The growing role of the euro in emerging market finance

More than eight years after the introduction of the euro, impacts on developing countries have been relatively modest. Overall, the euro has become much more important in debt issuance than in official foreign exchange reserve holdings. The former has benefited from the creation of a large set of investors for which the euro is the home currency, while demand for euro reserves has been held back by the dominance of the dollar as a vehicle and intervention currency, and the greater liquidity of the market for US treasury securities. Fears of further dollar decline may fuel some shifts out of dollars into euros, however, with the potential for a period of financial instability.Debt Markets,Emerging Markets,Fiscal&Monetary Policy,Currencies and Exchange Rates,

Exchange Rates and Portfolio Balance

An open economy portfolio balance model, describing allocation among money, a domestic bond, and a traded foreign currency bond is developed for a world of many countries. A special role is attributed to the dollar, namely that all internationally traded bonds are denominated in that currency. It is shown that in the short run with real variables exogenous and expectations static, stability requires that all countries except the U.S. be net creditors in dollar-denominated bonds. What data are available on inter-country claims suggest that some countries may well be net debtors abroad in foreign currency. In particular, if one excludes direct investment claims, private claims on the rest of the world by Japan and Canada have been negative over the period of floating rates since 1973. However, some preliminary reduced-form regression equations for the dollar exchange rates of these two countries do not support the implications of the portfolio balance model in the debtor case. On the other hand, an equation for a composite of Western European currencies (by our calculations, this group of countries is a net creditor) gives more promising results.

Les effets à long terme de différentes règles de financement du gouvernement

Le but de ce texte est d’essayer de quantifier les effets de substitution entre travail et loisir induits par les changements d’impôts, et de voir combien ces effets modifient la neutralité du choix de financement du gouvernement. Un modèle basé sur la maximisation de l’utilité de la consommation et du loisir est estimé sur la période 1958 à 1980. Ce modèle sert ensuite à faire des simulations d’une augmentation temporaire des transferts, financée soit par les impôts, soit par les obligations. Les simulations indiquent que le mode de financement peut avoir un effet important sur le comportement de l’économie.The purpose of this paper is to quantify the substitution effects brought about by tax rate changes and to see to what extent they modify the neutrality of the financing choice facing the government, that is, tax increases on borrowing. An intertemporal utility maximisation model of household behaviour is estimated over the period 1958-1980, where utility is a function of both consumption and leisure. The model is then used to simulate a temporary increase in government transfer payments to households, financed either by taxes or by bond issues. The simulation results indicate that the method of financing can have an important effect even in a classical equilibrium model, given the estimated elasticity of substitution between work and leisure

Les effets à long terme de différentes règles de financement du gouvernement

The purpose of this paper is to quantify the substitution effects brought about by tax rate changes and to see to what extent they modify the neutrality of the financing choice facing the government, that is, tax increases on borrowing. An intertemporal utility maximisation model of household behaviour is estimated over the period 1958-1980, where utility is a function of both consumption and leisure. The model is then used to simulate a temporary increase in government transfer payments to households, financed either by taxes or by bond issues. The simulation results indicate that the method of financing can have an important effect even in a classical equilibrium model, given the estimated elasticity of substitution between work and leisure. Le but de ce texte est d’essayer de quantifier les effets de substitution entre travail et loisir induits par les changements d’impôts, et de voir combien ces effets modifient la neutralité du choix de financement du gouvernement. Un modèle basé sur la maximisation de l’utilité de la consommation et du loisir est estimé sur la période 1958 à 1980. Ce modèle sert ensuite à faire des simulations d’une augmentation temporaire des transferts, financée soit par les impôts, soit par les obligations. Les simulations indiquent que le mode de financement peut avoir un effet important sur le comportement de l’économie.

