Uncovered Interest Parity in a Partially Dollarized Developing Country: Does UIP Hold in Bolivia? (And If Not, Why Not?)

According to the Uncovered Interest Parity (UIP) condition, interest rate differentials compensate for expected exchange rate changes, equalizing the expected returns from holding assets which only differ in terms of currency denomination. In the previous literature, there are many tests of UIP for industrialized countries, and, more recently, some tests for emerging economies. However, due to data availability problems, poorer developing countries have not been studied. This paper tests UIP in a partially dollarized economy, Bolivia, where bank accounts only differ in terms of currency denomination (U.S. dollars or bolivianos). I find that UIP does not hold in Bolivia, but that the deviations are smaller than in most other studies of developed and emerging economies. Moreover, several factors seem to contribute to the deviations from UIP. The so-called peso problem could possibly account for the observed data, but there is also evidence of a time-varying risk premium, as well as deviations from rational expectations.Uncovered interest parity; UIP; partial dollarization; time-varying risk premium; peso problem; rational expectations

Uncovered interest parity in a partially Dollarized developing country: Does UIP hold in Bolivia (and if not, why not?)

According to the Uncovered Interest Parity (UIP) condition, interest rate differentials compensate for expected exchange rate changes, equalizing the expected returns from holding assets which only differ in terms of currency denomination. In the previous literature, there are many tests of UIP for industrialized countries, and, more recently, some tests for emerging economies. However, due to data availability problems, poorer developing countries have not been studied. This paper tests UIP in a partially dollarized economy, Bolivia, where bank accounts only differ in terms of currency denomination (U.S. dollars or bolivianos). I find that UIP does not hold in Bolivia, but that the deviations are smaller than in most other studies of developed and emerging economies. Moreover, several factors seem to contribute to the deviations from UIP. The so-called peso problem could possibly account for the observed data, but there is also evidence of a time-varying risk premium, as well as deviations from rational expectations

The effects of real exchange rate shocks in an economy with extreme liability dollarization

This paper studies the effects of real exchange rate depreciation in an economy with extreme liability dollarization using vector autoregression (VAR) methods. Bolivia's extreme liability dollarization makes it an interesting case for empirical testing of the contractionary-depreciations hypothesis. In contrast to the previous contractionary-depreciations literature, the paper uses identification assumptions which are inspired by modern macroeconomic theory and common in the empirical VAR literature on the effects of monetary policy. I find that a real exchange rate depreciation has negligible effects on output, since a contractionary balance-sheet effect on investment is counteracted by the standard expansionary effect on net exports. Furthermore, I find that a real depreciation has inflationary effects. A key finding is that the identification assumptions used in this paper gives more reasonable results than alternative assumptions used in the previous literature

Novel subgroups of adult-onset diabetes and their association with outcomes : a data-driven cluster analysis of six variables

Background Diabetes is presently classified into two main forms, type 1 and type 2 diabetes, but type 2 diabetes in particular is highly heterogeneous. A refined classification could provide a powerful tool to individualise treatment regimens and identify individuals with increased risk of complications at diagnosis. Methods We did data-driven cluster analysis (k-means and hierarchical clustering) in patients with newly diagnosed diabetes (n=8980) from the Swedish All New Diabetics in Scania cohort. Clusters were based on six variables (glutamate decarboxylase antibodies, age at diagnosis, BMI, HbA(1c), and homoeostatic model assessment 2 estimates of beta-cell function and insulin resistance), and were related to prospective data from patient records on development of complications and prescription of medication. Replication was done in three independent cohorts: the Scania Diabetes Registry (n=1466), All New Diabetics in Uppsala (n=844), and Diabetes Registry Vaasa (n=3485). Cox regression and logistic regression were used to compare time to medication, time to reaching the treatment goal, and risk of diabetic complications and genetic associations. Findings We identified five replicable clusters of patients with diabetes, which had significantly different patient characteristics and risk of diabetic complications. In particular, individuals in cluster 3 (most resistant to insulin) had significantly higher risk of diabetic kidney disease than individuals in clusters 4 and 5, but had been prescribed similar diabetes treatment. Cluster 2 (insulin deficient) had the highest risk of retinopathy. In support of the clustering, genetic associations in the clusters differed from those seen in traditional type 2 diabetes. Interpretation We stratified patients into five subgroups with differing disease progression and risk of diabetic complications. This new substratification might eventually help to tailor and target early treatment to patients who would benefit most, thereby representing a first step towards precision medicine in diabetes.Peer reviewe

The Effect of Cash Flow on Investment: An Empirical Test of the Balance Sheet Channel

This paper tests the balance sheet theory, where the status of balance sheets affects the economy's response to monetary and other shocks. The theory predicts a positive effect of cash flow on investment, given fundamental determinants of investment. I use an empirical method developed by Gilchrist and Himmelberg (1995, 1999), which has previously only been used to study very large, publicly traded firms. In contrast, this paper uses a large Swedish data set with many smaller firms, where balance sheet effects are likely to be especially important. I find that a firm's cash flow has a positive impact on its investment, controlling for any information in cash flow about investment opportunities. As predicted by the balance sheet channel, the estimated effect of cash flow on investment is especially large for firms which, a priori, are more likely to be financially constrained (low-dividend, small and non-group firms). Moreover, the investment-cash flow sensitivity is significantly larger and more persistent during the first half of the sample period, which includes a severe banking crisis and recession, than during the second half

