"A Financial Sector Balance Approach and the Cyclical Dynamics of the U.S. Economy"

This paper investigates the relationship between asset markets and business cycles with regard to the United States economy. We consider the Goldman Sachs approach (2003) developed to study the dynamics of financial balances. By means of a small econometric model we find that asset market dynamics are fundamental to determining the long-run financial sector balance dynamics. The gap between long-run equilibrium values and the actual values of the financial balances help to explain the cyclical path of the economy. Among all financial sectors balances, the financing gap in the corporate sector shows a leading effect on business cycles, in a Minskyan spirit. The last results appear innovative with respect to Goldman Sachs's findings. Furthermore, our econometric results are robust and quite stable.

Inflation and consumption in a long term perspective with level shift

This article examines the existence and stability of the consumption function in the United States of America (US) economy during a sample period, beginning in the 1950s. In order to obtain a stable long run relationship, we have introduced two innovative elements into the analysis of the life-cycle of the consumption function with wealth effects: 1) a shift level break in the cointegrating relationship, and 2) using inflation as an additional explanatory variable. By implementing a well structured estimation strategy we found that, after taking the shift level break into account, a cointegration including inflation exists and is more stable for the critical sub-samples than traditional consumption function models.Consumption, Cointegration, Inflation, Shift level break

Private sector balance, financial markets, and U.S. cycle: A SVAR analysis

Purpose – Considering the sectoral balance approach of Godley, and focusing only on the two main components of the private sector balance for the U.S. economy (household and non-financial corporate balance), we investigate the relationship between these two sectors, the financial variables, and economic cycle. In particular, we consider all these relationships endogenously. Design/methodology/approach – We estimate a structural VAR model between household and (non-financial) corporate financial balances, financial markets, and economic cycle and we perform an impulse response analysis. All the variables are expressed as cyclical components applying the Hodrick-Prescott filter. Findings - The main result is that: (1) household and corporate balances react to financial markets in the way we expected and discussed; (2) the economic cycle influences the two financial balances; (3) the corporate balance has a positive impact on the cycle; (4) the economic cycle and financial balances influence the financial variables. In particular, point (3) shows that the corporate balance is a leading component of the cycle as suggested by Casadio and Paradiso (2009) and accords with Minsky’s theory of financial instability. Research limitations/implications – The analysis does not include the foreign sector (current-account balance). Originality/value – Our contribution is an important step forward with respect to the two main contributions in literature which use this approach: the Levy Institute macroeconomic team and Goldman Sachs. Methodologically their models are based on some assumptions (such as exogeneity or market clearing price mechanism for the financial markets) which we overcome considering all the relationships studied in an endogenous manner.Household financial balance, Corporate financial balance, Business cycle, Financial markets, SVAR

Assessing Sustainability of the Irish Public Debt

This paper utilizes a small-scale econometric model to study the dynamics of the Irish debt-to-GDP ratio. The role of world GDP growth, domestic GDP growth, real effective exchange rate, interest rate and primary balance is analyzed in the debt dynamics. We find that the Irish economy will recover to its normal path by 2015. Policy interventions for higher primary balance and output growth, and the external positive scenarios for variables such as the world GDP growth, rate of interest and real effective exchange rate are desirable to help further reduce the debt path.Debt to GDP ratio; Irish economy; Sustainability

"The Household Sector Financial Balance, Financing Gap, Financial Markets, and Economic Cycles in the US Economy: A Structural VAR Analysis"

This paper investigates private net saving in the US economy—divided into its principal components, households and (nonfinancial) corporate financial balances—and its impact on the GDP cycle from the 1980s to the present. Furthermore, we investigate whether the financial markets (stock prices, BAA spread, and long-term interest rates) have a role in explaining the cyclical pattern of the two private financial balances. We analyze all these aspects estimating a VAR—between household and (nonfinancial) corporate financial balances (also known as the corporate financing gap), financial markets, and the economic cycle—and imposing restrictions on the matrix A to identify the structural shocks. We find that households and corporate balances react to financial markets as theoretically expected, and that the economic cycle reacts positively to corporate balance, in accordance with the Minskyan view of the operation of the economy that we have embraced.Household Financial Balance; Financing Gap; Business Cycle; Financial Markets; SVAR

Dynamic Choice and Timing-Independence: an experimental investigation

Timing-independence implies that individuals are indifferent between a sequential choice problem and a planned choice problem which are strategically equivalent except for the timing of resolution of the uncertainty. This paper reports an experiment in which we investigate whether the timing of resolution of the uncertainty affects individual preferences. We elicit individual preferences for three strategically equivalent decisions problems. The experimental results suggest that timing- independence is an inappropriate assumption of individual preferences. The paper discusses possible implications of such findings.

From fix to fit into the autoptic human brains.

Formalin-fixed, paraffinembedded (FFPE) human brain tissues are very often stored in formalin for long time. Formalin fixation reduces immunostaining, and the DNA/RNA extraction from FFPE brain tissue becomes suboptimal. At present, there are different protocols of fixation and several procedures and kits to extract DNA/RNA from paraffin embedding tissue, but a gold standard protocol remains distant. In this study, we analyzed four types of fixation systems and compared histo and immuno-staining. Based on our results, we propose a modified method of combined fixation in formalin and formic acid for the autoptic adult brain to obtain easy, fast, safe and efficient immunolabelling of long-stored FFPE tissue. In particular, we have achieved an improved preservation of cellular morphology and obtained success in postmortem immunostaining for NeuN. This nuclear antigen is an important marker for mapping neurons, for example, to evaluate the histopathology of temporal lobe epilepsy or to draw the topography of cardiorespiratory brainstem nuclei in sudden infant death syndrome (SIDS). However, NeuN staining is frequently faint or lost in postmortem human brain tissues. In addition, we attained Fluoro Jade C staining, a marker of neurodegeneration, and immunofluorescent staining for stem cell antigens in the postnatal human brain, utilizing custom fit fixation procedures

Time series estimates of the US new Keynesian Phillips curve with structural breaks

This paper uses recent US data to estimate the new Keynesian Phillips curve (NKPC) with three modifications. Firstly, the variables in the NKPC are found to be nonstationary. Therefore, it is estimated with the time series methods and the cointegrating equations are tested for structural breaks. Secondly, inflationary expectations are proxied with the survey data. Thirdly, unlike in the hybrid NKPC, the effects of the lagged inflation rates are introduced into the dynamic adjustment equations. This offers an opportunity to estimate these dynamic effects with a more general specification instead of the restricted partial adjustment mechanism underlying the hybrid NKPC. Our NKPC, with these changes, is consistent with its underlying micro foundations and forward looking expectations. The results of our NKPC can explain the dynamics of the US inflation rate as well as any other alternative model.US New Keynesian Phillips Curve, Forward looking expectations, Survey data, Wage share, Cointegration

Flattening of the Phillips Curve and the Role of Oil Price: An Unobserved Components Model for the USA and Australia

We use the unobserved components model of Harvey (1989 and 2011) to estimate the Phillips curve (PC) for the USA and Australia, by augmenting it with oil prices. We found that the level coefficient of inflation and the coefficient of demand pressure have declined and contributed to the flattening of the Phillips curve. But the coefficient of oil prices has increased and has partly offset these effects. Therefore, oil prices are likely to play a significant role in future inflation rates.Unobserved components, Harvey, USA, Australia, Flattening of the Phillips curve and Oil prices