International Coordination of Economic Policies: Scope, Methods, and Effects

This paper discusses the scope, methods, the effects of international coordination of economic policies. In addressing the scope for and of coordination, the analysis covers the rationale for coordination, barriers to coordination, the range and specificity of policies to be coordinated, the frequency of coordination, and the size of the coordinating group. Turning to the methods of coordination, the emphasis is on the broad issues of rules versus discretion, single-indicator versus multi-indicator approaches, and hegemonic versus more symmetric systems. In an attempt to shed some light on the effects of alternative rule- based proposals for coordination, we present some simulations of a global macroeconomic model (MULTIMQD) developed in the International Monetary Fund. The simulations considered range from 'smoothing rules for monetary and fiscal policy that imply only minimal international coordination, to more activist "target-zone" proposals that place greater restrictions on national authorities in the conduct of monetary and/or fiscal policies. The simulation results are compared to the actual evolution of the world economy over the 1974-87 period. Our findings suggest that simple mechanistic rule-based proposals are unlikely to lead to improved performance.

Credibility of Policies versus Credibility of Policymakers

Standard models of policy credibility. defined as the expectation that an announced policy will be carried out. emphasize the preferences of the policymaker (his "type") and the role of policies in signaling type. Whether a policy is carried out. however. should also reflect the state of the economy. so that even a "tough" policymaker may renege on an announced policy in adverse circumstances. We investigate this alternative notion of credibility, using an "escape clause" model of devaluation. in which a policymaker maintains a fixed parity in good times, but devalues if the unemployment rate gets too high. Our main conclusion is that if there is persistence in the process driving unemployment, following a tough policy in a given period may lower rather than raise the credibility of a no-devaluation pledge in subsequent periods. in contrast to the results in the earlier literature. We test this implication on EMS interest rates and find support for our hypothesis.

Simulating the Effects of Some Simple Coordinated versus Uncoordinated Policy

Effects of different policy rules are simulated: uncoordinated targeting of the money supply or nominal income, use of monetary policy to achieve coordinated targets for nominal or real exchange rates, and the use of monetary and fiscal policies to hit targets for internal and external balance. The following conclusions emerge: rules which performed best for some shocks performed poorly for others; monetary policy was ineffective in limiting movements in real exchange rates; unconstrained use of fiscal policy was quite powerful in influencing real variables; and dynamic instability was a potentially serious problem. Robustness to different specifications and to constraints on instruments remains to be examined.

Prednisolone or pentoxifylline for alcoholic hepatitis

BACKGROUND: Alcoholic hepatitis is a clinical syndrome characterized by jaundice and liver impairment that occurs in patients with a history of heavy and prolonged alcohol use. The short-term mortality among patients with severe disease exceeds 30%. Prednisolone and pentoxifylline are both recommended for the treatment of severe alcoholic hepatitis, but uncertainty about their benefit persists.METHODS: We conducted a multicenter, double-blind, randomized trial with a 2-by-2 factorial design to evaluate the effect of treatment with prednisolone or pentoxifylline. The primary end point was mortality at 28 days. Secondary end points included death or liver transplantation at 90 days and at 1 year. Patients with a clinical diagnosis of alcoholic hepatitis and severe disease were randomly assigned to one of four groups: a group that received a pentoxifylline-matched placebo and a prednisolone-matched placebo, a group that received prednisolone and a pentoxifylline-matched placebo, a group that received pentoxifylline and a prednisolone-matched placebo, or a group that received both prednisolone and pentoxifylline.RESULTS: A total of 1103 patients underwent randomization, and data from 1053 were available for the primary end-point analysis. Mortality at 28 days was 17% (45 of 269 patients) in the placebo-placebo group, 14% (38 of 266 patients) in the prednisolone-placebo group, 19% (50 of 258 patients) in the pentoxifylline-placebo group, and 13% (35 of 260 patients) in the prednisolone-pentoxifylline group. The odds ratio for 28-day mortality with pentoxifylline was 1.07 (95% confidence interval [CI], 0.77 to 1.49; P=0.69), and that with prednisolone was 0.72 (95% CI, 0.52 to 1.01; P=0.06). At 90 days and at 1 year, there were no significant between-group differences. Serious infections occurred in 13% of the patients treated with prednisolone versus 7% of those who did not receive prednisolone (P=0.002).CONCLUSIONS: Pentoxifylline did not improve survival in patients with alcoholic hepatitis. Prednisolone was associated with a reduction in 28-day mortality that did not reach significance and with no improvement in outcomes at 90 days or 1 year. (Funded by the National Institute for Health Research Health Technology Assessment program; STOPAH EudraCT number, 2009-013897-42 , and Current Controlled Trials number, ISRCTN88782125 ).</p

