Bipolar Disorder: Roles of neurotransmitters and signal transduction

Bipolar Disorder: Roles of neurotransmitters and signal transduction This systematic review provides a critical insight into the biochemical aetiology of bipolar disorder. It presents an overview of the findings collected from various researches which investigate the abnormalities in neurotransmitter systems and signal transduction system. The results confirm hypothesises established in earlier theories of the causes of Bipolar disorder form pharmacological investigations. However these results are correlation, culmination of these variables and others such as environmental and genetics may influence the development of bipolar disorder. Aims, Evaluation, implications and limitations of these studies are included in this review. Bipolar disorder also known as manic depressive disorder can have a negative effect on an individuals mood, relationships, and everyday life. This disorder can affect the cognitive functions and is known to impair cognitive areas such as attention, executive functions, learning, memory and psychomotor speed. Bipolar usually develops in late teens or early adulthood but can sometimes develop early on in childhood. Symptoms usually build up later on in life. The disorder can lead to poor school performance, damaged social lives and jobs. . It affects both sexes equally in all age groups and approximately 3-5% of the general population are affected (Baldessanni, 2002). Bipolar disorder is the most rigorous forms of all mental illness and is characterized by swinging moods .The clinical course of illness can vary from a mild depression to a rigorous form of mania. The condition has a high rate of recurrence and can lead to suicide if left untreated (15% of patients) this is most likely t o occur during a depressive state. Bipolar disorder is a severely debilitating brain affective disorder which has had very little extensive research conducted on; in particular the biochemistry component of the disorder has had relatively few research studies compared to genetics. Due to its high rate of suicide and reoccurrence rate it is essential to develop effective treatment to prevent the two main problems of bipolar disorder (Shastry, Burker S, 2005). The manifestations of the symptoms are often mistaken for unipolar depression (31%) and therefore misdiagnosis of bipolar often occurs (Berk et al, 2006). Research into the neuropathological aspect paves the way for more future developments in viable treatments, which should be more tolerable for patients for this affective mood disorder, this could include improving existing drug treatments. Although Bipolar is one of the oldest known mental illness it was never classified; the symptoms were described and examined throughout history and sometimes the etiologies which were established were imprudent. Mania was seen as occurring from an excess of yellow bile, or a mixture of black and yellow bile. The theory of a link between mania and depression goes back to the 2nd century AD. Soranus of Ephedrus (98-177 AD) described mania and depression as diseases with different etiologies; however, he acknowledged that many others consider melancholia a form of the disease of mania. Depression was formally known as melancholia. In 1650, a scientist named Richard Burton determined the characteristics of depression in The Anatomy of Melancholia. His findings are still used today in the mental health field, and he is established as being the father of the study of depression.Emil Kraepelin (1856-1926), a German psychiatrist first termed the disease as manic depressive psychosis. He stud ied the disorder in untreated patients. In 1948, Dr. Cade a psychiatrist found out that Lithium Carbonate could be used as a successful treatment of manic depressive disorder. This was the first time a drug had been discovered that proved to be a successful treatment of this condition. The current term bipolar disorder replaced manic depressive disorder in 1980, and featured as diagnostic term in the Diagnostic and Statistical Manual of the American Psychiatric Association (DSM-III).Most diagnosis of bipolar disorder are based on DSM IV (2000). Due to the complexity of brain function, the aetiology and pathophysiology of the disorder is not very well understood .The debate as to whether it is genetic factors or neurobiological factors which contribute to bipolar disorder is ongoing. Genetics have been known to play a major role in aetiology of bipolar disorder from early on, however many theories suggest neurotransmitter dysfunctions in depression, and therefore maybe the best explanation to finding the cause of Bipolar disorder would be to investigate a chemical basis of the disorder, as this review will examine. The pathophsysiolgy has recently been overtaking research on genetics of bipolar disorder. It would be essential to study the same neurotransmitters