The mass of Albireo Aa and the nature of Albireo AB: New aspects from Gaia DR2

Aims: We aim to clarify the nature of Albireo AB and specifically to decipher whether it is an optical or physical pair. We also try to determine the mass of Albireo Aa. Methods: We scrutinize and compare the available absolute astrometric data (from Hipparcos and Gaia DR2) of Albireo A and B, and we investigate the relative orbit of the pair Albireo Aa,Ac using orbit solutions based on ground-based interferometric measurements. Results: The mass of Albireo Aa (K3 II) is surprisingly small; only an upper limit of about 0.7 solar masses could be derived. The systemic proper motion of Aa,Ac differs from that of component B by about 10 mas/year with an uncertainty of less than 2 mas/year. Albireo AB is therefore most probably an optical double. Conclusions: Specific astrometric and spectroscopic follow-up observations clarifying the surprising mass estimate for Albireo Aa are recommended.Comment: 4 pages, 3 figures, accepted by Astron. Astrophy

"Aggregate Risk in Japanese Equity Markets"

In the past decade Japanese households have been buffeted by some big aggregate shocks. Economic growth has slowed, unemployment risk has risen, and asset prices have fallen to levels not seen since the early 1980's. These shocks have hit both households' financial and human capital. This paper develops a framework for identifying the sources of these shocks and a way to measure how household assessments of these risks vary over time. We consider the perspective of a forward-looking risk-averse household and derive expected returns and time-varying risk premia for each risk factor. We then construct times-series of historical expected risk premia using Japanese data on industry returns. An analysis of this data provides four main findings. First, prior to 1984 expected risk premia on identified goods market shocks, monetary policy and financial market risk are all important determinants of industry level expected returns. Second, starting in 1984 households perceive that the risk from financial shocks is increasing and demand higher risk premia to hold this risk. Third, between 1987 and 1990 risk premia on monetary policy are large and positive. Monetary policy is perceived to be adding to financial risk. Fourth, in 1990 as expected risk premia on financial risk shoot up, expected risk premia on monetary policy shocks turn negative for all industry returns. As stock prices collapse between 1990 and 1995, monetary policy shocks play an important role in hedging risk emanating from the financial sector.

The Welfare Enhancing Effects of a Selfish Government in the Presence of Uninsuarable, Idiosyncratic Risk

This paper poses the following question: Is it possible to improve welfare by increasing taxes and throwing away the revenues? This paper demonstrates that the answer to this question is "yes." We show that there may be welfare gains from taxing capital income even when the additional capital income tax revenues are wasted or consumed by a selfish government. Previous literature has assumed that government expenditures are exogenous or productive, or allowed for redistribution of tax revenue either via lump-sum transfers, unemployment compensation or other redistributive schemes. In our model a selfish government taxes capital above a given threshold and then consumes the proceeds. This raises the before-tax real return on capital and and thereby enhances the ability of agents to self-insure when they are long-term unemployed and have low savings. Since all agents have positive probability of finding themselves in that state there are cases where all agents prefer a selfish government to no government at all.

Monetary Policy during Japan's Lost Decade

We develop a quantitative costly price adjustment model with capital formation for the Japanese Economy. The model respects the zero interest rate bound and is calibrated to reproduce the nominal and real facts from the 1990s. We use the model to investigate the properties of alternative monetary policies during this period. The setting of the long-run nominal interest rate in a Taylor rule is much more important for avoiding the zero bound than the setting of the reaction coefficients. A long-run interest rate target of 2.3 percent during the 1990s avoids the zero bound and enhances welfare.

"The Welfare Enhancing Effects of a Selfish Government in the Presence of Uninsurable, Idiosyncratic Risk"

This paper poses the following question: Is it possible to improve welfare by increasing taxes and throwing away the revenues? This paper demonstrates that the answer to this question is "yes." We show that there may be welfare gains from taxing capital income even when the additional capital income tax revenues are wasted or consumed by a selfish government. Previous literature has assumed that government expenditures are exogenous or productive, or allowed for redistribution of tax revenue either via lump-sum transfers, unemployment compensation or other redistributive schemes. In our model a selfish government taxes capital above a given threshold and then consumes the proceeds. This raises the before-tax real return on capital and and thereby enhances the ability of agents to self-insure when they are long-term unemployed and have low savings. Since all agents have positive probability of finding themselves in that state there are cases where all agents prefer a selfish government to no government at all.

Making the case for a low intertemporal elasticity of substitution

We provide two ways to reconcile small values of the intertemporal elasticity of substitution (IES) that range between 0.35 and 0.5 with empirical evidence that the IES is large. We do this reconciliation using a model in which all agents have identical preferences and the same access to asset markets. We also conduct an encompassing test, which indicates that specifications of the model with small values of the IES are more plausible than specifications with a large IES.