In Patients With Severe Alcoholic Hepatitis, Prednisolone Increases Susceptibility to Infection and Infection-Related Mortality, and Is Associated With High Circulating Levels of Bacterial DNA

Background & Aims Infections are common in patients with severe alcoholic hepatitis (SAH), but little information is available on how to predict their development or their effects on patients. Prednisolone is advocated for treatment of SAH, but can increase susceptibility to infection. We compared the effects of infection on clinical outcomes of patients treated with and without prednisolone, and identified risk factors for development of infection in SAH. Methods We analyzed data from 1092 patients enrolled in a double-blind placebo-controlled trial to evaluate the efficacy of treatment with prednisolone (40 mg daily) or pentoxifylline (400 mg 3 times each day) in patients with SAH. The 2 × 2 factorial design led to 547 patients receiving prednisolone; 546 were treated with pentoxifylline. The trial was conducted in the United Kingdom from January 2011 through February 2014. Data on development of infection were collected at evaluations performed at screening, baseline, weekly during admission, on discharge, and after 90 days. Patients were diagnosed with infection based on published clinical and microbiologic criteria. Risk factors for development of infection and effects on 90-day mortality were evaluated separately in patients treated with prednisolone (n = 547) and patients not treated with prednisolone (n = 545) using logistic regression. Pretreatment blood levels of bacterial DNA (bDNA) were measured in 731 patients. Results Of the 1092 patients in the study, 135 had an infection at baseline, 251 developed infections during treatment, and 89 patients developed an infection after treatment. There was no association between pentoxifylline therapy and the risk of serious infection (P = .084), infection during treatment (P = .20), or infection after treatment (P = .27). Infections classified as serious were more frequent in patients treated with prednisolone (odds ratio [OR], 1.27; 95% confidence interval [CI], 1.27−2.92; P = .002). There was no association between prednisolone therapy and infection during treatment (OR, 1.04; 95% CI, 0.78−1.37; P = .80). However, a higher proportion (10%) of patients receiving prednisolone developed an infection after treatment than of patients not given prednisolone (6%) (OR, 1.70; 95% CI, 1.07−2.69; P = .024). Development of infection was associated with increased 90-day mortality in patients with SAH treated with prednisolone, independent of model for end-stage liver disease or Lille score (OR, 2.46; 95% CI, 1.41−4.30; P = .002). High circulating bDNA predicted infection that developed within 7 days of prednisolone therapy, independent of Model for End-Stage Liver Disease and white blood cell count (OR, 4.68; 95% CI, 1.80−12.17; P = .001). In patients who did not receive prednisolone, infection was not independently associated with 90-day mortality (OR, 0.94; 95% CI, 0.54−1.62; P = .82) or levels of bDNA (OR, 0.83; 95% CI, 0.39−1.75; P = .62). Conclusions Patients with SAH given prednisolone are at greater risk for developing serious infections and infections after treatment than patients not given prednisolone, which may offset its therapeutic benefit. Level of circulating bDNA before treatment could identify patients at high risk of infection if given prednisolone; these data could be used to select therapies for patients with SAH. EudraCT no: 2009-013897-42; Current Controlled Trials no: ISRCTN88782125

Vestiges of the Phoenix: De Quincey, Kant and the Heavens

© Edinburgh University Press, 2011publication-status: Accepte