Choosing the Currency Structure of Foreign-currency Debt: a Review of Policy Approaches

Starting from the constraints and incentives that cause countries to issue debt in foreign currency, this paper provides an overview of policy approaches for choosing the optimal currency structure of sovereign foreign-currency debt. The objective of sovereign debt managers generally includes both risk and cost minimization, while constraints to foreign-currency debt allocation originate in the parameters of the domestic macroeconomy, the shocks it faces, and the initial conditions. Overall, the main parameters that drive the solutions for optimal currency allocation of foreign-currency debt are the covariances of macrovariables with exchange rates and the variances of different exchange rates. Both the covariances and the exchange rate volatility can be deceptive when a fixed exchange rate regime is maintained, however. To adequately capture the expected covariances in the context of managed exchange rate regimes, we suggest that sovereign debt managers work with equilibrium instead of actual exchange rates. For the same reason and because the estimates of relative exchange rate variances should be forward looking, we suggest using synchronization indicators in the policy analysis to better capture the underlying drivers of exchange rate volatility across currencies.Sovereign Debt Management, Foreign-Currency Debt, Exchange Rates and Exchange Rate Volatility, External Shocks, Developing Countries.

Choosing the currency structure for sovereign debt : a review of current approaches

This paper acknowledges the fact that some countries have to borrow in foreign currencies due to the various constraints they face. Starting from this point, the author reviews approaches for trying to determine the currency structure for sovereign debt, and discusses some issues inherent in these approaches. The analysis mainly focuses on the correlations of domestic fundamentals with the actual versus equilibrium exchange rate in light of the long-term perspective of a debt manager and changing exchange rate regimes. In addition, the author makes some observations on the characterization of exchange rate volatilities in the existing approaches.Economic Theory&Research,External Debt,Financial Intermediation,Strategic Debt Management,Foreign Direct Investment

Government debt management in the euro area - recent theoretical developments and changes in practices

This paper reviews recent developments in the management of government debt in the euro area, covering both theoretical and practical aspects. It focuses on key aspects of debt management; the objectives of debt management, its organisation, the maturity of debt, inflation-indexation, currency-denomination, the ownership of debt, and debt issuing and trading practices. Main adjustments include an increase in autonomy of debt management agencies, and a convergence in debt maturities and in debt issuing strategies. Issuance of inflation-indexed bonds and the use of interest rate swaps have increased strongly. While the share of government debt denominated in non-domestic currencies is falling, foreign ownership of euro area government debt is increasing markedly. The observed changes in recent years in part reflect the introduction of the euro and the related integration of European capital markets.

Recognizing Degraded Handwritten Characters

In this paper, Slavonic manuscripts from the 11th century written in Glagolitic script are investigated. State-of-the-art optical character recognition methods produce poor results for degraded handwritten document images. This is largely due to a lack of suitable results from basic pre-processing steps such as binarization and image segmentation. Therefore, a new, binarization-free approach will be presented that is independent of pre-processing deficiencies. It additionally incorporates local information in order to recognize also fragmented or faded characters. The proposed algorithm consists of two steps: character classification and character localization. Firstly scale invariant feature transform features are extracted and classified using support vector machines. On this basis interest points are clustered according to their spatial information. Then, characters are localized and eventually recognized by a weighted voting scheme of pre-classified local descriptors. Preliminary results show that the proposed system can handle highly degraded manuscript images with background noise, e.g. stains, tears, and faded characters

Strategic debt management within the stability and growth pact

Opportunistic politicians use the composition of public debt as a signal for competence. A competent government will not issue long-term nominal debt, as optimal to balance the budget, but long-term inflation-indexed debt. We consider politicians that pursue the objective of a balanced budget subject to the Stability and Growth Pact and reelection. A government's competence is reflected by its ability to produce a public service at a lower cost (taxes). Competence is private information of politicians. --Political Budget Cycle,Debt Management,Inflation-indexed Bonds,Stability and Growth Pact

Increased expression and activity of p75NTR are crucial events in azacitidine-induced cell death in prostate cancer

The high affinity nerve growth factor (NGF) NGF receptor, p75NTR, is a member of the tumor necrosis factor (TNF) receptor superfamily that shares a conserved intracellular death domain capable of inducing apoptosis and suppressing growth in prostate epithelial cells. Expression of this receptor is lost as prostate cancer progresses and is minimal in established prostate cancer cell lines. We aimed to verify the role of p75NTR in the azacitidine-mediated antitumor effects on 22Rv1 and PC3 androgen-independent prostate cancer cells. In the present study, we reported that the antiproliferative and pro-apoptotic effects of 5-azacytidine (azacitidine) were more marked in the presence of physiological concentrations of NGF and were reduced when a blocking p75NTR antibody or the selective p75NTR inhibitor, Ro 08-2750, were used. Azacitidine increased the expression of p75NTR without interfering with the expression of the low affinity NGF receptor TrkA and induced caspase 9-dependent caspase 3 activity. Taken together, our results suggest that the NGF network could be a candidate for future pharmacological manipulation in aggressive prostate cancer

