Price level determinacy with an interest rate policy rule and rational expectations

This paper reconsiders a result obtained by Sargent and Wallace namely, that price level indeterminacy obtains in their model if the monetary authorities adopt a feedback rule for the interest rate rather than the money stock. It is shown that the indeterminacy vanishes if the interest rate rule is chosen so as to have a desired effect on the expected quantity of money demanded. This holds even if considerable weight is given, in the choice of a rule, to the aim of smoothing interest rate fluctuations.     

Applying portfolio theory to global bank lending

Portfolio theory provides some insights into how a bank should manage its global exposures. Practical application of some of the principles of portfolio analysis is possible if comparable credit ratings are available and if the impact on each loan's rating of likely future events can be assessed. If further restrictive assumptions are made about which quality dimensions of the portfolio are more important (and how much more important), and if judgements can be quantified about what risk-return tradeoffs are acceptable, then it is possible to derive measures to guide exposure and pricing decisions. This article is related to the other papers in this special issue in that country and corporate risk assessment methodologies can provide important inputs into the portfolio analysis. This paper, however, attempts to go beyond the evaluation of risk at the level of individual companies, countries, or other loan customers, and to focus instead on the problem of managing the riskiness of the overall bank loan portfolio.     

Pig pandemic: Industrial hog farming in eastern Mexico

Industrial hog farming is an increasingly important land use in Mexico. Despite the known public health and environmental risks associated with this factory-style model of production, hog concentrated animal feeding operations (CAFOs) remain unregulated. Legal standards regarding the establishment and operation of swine CAFOs are lacking at municipal, regional, and federal levels. There are currently no restrictions on the size, concentration, or geographic location of operations, and public notice to surrounding and downstream communities is generally not required. These lax environmental standards facilitate swine CAFO expansion in regions such as the Perote Valley, with potential for negative long-term impacts on public health, community well-being, water resources, ecosystems, and climate.