which have implicated in cause of depression and the areas affected by medications which alleviate symptoms of manic-depression (Ackenheil, 2001). Theories about neurotransmitter abnormalities in bipolar disorder have been created by experiments which have been created by experiments studying the effects of pharmacological treatments. Lithium was first used 40 years ago to treat bipolar disorder, studies on the effects of lithium, its target and mechanism of action on bipolar patients have indicated mostly monoamine neurotransmitter abnormalities are involved behind bipolar disorder however even though large amounts of research on neurotransmitter abnormalities have been conducted the aetiology of bipolar is far from completely understood. Many patient are unaffected by lithium, this shows that bipolar disorder may have more than one cause maybe this accounts for the various symptoms involved in this disorder. Many models focus on one neurotransmitter or neurotransmitter system as the case of bipolar disorder however these models cannot be sufficient enough to explain the array of symptoms. A valid general theory has to consider opposite effects of activity of neurons leading to the cycle of mood states, this could be a system involving the releases of transmitters, abnormality in cerebral activities or a regulatory protein involved in the interaction of various systems on levels of signal transduction. The debate above provides the basis for this review. To understand the neurochemistry of bipolar disorder the molecular and cellular systems have to be determined. This literature review is organized around the signal transduction pathways and central neurotransmitter systems and convergence of these areas to provide an insight into the pathophysiology of bipolar disorder. Neurotransmitters involved in this review are serotonin, dopamine and noradrenalin. The neuroamine exert their action through postsynaptic receptors which are coupled to Guanine nucleotide binding proteins (G proteins). This is the main part of the intracellular signalling mentioned in this review. Other systems which have also been studied are sodium and calcium transport, disturbances in these systems have been implicated in the physiology of bipolar disorder, although this topic is beyond the scope of this review and there is relatively little research compared to G coupled proteins and cyclic AMP system, Given this, and the authors own personal interests, it was decided to focus on G coupled proteins and cyclic AMP system and the other main pathway phosphoinositide. 3. Aims This literature review aims to provide a critical evaluation of the research investigating the structures and circuits involved in the aetiology of bipolar affective disorder. Initially neurotransmitters and signal transduction will be examined and outlined by introducing the most popular and widely-used theories associated with the development of bipolar disorder and explain by what is meant by bipolar. Following this a search protocol is included: an explanation of how the reviewed articles were sourced and analysed. After which will follow a comprehensive review of the studies found in the search about how each neurotransmitter and signal transduction affect bipolar disorder. Also the disagreements and contradictions in the literature will be discussed. The implications and limitations of these findings of the studies found will then be considered and topics for future research presented. 4. Bipolar Affective Disorder 4.1. Diagnostic Criteria There are two types of bipolar disorder; Bipolar I and Bipolar II. Bipolar II consist of symptoms which are not as severe or prolonged as Bipolar I. The criteria for bipolar disorder is complex and is separated into six criteria sets theses are: single manic episode, most recent episode hypomania, most recent episode depressed, most recent episode mixed, most recent episode depressed and most recent episode unspecified. The table below summarizes the main DSM-IV classification (4th edition) criteria for the diagnosis of bipolar I and bipolar II disorder. Table 1 DSM-IV category Criteria Bipolar I Presence of one or more manic or mixed episodes, current or most recent episode: accompanied by one or more depressive episodes .Severe: with psychotic features In partial or full remission: With catatonic features With postpartum onset Current or most recent major depressive episode: significant distress occurs. Depressive state occurs more frequently then mania. Bipolar II No history of manic episode, not as severe as Bipolar I. Characterised by at least one hypomanic episode and depressive episode 4.2. Major depression Depression can distort an individuals way of thinking about themselves, their lives and of other people around them. Individuals who are diagnosed with depression tend to have higher negative views and fail to see the positive in any situation. Depression can also