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DNA transposable elements and transposase-derived genes are present in most living organisms, including vertebrates, but their function is largely unknown. PiggyBac Transposable Element Derived 5 (PGBD5) is an evolutionarily conserved vertebrate DNA transposase-derived gene with retained nuclease activity in cells. Vertebrate brain development is known to be associated with prominent neuronal cell death and DNA breaks, but their causes and functions are not well understood. Here, we show that PGBD5 contributes to normal brain development in mice and humans, where its deficiency causes disorder of intellectual disability, movement and seizures. In mice, Pgbd5 is required for the developmental induction of post-mitotic DNA breaks and recurrent somatic genome rearrangements in neurons. Together, these studies nominate PGBD5 as the long-hypothesized neuronal DNA nuclease required for brain function in mammals.One-Sentence SummaryPiggyBac Transposable Element Derived 5 (PGBD5) is required for brain development in humans and mice by promoting somatic neuronal genome rearrangements.

Motivated by the long-standing debate on the pros and cons of competitive devaluation, we propose a new perspective on how monetary and exchange rate policies can contribute to a country’s international competitiveness. We refocus the analysis on the implications of monetary stabilization for a country’s comparative advantage. We develop a two-country New-Keynesian model allowing for two tradable sectors in each country: while one sector is perfectly competitive, firms in the other sector produce differentiated goods under monopolistic competition subject to sunk entry costs and nominal rigidities, hence their performance is more sensitive to macroeconomic uncertainty. We show that, by stabilizing markups, monetary policy can foster the competitiveness of these firms, encouraging investment and entry in the differentiated goods sector, and ultimately affecting the composition of domestic output and exports. Panel regressions based on worldwide exports to the U.S. by sector lend empirical support to the theory. Constraining monetary policy with an exchange rate peg lowers a country’s share of differentiated goods in exports between 4 and 12 percent.

Sport is an important aspect of cultural identity for New Zealand Maori migrants living in Australia. Maori sporting endeavours, especially at festivals such as the Taki Toa Tournament in New South Wales, often reveal distinctive Maori features of cultural performance, in the rituals prior to a game, in the spirited manner with which a game is played, and in the whânau (large/extended family) spirit of belonging and celebration that is encouraged after a game. However, notwithstanding the occasional Maori tournament or festival, Maori sporting participation in Australia is not restricted to an ‘ethnic ghetto’. Widespread Maori involvement in sport has provided an important avenue for Maori migrants to mix socially with Aboriginal and other Australians in their local communities, and to gain acceptance, respect and, in some cases, economic advancement. Many first-generation Maori migrants display a keen sense of a New Zealand rather than an Australian identity when it comes to trans-Tasman international sport. Transnational links are also important for Australian Maori who visit New Zealand with sporting teams and stay on various marae (tribal meeting places). The experience of ‘Maori culture’ and hospitality offered by their New Zealand kinsfolk may have a significant influence upon the sporting visitors' subsequent development of Maori cultural identity.

Firm entry dynamics are an integral part of the propagation of financial shocks to the real economy. A VAR documents that adverse financial shocks in the U.S. postwar period are associated with a fall in new firm creation and a fall in firm equity values. We propose a DSGE model with endogenous firm entry and financial frictions that is able to explain these facts. The model is novel in giving firms a choice of financing up-front entry costs through a combination of debt as well as equity, so that financial shocks directly impact the financing of firm entry. The model is also novel in making use of the asset pricing implications of the firm entry condition to explain the equity price response to a financial shock. The model indicates that free entry of new firms limits the ability of incumbent firms to respond to negative financial shocks through endogenous capital restructuring. Also, allowing the number of firms to fall after an adverse financial shock is a useful margin of macroeconomic adjustment, reducing the overall impact of the shock on aggregate output. This is because the remaining firms become financially stronger and better able to withstand a financial shock.

