The Costs of Financial Crises: Resource Misallocation, Productivity and Welfare in the 2001 Argentine Crisis

Financial crises in emerging market countries appear to be very costly: both output and a host of partial welfare indicators decline dramatically. The magnitude of these costs is puzzling both from an accounting perspective -- factor usage does not decline as much as output, resulting in large falls in measured productivity -- and from a theoretical perspective. Towards a resolution of this puzzle, we present a framework that allows us to (i) account for changes in a country's measured productivity during a financial crises as the result of changes in the underlying technology of the economy, the efficiency with which resources are allocated across sectors, and the efficiency of the resource allocation within sectors driven both by reallocation amongst existing plants and by entry and exit; and (ii) measure the change in the country's welfare resulting from changes in productivity, government spending, the terms of trade, and a country's international investment position. We apply this framework to the Argentine crisis of 2001 using a unique establishment level data-set and find that more than half of the roughly 10% decline in measured total factor productivity can be accounted for by deterioration in the allocation of resources both across and within sectors. We measure the decline in welfare to be on the order of one-quarter of one years GDP.

Urban Structure and Growth

Most economic activity occurs in cities. This creates a tension between local increasing returns, implied by the existence of cities, and aggregate constant returns, implied by balanced growth. To address this tension, we develop a theory of economic growth in an urban environment. We show that the urban structure is the margin that eliminates local increasing returns to yield constant returns to scale in the aggregate, which is sufficient to deliver balanced growth. In a multi-sector economy with specific factors and productivity shocks, the same mechanism leads to a city size distribution that is well described by a power distribution with coefficient one: Zipf's Law. Under certain assumptions our theory produces Zipf's Law exactly. More generally, it produces the systematic deviations from Zipf's Law observed in the data, including the under-representation of small cities and the absence of very large ones. In general, the model identifies the standard deviation of industry productivity shocks as the key parameter determining dispersion in the city size distribution. We present evidence that the relationship between the dispersion of city sizes and the variance of productivity shocks is consistent with the data.

Firm Size Dynamics in the Aggregate Economy

Why do firm growth and exit rates decline with size? What determines the size distribution of firms? This paper presents a theory of firm dynamics that simultaneously rationalizes the basic facts on firm growth, exit, and size distributions. The theory emphasizes the accumulation of industry specific human capital in response to industry specific productivity shocks. The theory implies that firm growth and exit rates should decline faster with size, and the size distribution should have thinner tails, in sectors that use human capital less intensively, or correspondingly, physical capital more intensively. In line with the theory, we document substantial sectoral heterogeneity in US firm dynamics and firm size distributions, which is well explained by variation in physical capital intensities.

The Stock of External Sovereign Debt: Can We Take the Data At ‘Face Value’?

The stock of sovereign debt is typically measured at face value. This is a misleading indicator when debts are issued with different contractual forms. In this paper we construct a new measure of the stock of external sovereign debt for 100 developing countries from 1979 to 2006 that is invariant to contractual form, and illustrate five problems with debt stocks measured at face value. First, we show that correcting for differences in the contractual form of debt paints a very different quantitative, and in some cases also qualitative, picture of the stock of developing country external sovereign debt. Second, rankings of indebtedness across countries, which were historically used to define eligibility for debt forgiveness, are sometimes inverted once we correct for differences in contractual form. Third, the empirical performance of the benchmark quantitative model of sovereign debt deteriorates by between 40 to 70 percent once model-consistent measures of debt are used. Fourth, we show how the spread of aggregation clauses in debt contracts which award creditors voting power in proportion to the contractual face value may introduce inefficiencies into the process of restructuring sovereign debts. Fifth, we show how the use of contractual face values gives issuing countries the ability to manipulate their debt stock data, and illustrate the use of these techniques in practice.

With age comes immaturity: Do countries with older populations issue shorter maturity debt?

Recent work has found that countries with older populations face steeper yield curves and issue shorter maturity debt than do younger countries. We reexamine these findings using a new database of public debt maturity and yields for OECD countries. We first show that the behavior of eurozone countries in the pre-euro period drives these results. Next, including more recent data from the post-euro period, we show that the relationship between population age, maturity, and yield curve slopes disappears. This finding is robust to excluding high-credit-risk countries. Last, we show that these patterns reemerge after the European debt crisis, suggesting that eurozone capital markets have resegmented

Superparamagnetic behaviour of antiferromagnetic DyPO4 nanoparticles

We report on the low-temperature magnetic ac-susceptibility of antiferromagnetic DyPO4 nanoparticles with a very high surface to volume ratio. The results are interpreted in terms of superparamagnetic relaxation of the Neel vector arising from a relatively large number approx 0.2 Na of uncompensated spins probably existing on the surface of the nanoparticles. The activation energy of the relaxation process is found to be Ea / kB = (2.6+-0.1) K within a model taking into account the magnetic interaction between nanoparticles.Comment: 3 pages, 1 figure, Espcrc2, ICM0

Nonlinear transmission and colour-centre dynamics in germanosilicate fibres at 420-540 nm

We report evidence in support of the view that induced loss and non-linear transmission in pure germanosilicate fibers at blue/green wavelengths are governed by the formation (via two-photon absorption), spontaneous and stimulated transformation and bleaching (via single-photon events) of Ge(1), Ge(2) and Ge(3) colour-centres. Using a tunable pulsed dye laser, the excitation spectrum of the induced absorption, its spectral attenuation and the effects of germania concentration and thermal annealing are investigated

Serologic Response of Gnotobiotic Pigs Challenged with Actinobacillus Pleuropneumoniae Serotype 5 or Actinobacillus Suis Field Isolates

Three studies, a pilot study with conventional early-weaned pigs and two studies with gnotobiotic pigs were completed. The piolot study indicated that conventional pigs could be challeneged with at least 107 colony forming units (cfu) or Actinobacillus pleuropneumonia (APP) or Actinobacillus suis (A suis) without developing clinical signs. No serological response was detected in these pigs. In the first gnotobiotic study, nine pigs were used: 3 control, 3 APP or 3 A. suis. The two groups of challened pigs failed to respond clinically or serologically to the intial callenege of 106 cfu or either APP or A. suis but the APP pigs did respond clinically and serologically to a second challenge of 107 cfu. A second study with twenty gnotobiotic pigs was completed. Eight pigs were assigned to the Actinobacillus pleuropneumoniae (APP) serotype 5 group; eight pigs were assigned to the Actinobacillus suis (A. suis) group and 4 pigs were assigned to the control group. Each group of gnotobiotic pigs were challenged with 107 colony forming units (cfu) of either APP or A. suis. In both gnotobiotic studies, serological tests indicated that the hemolysin neutralization test (HNT) specificity was poor as it was unable to discriminate between APP or A. suis infections. The HNT test detected more APP positive animals than any other test and detected APP infected animals one-month post challenge. In the first gnotobiotic study, APP infected pigs were detected at one-two weeks post challenge with the APP5 ELISA developed by the University of Montreal (ELISA-M). ELISA-M was a more sensitive test than the APP5 ELISA developed by Oxford Laboratories (ELISA-O). In the second gnotobiotic study, the ELISA-M and ELISA-O failed to detect any APP 5 infected animals. In both gnotobiotic studies, the complement fixation test failed to detect any animals and was insensitive to APP infections

A Measurement of Stimulated Emission From 83m-Kr(m)

This research was sponsored by the National Science Foundation Grant NSF PHY-931478