Beyond the Wall: Typography from the German Democratic Republic

1989: The German Democratic Republic (GDR) still existed and the Berlin Wall was still standing. Communism was alive in Europe. Hard to believe now, yet only fifteen years ago, a reality. By 1990 the GDR was gone, but it lingers on in the memory of many people now as a dull, repressive, unimaginative place full of cheap plastic, grey concrete, goosestepping soldiers, sports stars with mullets, the dreaded Stasi secret police and of course, the Wall. These memories illustrate common Western stereotypes of the GDR. But in the real, existing East Germany, the reaction of designers to the Communist system was not as downbeat or sterile as you might expect. The graphical and typographical culture of the GDR is a fascinating glimpse into how graphics and typography might have developed and functioned in an integrated system not based solely on the economics of supply and demand. The “workers and peasants state” was founded in 1949 on the premise of supporting humanism, anti-fascism, peace and security. East Germany occupied a unique position within Eastern Europe; not only did it define an outer edge of the Soviet bloc, it faced the difficulty of being umbilically connected to ‘the other (Western) Germany’. Questions of identity dogged it to the end, and stereotypical perceptions about Communism and Capitalism heightened the tensions between the split personality of east and west. The history of East German typography is essentially, from a Western perspective, one of those “in spite of” stories. Inevitably constrained by inconsistent political ideologies in the arts, a lack of raw materials and outdated typesetting and printing equipment, GDR graphics and typography eventually flourished in a way which only occurs when designers are forced to come up with solutions in the face of seemingly impossible obstacles. Designers found innovative, critical and individual ways of coping with political and material shortcomings

The documentary evidence for Templar religion

The Templar Rule and statutes are also only of limited help when it comes to establishing what went on within the walls of Templar churches. The documentary evidence that captures the patchwork nature of Templar religion best is found in the Templar inventories drawn up, for the most part, shortly after the Templars’ arrests in 1307–1311. Historians working on the Templars’ Spanish inventories – especially Maria Vilar Bonet and, more recently, Sebastian Salvado – have already pointed out that Mass in Templar chapels and churches could be a colourful affair. An alb and amice made of golden velvet and embroidered with birds was found in the Templar church of Mary Magdalene in Bologna. To speak of a South-North or even Spanish-French divide in the material presentation of Templar religion may be a gross simplification of what was in any case a very complex religious and liturgical landscape

Public Debt Management in Brazil

This paper derives the optimal composition of the Brazilian public debt by looking at the relative impact of the risk and cost of alternative debt instruments on the probability of missing the stabilization target. This allows to price risk against the expected cost of debt service and thus to find the optimal combination along the trade off between cost and risk minimization. The optimal debt structure is a function of the expected return differentials between debt instruments, of the conditional variance of debt returns and of their covariances with output growth, inflation, exchange-rate depreciation and the Selic rate. We estimate the relevant covariances by: i) exploiting the daily survey of expectations; ii) simulating a small structural model of the Brazilian economy under different shocks; iii) estimating the unanticipated components of the relevant variables with forecasting regressions. The empirical evidence strongly supports the funding strategy of Brazilian Treasury in 2003 of relying heavily on fixed-rate LTN bonds. It also supports its recent decision to revitalize the market for price-indexed bonds with the new NTN-B program of IPCA indexation. Though decreasing, the exposure to exchange rate risk appears too large suggesting that more efforts should be made to reduce funding in foreign currencies.

Managing Debt Stability

This paper presents a simple model in which debt management stabilizes the debt-to-GDP ratio in face of shocks to real returns and output growth and thus supports fiscal restraint in ensuring sustainability. The optimal composition of public debt is derived by looking at the relative impact of the risk and cost of alternative debt instruments on the cost of missing the stabilization target. The optimal debt structure is a function of the expected return differentials between debt instruments, of the conditional variance of their returns and of the conditional covariances of their returns with output growth and inflation. We then explore how the relevant covariances and thus the optimal choice of debt instruments depend on the monetary regime and on Central Bank preferences for output stabilization, inflation control and interest-rate smoothing. Finally, we estimate the composition of public debt that would have supported debt stabilization in OECD countries over the last two decades. The empirical evidence suggests that the public debt should have a long maturity and a large share of it should be indexed to the price level.debt management, debt structure, debt stabilization, inflation indexation, interest rates