occur as anger. If episodes of low or depressed mood and a decrease in energy, activity, interest, or pleasure occur for two weeks the individual is diagnosed as major depressive ( DSM IV, 2000) 4.3. Mania Mania is the abnormal elevation of emotions, usually occurrence of irritable mood, inflated self esteem and may feature delusions or hallucinations (psychotic symptoms) when symptoms are less severe the patient is experiencing a hypomania episode. Mania can manifest itself in many forms. The DSM-IV splits the severity of mania symptoms into further subgroup for accurate diagnosis: Mild: symptoms barely meet criteria for an episode of mania. Moderate: There is a high increase in either activity level or impaired judgment. Severe without psychotic features: The patient requires continuous supervision to prevent physical harm to self or to others. Severe with psychotic features: The patient has delusions or hallucinations which may be mood-congruent or mood-incongruent. The table below summarises the symptoms of mania and depression Table 2 Mania Depression Need for sleep is decreased Increased talkativeness, pressure to keep talking, hyperactiveness Flight of ideas may be erratic- raving thoughts Incomprehensible speech Excess involvement in pleasurable activities e.g. impulsive sex- potential for painful consequence Having unrealistic beliefs in abilities Increasingly involved in goal relative activities, starting new projects Feeling constantly tired Having problems concentrating, remembering, and making decisions Lack of pleasure in activities Negative thoughts Being restless or irritable Changing eating, sleeping, or other habits (excess sleep usually occurs) Contemplating death or suicide, or attempting suicide. An individual with hypomanic episodes may have increased energy although the symptoms are not as severe as typical mania, the symptoms may come in episodes that last less than a week, do not require hospitalisation and will not be classified as full blown bipolar disorder I. A person having a hypo manic episode may feel they are on a high, be extremely productive, and function well. The individual may not perceive their behaviour as abnormal although these mood swings may be apparent to friends and family members. Without treatment, however, individuals with hypomania may develop severe mania or depression. 4.4. Definition issues Very few patients with bipolar alternate between episodes with pure mania or pure depression, many however have a variety of patterns and are regularly in a mixed state and rapid cycling between mania and depression occurs. Some experience months of depression followed by months of mania, some can swing states in a matter of hours (Berk et al 2005) this is usually defined as bipolar spectrum and can complicate diagnosis. There are unclear boundaries which can limit the selection of appropriate treatment. Accurate diagnosis on basis of clinical interviews may not be possible as many patients at the time of interview are in one phase. The psychotic symptoms reflect the persons extreme mood. For example, if a person is having a manic episode he/she may experience psychotic symptoms such as believing he or she is famous, has a lot of money, or has special powers which may make them invincible , this can be quite dangerous and can lead to death( Bauer, Michael et al, 2002). On the other h and, a person experiencing a depressive episode may believe he or she is ruined and penniless, or has committed a crime which in turn can lead to suicide. Due to these psychotic symptoms in individuals with bipolar disorder are sometimes wrongly diagnosed as having schizophrenia, another severe mental illness that is associated with hallucinations and delusions. People with bipolar disorder may also have other behavioural problems. Many turn to alcohol or substances, others tend to have attention deficit hyperactivity disorder (ADHD) or post traumatic stress disorder (Strakowski S.M. et al, 1998) so initially its not easy to recognize these problems as signs of a major mental illness. Individuals with Bipolar disorder sometimes go through states where they exhibit minimal symptoms however they still have the vulnerability for mood deregulation, this state is called euthymia (Strakowski et al.2004). There are no separate criteria for diagnosis of children although it has been stated that bipolar disorder in children is slightly different from bipolar in adults. 