While outsourcing of production from the U.S. to Mexico has been hailed in Mexico as a valuable engine of growth, recently there have been misgivings regarding the fickleness and volatility of this engine. This paper is the first in the literature to focus on the second moment properties of outsourcing. We begin by documenting a new stylized fact: the maquiladora outsourcing industries in Mexico experience fluctuations in value added that are roughly twice as volatile as the corresponding industries in the U.S. A difference-in-difference method adapted to second moments is used to verify that this finding is specific to the outsourcing sector and is statistically significant. We then develop two theoretical models of outsourcing that can explain this stylized fact. Both models rely on a continuum of products and many varieties of each product. In the first model, firms can enter into outsourcing relationships via new products and new product varieties, with CES preferences. In the second model, firms enter into outsourcing only via new product varieties, and the degree of entry is modulated by a novel mechanism of endogenous markups obtained from translog preferences.

This paper develops a two-country macro model with endogenous tradability to study features of international economic integration. Recent episodes of integration in Europe and North America suggest some surprising observations: while quantities of trade have increased significantly, especially along the extensive margin of goods previously not traded, price dispersion has not decreased and may even have increased. These observations challenge the usual understanding of integration in the literature. We propose a way of reconciling these price and quantity observations in a macroeconomic model where the decision of heterogeneous firms to trade internationally is endogenous. Trade is shaped both by the nature of heterogeneity -- trade costs versus productivity -- and by the nature of trade policies -- cuts in fixed costs versus cuts in per unit costs like tariffs. For example, in contrast to tariff cuts, trade policies that work mainly by lowering various fixed costs of trade may have large effects on entry decisions at the extensive margin without having direct effects on price-setting decisions. Whether this entry raises or lowers price dispersion depends on the type of heterogeneity that distinguishes the new entrants from incumbent traders.

This paper advocates a new way of thinking about goods trade in an open economy macro model. It develops a simple method for analyzing trade costs that are heterogeneous among a continuum of goods, and it explores how these costs determine the endogenous decision by a seller of whether to trade a good internationally. This way of thinking offers new insights into international market integration and the behavior of international relative prices. As one example, it provides a natural explanation for a prominent and controversial puzzle in international macroeconomics regarding the surprisingly low degree of volatility in the relative price of nontraded goods. Because tradedness is an endogenous decision, the good on the margin forms a link holding together the prices of traded and nontraded goods. The paper goes on to find that endogenizing trade has implications for other basic macroeconomic issues.

This paper generates persistent effects of a monetary disturbance in the context of staggered price-setters. Previous research has been restricted by the CES functional form to price-setting rules that are constant markups over marginal costs. The present paper considers a translog form for preferences and an input-output structure for production in the context of a dynamic general equilibrium model of monopolistically competitive staggered price-setters. We derive a price-setting rule that is a function of milrginal cost and also competitors'' prices. This rule better captures the interaction of price-setters envisioned in Tajlor (1980) and Blanchard (1983) in their early work on staggered contracts. The model is able to generate reasonable persistence, and also confirms the conjecture of Taylor and Blanchard that increasing the number of contracting groups increases the degree of persistence.

