A Small Dynamic Hybrid Model for the Euro Area

The authors estimate and solve a small structural model for the euro area over the 1983–2000 period. Given the assumption of rational expectations, the model implies a set of orthogonality conditions that provide the basis for estimating the model’s parameter by generalized method of moments. The authors’ main results are: (i) the impulse-response functions implied by the model are consistent with the standard stylized facts about the dynamic effects of monetary policy, (ii) evidence suggests that flexibility in Europe has increased since the adoption of the Maastricht Treaty, and (iii) the inflation expectations captured by the model might explain the European Central Bank’s reluctance to ease monetary conditions in 2000.Transmission of monetary policy

Using Ex Ante Payments in Self-Enforcing Risk-Sharing Contracts

In this paper we analyze a long-term risk-sharing contract between two risk-averse agents facing self-enforcing constraints. We enlarge the contracting space to allow for an ex ante transfer (at the beginning of the period) before the state of nature is realized. We analyze the trade-off between the self-enforcing constraints of the two agents by characterizing the optimal ex ante and ex post transfer payments. We show that optimal ex ante payments are non-stationary. They optimally depend on the surplus from the relationship each agent expects. The size of the ex ante payment an agent makes is inversely related to its expected surplus from the relationship. The introduction of ex ante payments generates interesting dynamic properties. In a two-state example with i.i.d. shocks, the dynamics of the optimal contract exhibit experience rating even though there is no private information or learning taking place. Ce papier analyse les propriétés dynamiques d'un contrat de partage de risque entre deux agents riscophobes qui font face à des contraintes de faillite. L'espace des contrats est élargi pour permettre aux agents d'effectuer un transfert au début de chacune des périodes avant la réalisation de l'incertitude. Ces paiements ex ante ne sont pas stationnaires. Ils dépendent du surplus que chaque agent attend de la relation. Ce paiement est inversement proportionnel à ce surplus. Dans un environnement i.i.d. à deux états de la nature, les propriétés dynamiques de la consommation de chacun des agents démontrent un lissage qui ressemble à de la tarification a posteriori.Risk sharing; Dynamic relationship; Self enforcing contracts, Partage de risque ; Relation dynamique ; Contrats auto-exécutoires

Linking Real Activity and Financial Markets: The Bonds, Equity, and Money (BEAM) Model

The authors estimate a small monthly macroeconometric model (BEAM, for bonds, equity, and money) of the Canadian economy built around three cointegrating relationships linking financial and real variables over the 1975–2002 period. One of the cointegrating relationships allows the identification of a supply shock as the only shock that permanently affects the stock market, and a demand shock that leads to important transitory stock market overvaluation. The authors propose a monetary policy reaction function in which the impact of a permanent inflation shock on the overnight rate is simulated and the future path of the overnight rate adjusted accordingly, to prevent any forecast persistent deviation from the inflation target. They introduce a technical innovation by showing under which conditions permanent shocks can be identified in a vector error-correction model with exogenous variables.Financial markets; Financial stability

Understanding Systemic Risk: The Trade-Offs between Capital, Short-Term Funding and Liquid Asset Holdings

We offer a multi-period systemic risk assessment framework with which to assess recent liquidity and capital regulatory requirement proposals in a holistic way. Following Morris and Shin (2009), we introduce funding liquidity risk as an endogenous outcome of the interaction between market liquidity risk, solvency risk, and the funding structure of banks. To assess the overall impact of different mix of capital and liquidity, we simulate the framework under a severe but plausible macro scenario for different balance-sheet structures. Of particular interest, we find that (1) capital has a decreasing marginal effect on systemic risk, (2) increasing capital alone is much less effective in reducing liquidity risk than solvency risk, (3) high liquid asset holdings reduce the marginal effect of increasing short term liability on systemic risk, and (4) changing liquid asset holdings has little effect on systemic risk when short term liability is sufficiently low.Financial stability; Financial system regulation and policies

Financial Conditions Indexes for Canada

The authors construct three financial conditions indexes (FCIs) for Canada based on three approaches: an IS-curve-based model, generalized impulse-response functions, and factoranalysis. Each approach is intended to address one or more criticisms of the monetary conditions index (MCI) and existing FCIs. To evaluate their three FCIs, the authors consider five performance criteria: the consistency of each FCI's weight with economic theory, its graphical ability to predict turning points in the business cycle, its dynamic correlation with output, its in-sample fit in explaining output, and its out-of-sample performance in forecasting output. Using monthly data, the authors find, in general, that housing prices, equity prices, and bond yield risk premiums, in addition to short- and long-term interest rates and the exchange rate, are significant in explaining output from 1981 to 2000. They also find that the FCIs outperform the Bank of Canada's MCI in many areas.Monetary and financial indicators; Monetary conditions index

Developing a Framework to Assess Financial Stability: Conference Highlights and Lessons

Central banks are still defining their approach to financial stability and are at an early stage in the development of useful models. The Bank of Canada's 2007 economic conference was organized to stimulate progress in the development of financial-stability frameworks. Among the highlights reported here are the discussions centred around three proposed frameworks: a contingent-claims-analysis framework, a semi-structural framework, and structural financial-stability models. Participants also reported on their experiences with stress-testing under the International Monetary Fund's Financial Sector Assessment Program and discussed the implications for financial stability of linkages among payment, clearing, and settlement systems.

Aire and Foxp3 expression in a particular microenvironment for T-cell differentiation

peer reviewe

Single and Multiple Domain Amnestic MCI: two sides of the same coin?

Background. Amnestic Mild Cognitive Impairment (aMCI) is considered a transition stage between normal aging and Alzheimer's disease (AD). Two main clinical subtypes of aMCI have been identified: 1) aMCI single domain (aMCI-SD), with isolated episodic memory impairments, and 2) aMCI multiple domain (aMCI-MD), with episodic memory impairments and deficits in one or more other cognitive domains. Aims.To map the pattern of gray matter (GM) atrophy associated with aMCI-SD, aMCIMD and mild AD. Methods. A group of aMCI-SD, aMCI-MD characterized by executive function disorders, mild AD patients and cognitively unimpaired age-matched subjects underwent a comprehensive neuropsychological assessment and a high-definition MR brain scan. Voxel-based morphometry (VBM) analysis was used to characterize the GM tissue loss in each patient group, and the common pattern of GM atrophy in aMCI-SD and aMCIMD. Results. The results revealed that aMCI-SD and aMCI-MD are characterized by a common pattern of GM atrophy within the medial temporal cortex, predisposing to AD and correlating with the severity of verbal memory symptoms. Moreover, the pattern of GM atrophy observed in aMCI-SD, aMCI-MD and mild AD revealed that, from an anatomical point of view, these three clinical syndromes could represent three severity points along the continuum between normal aging and AD