheats

For more than 10,000 years, the selection of plant and animal traits that are better tailored for human use has shaped the development of civilizations. During this period, bread wheat (Triticum aestivum) emerged as one of the world’s most important crops. We use exome sequencing of a worldwide panel of almost 500 genotypes selected from across the geographical range of the wheat species complex to explore how 10,000 years of hybridization, selection, adaptation and plant breeding has shaped the genetic makeup of modern bread wheats. We observe considerable genetic variation at the genic, chromosomal and subgenomic levels, and use this information to decipher the likely origins of modern day wheats, the consequences of range expansion and the allelic variants selected since its domestication. Our data support a reconciled model of wheat evolution and provide novel avenues for future breeding improvement.</p