Open economy macroeconomics typically takes as exogenously given important aspects of the pattern of international trade. This paper shows how heterogeneity in trade costs and heterogeneity in productivities work together to jointly determine features of the pattern of international trade and the macroeconomic effects of productivity shocks. This is demonstrated in a general equilibrium macroeconomic model which allows the status of a good as traded or nontraded to be determined endogenously. The model includes two countries, each of which produces a distinct continuum of varieties through monopolistically competing firms. These goods are heterogeneous in terms of the technology in their respective production functions and the iceberg costs they incur in international trade; they also face fixed costs of exporting that are assumed constant across the varieties of each good. We posit convenient distributions for technology and for iceberg costs, which permit us to aggregate over the heterogeneous goods, and evaluate aggregate prices and quantities. Unlike open economy macro, trade theory has long studied the endogenous development of trade patterns. Traditionally, there has been an interest in trade theory in seeing how the goods along a continuum that are exported or imported are determined endogenously, with a range of goods possibly remaining untraded due to trade costs. This work typically ranks goods by their productivities, while assuming that the magnitude of trade costs is uniform across goods. Those goods with the greatest comparative advantage in one country or the other are traded, while those goods with small gains from trading relative to the uniform trade costs remain nontraded. However, since some goods are much more difficult to trade than others, the identity of a good as traded or nontraded is likely to be determined by heterogeneity in trade costs as well as by comparative advantage based on productivity. For example, the reason that many types of services are nontraded is not because countries are so similar in their productivities in these sectors; rather, they remain nontraded primarily because such services are particularly difficult to trade over long distances. Recent empirical work has emphasized that trade costs -- including tariff and nontariff barriers, shipping costs, and other associated costs of marketing and distribution -- vary greatly across classes of goods and play an important role in trade decisions. Other empirical work has also found support for the idea that some goods do switch over time between status as traded and nontraded. Our framework sheds light on the interaction between productivity and iceberg trade costs in determining which goods are traded. Because both affect the marginal costs of goods sold abroad, they enter the decision of whether to export in a parallel manner; hence it is the net effect of the two that determines the traded status of that good. A good that is especially costly to trade may be traded nonetheless, if the productivity of that good relative to other potentially tradable goods is sufficiently high to compensate for the extra trade cost. We show that a rise in heterogeneity in either dimension along the continuum of goods will tend to increase specialization in trade and raise the share of nontraded goods in an economy. This is because the marginal exporter compares his productivity net of transport costs to the average level of other exporters, as this determines the relative price and level of demand for his export in the foreign market. Consequently, a rise in heterogeneity of either productivity or transport costs will increase the average profitability of exporting relative to that of the marginal exporter, causing the marginal firm to exit the export market. Productivity and trade costs have different effects on relative prices, such as the real exchange rate, since technology heterogeneity generates heterogeneity in prices and hence production of goods sold at home, while transport cost heterogeneity only comes into play when goods are exported. Moreover, while productivity heterogeneity affects pricing in domestic and export markets equally under standard monopolistic-competition price setting, heterogeneous trade costs creates the cross-good variations in pricing to market and deviations from the law of one price that we observe in data. Our framework also has implications for the Balassa-Samuelson proposition that rich countries tend to have appreciated real exchange rates. First, we show that since the productivities of individual goods differ along a continuum, the distribution of technology improvements must be sufficiently biased toward goods with low trade costs for the real exchange rate to appreciate. Second, the magnitude of the Balassa-Samuelson effect depends upon the degree of heterogeneity in trade costs and the degree of the underlying distinction between traded and nontraded goods. Allowing the share of nontraded goods to rise endogenously in response to a biased productivity gain tends to double the size of the effect on the real exchange rate in simulations. Our analysis is related to several other recent papers in the literature. Obstfeld and Rogoff (NBER #7777, 2000) demonstrated that introducing trade costs into simple macro models can have dramatic implications for understanding a range of open economy issues. Bergin and Glick (NBER #9739, 2003) introduced heterogenous trade costs with a continuum of goods in a small-open macro model, but with output treated as an endowment, to analyze endogenous tradability, relative price variations, and current account imbalances. Ghironi and Melitz (2003) develop a macro model in which goods can switch between traded and nontraded; further their model allows for entry and exit from production, which our model does not permit. But their model allows heterogeneity only in the dimension of productivities, whereas our focus is on the role of heterogeneity in trade costs and how this interacts with productivity differences.

This paper examines the degree of monetary policy coordination between major industrialized countries from a completely new perspective. The analysis uses a new data set on central bank issued interest rate targets for 14 OECD countries. The methodology that we use decomposes the notion of coordination into two components: (1) Do countries coordinate the timing of their monetary policy actions? and (2) Is there coordination in the direction in which targets are changed? The answers to these two questions are based on a newly developed dynamic discrete duration model (the autoregressive conditional hazard model or ACH) and on an ordered response model in event time. The results indicate there is significant policy coordination among these 14 countries during the 1980-1998 sample period in contrast to recent theoretical work suggesting that gains to coordination are small. Moreover, this coordination appears to work through channels other than documented coordination agreements.