4.5. Treatment The treatment for Bipolar I Disorder is usually lifelong therapy with a mood-stabilizer this can be Lithium, Carbamazepine, or Divalproex / Valproic acid often in combination with an antipsychotic medication. Many of these medications are anticonvulsants except for lithium. Anticonvulsants medications help control moods although are usually used to control seizures. An antipsychotic medication and/or a benzodiazepine medication are often added to the mood-stabilizer in mania. In depression, Quetiapine, Olanzapine, or Lamotrigine is frequently taken with the mood-stabilizer. Alternations occur between medications, in depression, the mood-stabilizer is sometimes substituted for another mood-stabilizer, or in some cases two mood-stabilizers can be used together. Occasionally, antidepressant medication is used in depression. However as antidepressant medication can trigger mania, antidepressant medication is always taken in combination with a mood-stabilizer or antipsychotic medication t o prevent mania (Ackenheil, 2001). Research has shown that the most effective treatment for bipolar disorder is a combination of supportive psychotherapy, and the use of a mood-stabilizer and antipsychotic medication (Miklowitz D.J. 2006) 5. Monoaminergic Neurotransmitter systems 5.1. Serotonergic system Serotonin pathways originate in the raphe nuclei and project throughout the cerebral cortex. Serotonin is known to interact with the other neurotransmitters, it modulates different neuronal activities, Serotonin triggers sleep wake cycles, mood and emotional behaviour; deficiency can lead to migraines (Birkmeyer, W. and P. Riederer, 1989) this neurotransmitter increases the threshold for pain, reduces arousal functions, hyperactivity results in improved appetite, weight increase, an increased urge to sleep, lowered consciousness, slower thought processes, and lack of drive, most of which have been shown to be symptoms of depression in bipolar disorder. Serotonergic cell bodies originate mainly in the upper Pons and the midbrain-specifically, the median and Dorsal raphe nuclei, the Candal locus ceruleus, the Postrema area, and the inter peduncular area. These neurons project to the basal ganglia, the limbic system, and the cerebral cortex. (Kaplan et al. 1994). 5.2. Noradrenergic system The Noradrenalin (NA) system originates in the locus coeruleus, lateral tegmental area in the brain stem and projects diffusely through axonal pathways to the cortex, amygdale and hippocampus, in the CNS it is involved in a wide range of neurological and psychological functions, which include cognition, attention, emotion, and memory formation (Robbins and Everitt 1995, Moore and Card 1984). Activation of NA neurons increases cellular responsiveness to sensory information as inhibition of the background activity of the target neurons occurs and also increases the selectivity of the responses to relevant stimuli (Foote et al 1983). NA is also involved in the fight or flight reaction. NA changes the efficiency of the excitatory and inhibitory synaptic transmission in particular neurons although it is dependent on the subtypes of adrenergic receptor (AR) and secondary messengers (Dohlman Et al 1991). 5.3 Dopamingenic system There are eight major dopaminergic pathways in the brain. The three main pathways originate from the midbrain, they are as follow: Mesolimbic pathway-consists of a bundle of dopaminergic fibres which are associated with the reward circuit. This pathway develops from the ventral tegmental area and innervates various formations of the limbic system, which include the nucleus accumbens. The mesolimbic pathway is involved in memory and is important for motivating behaviours. Mesocortical pathway also originates in the ventral tegmental area, although also projects to the frontal cortex and surrounding areas. Dysfunction in this pathway might be the cause of some of the symptoms such as hallucinations and disordered thinking in bipolar disorder. Medications used to reduce psychotic delirium block this pathway, and also reduce the overall activity of the frontal lobes. Tuberoinfundibular pathway- is located in the hypothalamus and releases dopamine into the portal vessels thus regulating the functioning of the pituitary. These distributed pathways are responsible for behavioural areas such as impulsivity and attention, reward seeking, emotional processing, working memory, and other executive functions. The actions of the neurotransmitter dopamine are usually connected through G-protein-coupled receptor slow transmission, which in turn modulates fast neurotransmission in glutaminergic and GABA- ergic neurones. There are two types of dopamine receptors D1-type and D2-type. D1-type receptors (D1 and D5) are mostly coupled to Gas and then stimulate the production of the second messenger cyclic-AMP (cAMP), whereas D2-type receptors (D2, D3, and D4 included) are coupled to Gai à ¢Ã‚ Ã¢â‚¬Å¾ o and decrease the production of cAMP and related downstream pathway. The various types of dopamine receptors are diffused throughout different areas of the brain (Greengard P. 2001) 6. Signalling transduction 6.1. G- Coupled proteins and Cyclic AMP system G-proteins are an important component of the intracellular signalling pathway; they interlink receptors in the membrane to the different intracellular effecter molecules which in turn produces responses. G-proteins