Country Spreads and Emerging Countries: Who Drives Whom?

A number of studies have stressed the role of movements in US interest rates and country spreads in driving business cycles in emerging market economies. At the same time, country spreads have been found to respond to changes in both the US interest rate and domestic conditions in emerging markets. These intricate interrelationships leave open a number of fundamental questions: Do country spreads drive business cycles in emerging countries or vice versa, or both? Do US interest rates affect emerging countries directly or primarily through their effect on country spreads? This paper addresses these and other related questions using a methodology that combines empirical and theoretical elements. The main findings of the paper are: (1) US interest rate shocks explain about 20 percent of movements in aggregate activity in emerging market economies at business-cycle frequency. (2) Country spread shocks explain about 12 percent of business-cycle movements in emerging economies. (3) About 60 percent of movements in country spreads are explained by country-spread shocks. (4) In response to an increase in US interest rates, country spreads first fall and then display a large, delayed overshooting; (5) US-interest-rate shocks affect domestic variables mostly through their effects on country spreads. (6) The fact that country spreads respond to business conditions in emerging economies significantly exacerbates aggregate volatility in these countries. (7) The US-interest-rate shocks and country-spread shocks identified in this paper are plausible in the sense that they imply similar business cycles in the context of an empirical VAR model as they do in the context of a theoretical dynamic general equilibrium model of an emerging market economy.

Global yield curve dynamics and interactions: a dynamic Nelson-Siegel approach

The popular Nelson-Siegel (1987) yield curve is routinely fit to cross sections of intra-country bond yields, and Diebold and Li (2006) have recently proposed a dynamized version. In this paper we extend Diebold-Li to a global context, modeling a potentially large set of country yield curves in a framework that allows for both global and country-specific factors. In an empirical analysis of term structures of government bond yields for the Germany, Japan, the U.K. and the U.S., we find that global yield factors do indeed exist and are economically important, generally explaining significant fractions of country yield curve dynamics, with interesting differences across countries

Global Yield Curve Dynamics and Interactions: A Dynamic Nelson-Siegel Approach

The popular Nelson-Siegel (1987) yield curve is routinely fit to cross sections of intra-country bond yields, and Diebold and Li (2006) have recently proposed a dynamized version. In this paper we extend Diebold-Li to a global context, modeling a potentially large set of country yield curves in a framework that allows for both global and country-specific factors. In an empirical analysis of term structures of government bond yields for the Germany, Japan, the U.K. and the U.S., we find that global yield factors do indeed exist and are economically important, generally explaining significant fractions of country yield curve dynamics, with interesting differences across countries.Term Structure, Interest Rate, Dynamic Factor Model, Global Yield, World Yield, Bond Market

Structural adjustments and international trade: theory and evidence from China

This paper studies how changes in factor endowment, technology, and trade costs jointly determine the structural adjustments, which are defined as changes in distributions of production and exports. We document the structural adjustments in Chinese manufacturing firms from 1999 to 2007 and find that production became more capital-intensive while exports did not. We structurally estimate a Ricardian and Heckscher-Ohlin model with heterogeneous firms to explain this seemingly puzzling pattern. Counterfactual simulations show that capital deepening made Chinese production more capital-intensive, but technology changes that biased toward the labor-intensive sectors and trade liberalizations provided a counterbalancing forc

A General Equilibrium Model of Sovereign Default and Business Cycles

Emerging markets business cycle models treat default risk as part of an exogenous interest rate on working capital, while sovereign default models treat income fluctuations as an exogenous endowment process with ad-hoc default costs. We propose instead a general equilibrium model of both sovereign default and business cycles. In the model, some imported inputs require working capital financing; default triggers an efficiency loss as these inputs are replaced by imperfect substitutes; and default on public and private obligations occurs simultaneously. The model explains several features of cyclical dynamics around defaults, countercyclical spreads, high debt ratios, and key business cycle moments.

A Solution to the Disconnect between Country Risk and Business Cycle Theories

We propose a model that solves the crucial disconnect between business cycle models that treat default risk as an exogenous interest rate on working capital, and sovereign default models that treat output fluctuations as an exogenous process with ad-hoc default costs. The model explains observed output dynamics around defaults, countercyclical spreads, high debt ratios, and key business cycle moments. Three features of the model are central for these results: working capital loans pay for imported inputs; default triggers an efficiency loss as imported inputs are replaced by imperfect domestic substitutes; and default on public and private foreign obligations occurs simultaneously.

Epidermal growth factor augments the self-renewal capacity of aged hematopoietic stem cells.

Hematopoietic aging is associated with decreased hematopoietic stem cell (HSC) self-renewal capacity and myeloid skewing. We report that culture of bone marrow (BM) HSCs from aged mice with epidermal growth factor (EGF) suppressed myeloid skewing, increased multipotent colony formation, and increased HSC repopulation in primary and secondary transplantation assays. Mice transplanted with aged, EGF-treated HSCs displayed increased donor cell engraftment within BM HSCs and systemic administration of EGF to aged mice increased HSC self-renewal capacity in primary and secondary transplantation assays. Expression of a dominant negative EGFR in Scl/Tal1+ hematopoietic cells caused increased myeloid skewing and depletion of long term-HSCs in 15-month-old mice. EGF treatment decreased DNA damage in aged HSCs and shifted the transcriptome of aged HSCs from genes regulating cell death to genes involved in HSC self-renewal and DNA repair but had no effect on HSC senescence. These data suggest that EGFR signaling regulates the repopulating capacity of aged HSCs

An Epidemiological Study of Concomitant Use of Chinese Medicine and Antipsychotics in Schizophrenic Patients: Implication for Herb-Drug Interaction

Background: Herb-drug interactions are an important issue in drug safety and clinical practice. The aim of this epidemiological study was to characterize associations of clinical outcomes with concomitant herbal and antipsychotic use in patients with schizophrenia. Methods and Findings: In this retrospective, cross-sectional study, 1795 patients with schizophrenia who were randomly selected from 17 psychiatric hospitals in China were interviewed face-to-face using a structured questionnaire. Association analyses were conducted to examine correlates between Chinese medicine (CM) use and demographic, clinical variables, antipsychotic medication mode, and clinical outcomes. The prevalence of concomitant CM and antipsychotic treatment was 36.4% [95% confidence interval (95% CI) 34.2%-38.6%]. Patients using concomitant CM had a significantly greater chance of improved outcomes than non-CM use (61.1% vs. 34.3%, OR = 3.44, 95% CI 2.80-4.24). However, a small but significant number of patients treated concomitantly with CM had a greater risk of developing worse outcomes (7.2% vs. 4.4%, OR = 2.06, 95% CI 2.06-4.83). Significant predictors for concomitant CM treatment-associated outcomes were residence in urban areas, paranoid psychosis, and exceeding 3 months of CM use. Herbal medicine regimens containing Radix Bupleuri, Fructus Gardenia, Fructus Schisandrae, Radix Rehmanniae, Akebia Caulis, and Semen Plantaginis in concomitant use with quetiapine, clozapine, and olanzepine were associated with nearly 60% of the risk of adverse outcomes. Conclusions: Concomitant herbal and antipsychotic treatment could produce either beneficial or adverse clinical effects in schizophrenic population. Potential herb-drug pharmacokinetic interactions need to be further evaluated. © 2011 Zhang et al.published_or_final_versio