This paper develops an intertemporal model of the current account that allows for variable interest rates and exchange rates. These additional variables are channels through which external shocks may influence the domestic current account. We test the restrictions imposed by the theory, using quarterly data from three small open economies. The paper finds that including the interest rate and exchange rte significantly improves the fit of the intertemporal model over what was found in previous studies. the augmented model produces a forecast that better matches the volatility of current account data and better explains historical episodes of current account imbalance.

This paper applies the intertemporal approach to the current account to the case of monetary shocks. A two-country dynamic general equilibrium model with predetermined wages is proposed as a means to bridge the gap between Mundell-Fleming and modern intertemporal models. Early versions of Mundell-Fleming implied that a monetary expansion must necessarily improve the current account; the alternative result became a possibility in more contemporary versions when intertemporal features were introduced into the asset market. The present model suggests that when intertemporal features are also introduced into the other markets of the economy, the model''s prediction is transformed yet further. A calibrated version of the model suggests a beggar-thy-neighbor improvement in the current account becomes unlikely for reasonable parameter values.

This paper offers an explanation for the persistence observed in real exchange rate movements. The model combines pricing to market behavior with sticky prices generated by staggered contracts. A translog preference structure is used to enhance both features. The paper finds that openness limits the degree of endogenous persistence. Nevertheless, the model under reasonable parameter values can replicate the serial correlation of real exchange rate data. Further, significant exchange rate volatility can be generated, and this is amplified by the presence of endogenous persistence.

A monetary union requires that a common central bank be shared among multiple nations, where governments and households may well be heterogeneous across national borders. A dynamic stochastic general equilibrium model of a two-country monetary union provides a natural setting in which to examine the implications of agent heterogeneity in government fiscal policies can be accommodated within a monetary union. Second, household heterogeneity gives monetary policy a reallocative dimension which affects price-level determination. For example, dissimilar preferences for holding money tend to enhance the potency of a monetary contraction to lower inflation. Fiscal federalism may reverse this effect.

This paper measures the degree of monetary policy interdependence between major industrialized countries from a new perspective. The analysis uses a special data set on central bank issued policy rate targets for 14 OECD countries. Methodologically, our approach is novel in that we separately examine monetary interdependence due to (1) the coincidence in time of when policy actions are executed from (2) the nature and magnitude of the policy adjustments made. The first of these elements requires that the timing of events be modeled with a dynamic discrete duration design. The discrete nature of the policy rate adjustment process that characterizes the second element is captured with an ordered response model. The results indicate there is significant policy interdependence among these 14 countries during the 1980-1998 sample period. This is especially true for a number of European countries which appeared to respond to German policy during our sample period. A number of other countries appeared to respond to U.S. policy, though this number is smaller than that suggested in preceding studies. Moreover, the policy harmonization we find appears to work through channels other than formal coordination agreements.

Andy Warhol the man is a difficult creature to grasp. His art, at least some parts of it, is familiar to us; so familiar, in fact, that it is becoming difficult not to think immediately of Warhol whenever we see a can of soup or an automobile accident. Yet in spite of this almost-overpowering presence or his work, Andy Warhol has managed to keep himself apart, a kind of enigma, a striking enigma, it is true, with his artificially grey hair, dark glasses and leather clothing, but an enigma nonetheless. His presence is as striking as one of his canvases, and just as devoid of a narrative sense. Warhol offers his image, his mask, for public consumption, but deprives the public of anything more. Asked about his background he once replied, “Why don't you make it up?” The remark is characteristic. It shows Warhol's unwillingness to expose himself beyond his public mask. The exact function of this image will be taken up later; but it should be mentioned now that Warhol apparently would prefer not to be thought o...

This paper develops an intertemporal model of the current account that allows for variable interest rates and exchange rates. These additional variables are channels through which external shocks may influence the domestic current account. We test the restrictions imposed by the theory, using quarterly data from three small open economies. The paper finds that including the interest rate and exchange rte significantly improves the fit of the intertemporal model over what was found in previous studies. the augmented model produces a forecast that better matches the volatility of current account data and better explains historical episodes of current account imbalance.