Corporate Taxation and Investment Evidence from the Belgian Ace Reform

We contribute to the empirical literature on the relationship between corporate taxes and investment. We exploit the introduction of the so-called ACE corporate tax reform in Belgium that came into effect in January 2006 to evaluate this relationship in a quasiexperimental setting based on firm-level accounting data. To identify the causal effect of the reform on capital spending of Belgian corporations, we focus on the indirect effect of taxes on investment via their impact on free cash-flow. We use the systematic variation of the cash-flow sensitivity of investment between small and medium versus large firms to form treatment and control groups for difference-in-differences (DiD) estimations. Our benchmark results provide highly significant and robust estimates that correspond to an increase in investment activity by small and medium-sized firms of about 3 percent in response to the ACE reform. We substantiate the robustness of our results by means of triple differences estimations (DDD) that use a matched sample of French companies as an additional dimension of contrast

The Effect of Cash Flow on Investment: An Empirical Test of the Balance Sheet Channel

This paper tests the balance sheet theory, where the status of balance sheets affects the economy´s response to monetary and other shocks. The theory predicts a positive effect of cash flow on investment, given fundamental determinants of investment. I use an empirical method developed by Gilchrist and Himmelberg (1995, 1999), which has previously only been used to study very large, publicly traded firms. In contrast, this paper uses a large Swedish data set with many smaller firms, where balance sheet effects are likely to be especially important. I find that a firm´s cash flow has a positive impact on its investment, controlling for any information in cash flow about investment opportunities. As predicted by the balance sheet channel, the estimated effect of cash flow on investment is especially large for firms which, a priori, are more likely to be financially constrained (low-dividend, small and non-group firms). Moreover, the investment-cash flow sensitivity is significantly larger and more persistent during the first half of the sample period, which includes a severe banking crisis and recession, than during the second half.Financial frictions; balance sheet channel; financial accelerator; investment; cash flow

Credit Matters

This paper develops a framework for analyzing macro-financial linkages in the United States. We estimate the effects of a negative shock to banks'' capital/assetratio on lending standards, which in turn affect consumer credit, mortgages, and corporate loans, and the corresponding components of private spending (consumption, residential investment and business investment). In addition, our empirical model allows for feedback from spending and income to bank capital adequacy and credit. Hence, we trace the full credit cycle. An exogenous fall in the bank capital/asset ratio by one percentage point reduces real GDP by some 1½ percent through its effects on credit availability, while an exogenous fall in demand of 1 percent of GDP is gradually magnified to around 2 percent through financial feedback effects.Credit;External shocks;Asset ratio;Consumer credit;Corporate sector;Gross domestic product;standards, bank capital, bank credit, capital adequacy, bank balance sheets, bank lending, banking, bank loans, mortgage loan, banks ? balance sheet, bank loan, deposit insurance, bank assets, recapitalization, federal deposit insurance, bank lenders, bank equity, capital adequacy ratio, mortgage lending, bank loan officers, bank capitalization, bank size, bank performance, banks ? balance sheets

Oesophageal dysmotility, delayed gastric emptying and gastrointestinal symptoms in patients with diabetes mellitus.

Aims Gastroparesis is a common gastrointestinal complication in diabetes mellitus, whereas dysfunction in the other gastrointestinal organs has been less thoroughly investigated. Furthermore, it is not known whether there is any relationship between motility and dysmotility between these organs. The aim of this study was to examine whether diabetic patients with gastrointestinal symptoms also have motility disturbances in the oesophagus and stomach and, if so, whether there are any associations between these disturbances. Methods Thirty-one patients with diabetes mellitus who complained of gastrointestinal symptoms were asked to complete a questionnaire about their symptoms. They were further investigated with oesophageal manometry and gastric emptying scintigraphy. Results Fifty-eight per cent of the patients had abnormal oesophageal function, and 68% had delayed gastric emptying. Abdominal fullness was the only symptom that related to any dysfunction, and it was associated with delayed gastric emptying (P = 0.02). We did not find any relationship in motility or dysmotility between the oesophagus and the stomach. Conclusion Oesophageal dysmotility, as well as gastroparesis, are common in patients with diabetes who have gastrointestinal symptoms. It is important to investigate these patients further, to be able to reach an accurate diagnosis and instigate appropriate treatment. Our findings indicate that the oesophagus and the stomach function as separate organs and that pathology in one does not necessarily mean pathology in the other

PP038. Renal ETK/BMX activation decreased in preeclampsia

INTRODUCTION: Vascular endothelial growth factors (VEGF's) are essential to angiogenesis and play a central role in the pathophysiology of preeclampsia. Specifically, antagonists of VEGFR2 cause a preeclampsia-like syndrome, in humans and rats[1]. ETK/BMX is a receptor tyrosine kinase (RTK) which induces VEGF expression and forms a complex with VEGFR2, whereby VEGF and TNF can induce a reciprocal activation of both kinases.OBJECTIVES: To determine the levels of phosphorylation, and thus activation, of VEGFR2 and ETK/BMX in renal tissue from women with preeclampsia and with healthy pregnancies.METHODS: Renal tissue was obtained with consent from six preeclamptic and six healthy pregnant women included in a previous renal needle biopsy study[2] and a RayBio® Phosphorylation Antibody Array was used according to instructions.RESULTS: Phosphorylated ETK/BMX was significantly reduced in the preeclamptic women compared to in the healthy pregnant women. There was no difference in phosphorylated VEGFR2 between groups.CONCLUSION: These data suggest that ETK/BMX could be an important mediator of VEGF function in healthy pregnancy, in the kidneys more so than VEGFR2, and that absence of the positive feedforward signalling that ETK/BMX and VEGF together accomplish, and/or a TNF induced activation of this, may play a role in the pathophysiology of preeclampsia