are made up of 3 sub units: an a subunit which binds and hydrolyzes guanosine triphosphate (GTP) these can be further divided into subunits of Gas, Ga, Gaq, Gao and b and g subunits which are firmly bound to one another. Various combinations of protein structures can be established out of these subunits thus creating a number of receptors for different or similar signal transduction systems. Small changes in the subunits of the G proteins can highly alter the order of events in signalling from receptors to the intracellular targets (Birnbaumer L, 1992, Spiegel et al., 1992) These G-protein coupled receptors stimulate or inhibit mainly two second messenger systems: cAMP and Phosphoinositol After receptor activation, G-proteins connect to various effectors (enzymes). This pathway involves coupling of G protein (inhibitory or stimulatory) sub units to enzymes for example adenyl cyclase (AC). Different forms of the enzyme AC catalyze to produce cAMP this is via adenosine triphosphate (ATP).cAMP controls cellular functions such as metabolism and gene transcription.As cAMP degrades quite quickly in the brain by phosphodiesterase binding of cAMP to another enzyme cAMP-dependent protein kinase (as protein kinase A) is used as an indirect measurement of cAMP. This enzyme is critical for connecting any short term changes in neurotransmitter signalling to long term neurobiological changes (Beavo J.A, 1974, Scott JD, 1991). 6.2. Phosphoinositide (PI) Pathway Another signalling path way involved in the coupling of neurotransmitter receptors is phosphoinositide , this pathway involves the phosphatidylinositol-specific phospholipase (PLC) enzyme, and the G-protein subtypes Gq/G11, (Perez et al ,2000) Hydrolization of inositol-containing phospholipid phosphatidylinositol 4, 5-bisphosphate (PIP2) to two important second messengers: 1, 2-diacylglycerol (DAG) and inositol 1,4,5-triphosphate (IP3) is induced by the activation of the receptors which stimulate PLC (Smrcka et al 1991). Inositol monophosphate (IP) is made by conversion of IP3. IP is then again converted into inositol which is then available for resynthesis of PI. Lithium decreases the level of inositol in the brain, it blocks the conversion of IP to inositol by interfering with inositol monophosphate phosphatise conversion of IP to inositol. 7. Theories There have been a number of theories of depression and mania separately. The main neurotransmitter system implicated in the development of bipolar disorder is the serotonin system and is still the most widely studied system; however there is evidence suggesting that other neurotransmitter systems also play important roles (Barros et al. 2002). The biogenic amine theory of depression (Bunney and Davis 1965; Schildkraut 1965) is based upon a link between pharmacological alterations (medications taken by Bipolar patients) of monoamines and modulation of affective disorders. Decreasing amine neurotransmitters (noradrenalin (NA) and serotonin (5-HT) in the synaptic clefts) leads to an increased incidence of bipolar affective disorder. Another theory suggests that antidepressants alter the concentration of neurotrophic factors which are essential for neuronal survival (Duman et al, 1997; Duman, 2002). Although recently it has been suggested that instead of being a simple case of depletion in some crucial cerebral transmitter; concentrations depression may be the result of a disturbed balance between various regulatory systems, which may lead to transmitter over activity in some brain regions (Syvà ¤lahti 1994). Another hypothesis by Harro Oreland (1996) the neurobiological aetiology of depression may lie in the alteration of the noradrenergic innervations from the locus coeruleus, which, in turn, may lead to dysfunction of serotonergic and dopaminergic neurotransmission. Theories associated with the Multicomponent, cellular signalling pathways suggest that the interaction at various levels is important, which form complex signaling networks essentially allowing the cell to obtain, process, and respond to information (Bourne HR, Nicoll R,1993, Weng G et al, 1999). The cascades of signals are assisted by these networks in a matter of milliseconds, they are crucial for physiological processes as they can alter the strength and duration of outputs and feedback. Thus abnormalities in these pathways may have variety of affects in different neurological disorders (Bhalla U.S. 1999). Patients treated with antidepressants have increased activation of cAMP system in particular regions of the brain. This causes the high expression rate of the transcription factors that are involved in this system (cAMP response element binding protein- CREB) which leads to the increased expression of neutrophic factors in hippocampus and cerebral cortex neurons theses neurotrophic factors are essential for survival and functioning of certain neurons these studies have lead to the molecular and cellular theory of depression. 