FDI in the Banking Sector

It is a well known quandry that when countries open their financial sectors, foreign-owned banks appear to bring superior efficiency to their host markets but also charge higher markups on borrowed funds than their domestically owned rivals, with unknown impacts on interest rates and welfare. Using heterogeneous, imperfectly competitive lenders, the model illustrates that FDI can cause markups (the net interest margins commonly used to proxy lending-to-deposit rate spreads) to increase at the same time efficiency gains and local competition keep the interest rates that banks charge borrowers from rising. Competition from arms-length foreign loans, however, both squeezes markups and lowers interest rates. We show that allowing foreign participation is not always a welfare-improving substitute for increasing competition and technical efficiency among domestic banks.multinational bank, heterogeneity, endogenous markup, foreign direct investment

Understanding Markups in the Open Economy under Bertrand Competition

The purpose of this paper is to understand the effects of endogenous markups and trade costs on the pricing behavior of exporters when firms are heterogeneous in productivity. Using new analytical distributions for markups under Bertrand competition, we uncover Ricardian patterns of export pricing that generate higher markups and export price volatility when industrialized countries sell to developing countries. These Ricardian patterns dissipate when developing countries move from bilateral to multilateral trade liberalization. The results arise from a form of price rigidity for exports that arises endogenously due to cut-throat competition, even though prices are otherwise perfectly flexible.

Teams of rivals: endogenous markups in a Ricardian world

We show that an ostensibly disparate set of stylized facts regarding firm pricing behavior can arise in a Ricardian model with Bertrand competition. Generalizing the Bernard, Eaton, Jenson, and Kortum (2003) model allows firms' markups over marginal cost to fall under trade liberalization, but increase with FDI, matching empirical studies in international trade. We are able to mesh this dichotomy with the existence of pricing-to-market and imperfect pass-through, as well as to capture stylized facts regarding the frequency and synchronization of price adjustment across markets. The result is a well specified distribution for markups that previously could only be seen numerically and a way to quantify endogenous pricing rigidities emerging from a market structure governed by fierce competition among rivals.Macroeconomics ; International trade ; Pricing

Correlation-Strength Driven Anderson Metal-Insulator Transition

The possibility of driving an Anderson metal-insulator transition in the presence of scale-free disorder by changing the correlation exponent is numerically investigated. We calculate the localization length for quasi-one-dimensional systems at fixed energy and fixed disorder strength using a standard transfer matrix method. From a finite-size scaling analysis we extract the critical correlation exponent and the critical exponent characterizing the phase transition.Comment: 3 pages; 2 figure

All Banks Great, Small, and Global: Loan pricing and foreign competition

Can allowing foreign participation in the banking sector increase real output, despite the imperfectly competitive nature of the industry? Using a new model of heterogeneous, imperfectly competitive lenders and a simple search process, we show how endogenous markups (the net interest margin commonly used to proxy lending-to-deposit rate spreads) can increase with FDI while the rates banks charge to borrowers are largely unchanged or actually fall. We contrast the competitive effects from cross-border bank takeovers with those of cross-border lending by banks located overseas, which in most cases reduces markups and interest rates. Both policies can increase aggregate output and generate permanent current account imbalances.

MMP-3 deficiency alleviates endotoxin-induced acute inflammation in the posterior eye segment

Matrix metalloproteinase-3 (MMP-3) is known to mediate neuroinflammatory processes by activating microglia, disrupting blood-central nervous system barriers and supporting neutrophil influx into the brain. In addition, the posterior part of the eye, more specifically the retina, the retinal pigment epithelium (RPE) and the blood-retinal barrier, is affected upon neuroinflammation, but a role for MMP-3 during ocular inflammation remains elusive. We investigated whether MMP-3 contributes to acute inflammation in the eye using the endotoxin-induced uveitis (EIU) model. Systemic administration of lipopolysaccharide induced an increase in MMP-3 mRNA and protein expression level in the posterior part of the eye. MMP-3 deficiency or knockdown suppressed retinal leukocyte adhesion and leukocyte infiltration into the vitreous cavity in mice subjected to EIU. Moreover, retinal and RPE mRNA levels of intercellular adhesion molecule 1 (Icam1), interleukin 6 (Il6), cytokine-inducible nitrogen oxide synthase (Nos2) and tumor necrosis factor alpha (Tnf alpha), which are key molecules involved in EIU, were clearly reduced in MMP-3 deficient mice. In addition, loss of MMP-3 repressed the upregulation of the chemokines monocyte chemoattractant protein (MCP)-1 and (C-X-C motif) ligand 1 (CXCL1). These findings suggest a contribution of MMP-3 during EIU, and its potential use as a therapeutic drug target in reducing ocular inflammation

Clustering protein environments for function prediction: finding PROSITE motifs in 3D

Background: Structural genomics initiatives are producing increasing numbers of three-dimensional (3D) structures for which there is little functional information. Structure-based annotation of molecular function is therefore becoming critical. We previously presented FEATURE, a method for describing microenvironments around functional sites in proteins. However, FEATURE uses supervised machine learning and so is limited to building models for sites of known importance and location. We hypothesized that there are a large number of sites in proteins that are associated with function that have not yet been recognized. Toward that end, we have developed a method for clustering protein microenvironments in order to evaluate the potential for discovering novel sites that have not been previously identified. Results: We have prototyped a computational method for rapid clustering of millions of microenvironments in order to discover residues whose surrounding environments are similar and which may therefore share a functional or structural role. We clustered nearly 2,000,000 environments from 9,600 protein chains and defined 4,550 clusters. As a preliminary validation, we asked whether known 3D environments associated with PROSITE motifs were "rediscovered". We found examples of clusters highly enriched for residues that share PROSITE sequence motifs. Conclusion: Our results demonstrate that we can cluster protein environments successfully using a simplified representation and K-means clustering algorithm. The rediscovery of known 3D motifs allows us to calibrate the size and intercluster distances that characterize useful clusters. This information will then allow us to find new clusters with similar characteristics that represent novel structural or functional sites