8.Method 8.1. Search protocol A breakdown of how the search was conducted is presented in Figure 1 below: Less detail Level of detail in search more detail Start Time of search finish Keywords Bp = Bipolar Disorder S= Serotonin D= Dopamine N= Neurotransmitter ST= Signal Transduction NA= neuroadrelaline GP= G proteins PI= Phosphoinositide cAMP= cAMP pathway 8.2. Selection method Articles were searched on several journal databases these included web of knowledge, Science Direct and Medline. Key words were chosen to assist with the search. Key words included: signal transduction, neurotransmitters, bipolar disorder, mania, serotonin, dopamine, noradrenalin and depression. Articles were selected by at first by reading the abstract and deciding whether the article was directly answering or related to the review question. If this link was established, the article was considered as having passed the first stage of screening Once all databases had been searched for those articles that passed stage one screening, further analysis was carried out. Articles werent excluded on basis of country of origin or date of publishing. Many studies incorporated different factors for example 8.3. Articles excluded Certain articles which were found within the search protocol were not included in this literature review. There is a large amount of literature investigating the genetic links to neurotransmitter receptors and bipolar disorder that purely focused on this factor although articles that purely focused on this factor were not included in the review. 9. Findings Direct and indirect methods which have been used in the studies include: brain studies, CSF studies, platelet studies and psychopharmacological have all been included in this review as it is difficult, to measure the chemical and physiological activity within the brain in vivo. Peripheral lymphocytes share many common characteristics with neuronal cells thus considered suitable models for testing various hypothesises. Lymphocytes have various neurotransmitter receptors on their cell membrane 9.1.Neurotransmitter studies Noradrenergic system has been shown to be involved in the pathophysiology of bipolar disorder. In depressive states, noradrenergic system has under functioned these results from these studies are taken from indirect measurements of noradrenalin metabolism in body fluids. Measuring desmthylimipramine, the growth hormone secretion shows estimate activity of noradrenergic neurons in the brain (Laakmann et al 1990). Abnormalities in the level of noradrenalin in plasma of patients has been observed which support the hypothesis that this neurotransmitter is involved in the aetiology of bipolar disorder , in subjects with mania the concentrations of NA has been increased ( Manji, Lenox, 2000) also the metabolite of noradrenalin (-methoxy-4-hydroxyphenylglycol -MHPG) has been established to be higher concentration in the urinary and cerebrospinal fluid of mania state than in depressive state ( Goodwin et al, 1990, Bowden CC 1997, Schatzberg AF et al 1995, Manji et al 1997). These were all longitudinal studies and therefore had higher validity compared to studies only examining one state of mood in bipolar disorder. Higher values were also noted in unipolar depression compared to bipolar depression (Goodwin FR, Jamison KR 1990, Manji et al 2000). Lower noradrenalin output and altered sensitivity of a2 receptor activity have been discovered in depressive states this has been indicated by the lowered growth hormone response to clonindine leading to a decrease in noradrenalin activity compared to in maniac state where noradrenalin release is increased (Delgado, 2000; Manji Lenox, 2000). Increased levels of a2 receptors in the hypothalamus, amygdale, hippocampus and cerebellum have also been reported (Delgado 2000, Young et al 1994, Vawter M.P et al 2000,). Another group of studies on serotonin and serotonin metabolism have shown that a lower concentration of the serotonin metabolite 5-hydroxyindoleacetic acid (5-HIAA) was found in bipolar disorder patients, particularly in aggressive bipolar patients and those who have attempted or contemplated suicide but were raised in patients with mania (Manji Lenox, 2000, Traskman et al 1981, Swann et al 1983, Asberg et al, 1984). Smaller numbers of serotonin uptake sites were also found in post mortem brains of depressed individuals with bipolar disorder ( Leake et al, 1991) other drug studies on Tryptophan, an essential amino acid on which serotonin synthesis is dependent on have established that prescribing tryptophan to patients with depression may sometimes result in the reversal of the therapeutic effect of selective serotonin re-uptake inhibitor administration and depression may reoccur, this suggests that serotonin levels in brains of bipolar disorder patients may not be the only cause of this disorder. Extensive results from CSF experiments, serotonin receptor and re uptake site binding studies, pharmacologic studies have been achieved which support the theory that alterations of serotonergic neurotransmission in depressive states occur (Goodwin et al 1990, Maes et al 1995, Garlow et al 1999). In studies of CSF 5-HIAA in patients with bipolar disorder in mania episode has generally produced inconsistent and conflicting results (Goodwin 1990, Shiah et al 2000). Most studies found no difference in levels of CSF 5-HIAA levels between depressed state and manic state, two reported both manic and depressive states have lowered CSF 5-HIAA levels and one reported manic have significantly lowered levels of CSF 5-HIAA compared to control subjects. More research in this area needs to be conducted in order to achieve consistent results (Goodwin, 1990). Maes et al (1995) and Garlow et al (1999) researches found decreased concentration of radioligand binding to the serotonin transporter which is involved in taking up serotonin from the synaptic cleft. These results were found both in platelets and mid brain of depressed subjects. Positron emission tomography (PET) studies have also reported decreases in 5-hydroxytryptamine (5- HT)1A receptor binding potential in the raphe and hippocampus and amygdala of the brains of depressed patients, especially in patients with bipolar and in unipolar patients with history of bipolar in their family, indicating a genetic link ( Drevets, 1999) To produce a more direct measurement of serotonergic system function neurotransmitter depletion models are used in the case of bipolar disorder tryptophan depletion to lower serotonin levels is used. Serotonin synthesis is dependent on Tryptophan, an essential amino acid. Depletion of tryptophan is created by the Australia: Inflation, Balance of Payment and Monetary Policy Australia: Inflation, Balance of Payment and Monetary Policy What is the main measure of inflation movements in Australia and what does it represent? CPI refers to the Consumer Price Index and is used as the primary measure of inflation movements within Australia over time. CPI can be defined as a measure of how the prices of goods and services change over time. It is a measure of overall cost a typical consumer pays for the purchase of goods and services. A larger increase in CPI represents an inflationary trend in the economy and decrease in CPI shows deflationary situation. It also helps in comparing the inflation patterns with other countries of the world. CPI can be calculated using the following formula: Inflation refers to the persistent rise in the general price level in the economy. Rising inflation negatively affects the purchasing power of a typical consumer, therefore, a typical family has to spend more to maintain his existing standard of living. We can estimate the rate of inflation in the following way: Where: refers to Inflation rate in the current financial year. refers to CPI in the preceding financial year. refers to CPI in the current financial year. CPI is considered as a benchmark inflation guide for the Australian economy The balance of payment is a record of monetary transactions between Australia and the rest of the world- it is made up of two accounts. What are the names of the accounts and what do they measure? Balance of payment keeps track of inflow and outflow of money from the economy of a country. It consist of two main accounts:- Current Account Capital Account Current Account The current account measures trade flow in and out of the country. In other words, it represents country’s exports and imports. It consist of following three components. Trade in goods and services Net Foreign Income Current Tranfer/Foreign aid Trade in Goods and Services The most important component of the current accounts is the balance of trade showing the country’s imports and exports of goods and services. If exports are larger than imports, it is a balance of trade surplus and if exports are fewer than imports shows a balance of trade deficit. Net foreign Income If local companies or individuals of a country (let say Australia) purchase bonds and stocks in other countries, the money will come into the country in the form of interest and dividend payments and will add to the net foreign income. On the other hand, the money that leaves the country in the form of interest payments and dividends to foreign investors, royalties paid by the subsidiaries (located in Australia) to their overseas head offices decreases the total net foreign income. Current transfer / Foreign Aid Grants/ donation and workers (foreigners) send money to their home countries. Current Account Surplus and Deficit Current account surplus means that country is earning more than spending or in other incoming money (credits) exceeds outgoing money (debit). It means the country has more money to lend to other countries. Whereas, the current account deficit shows that the spendings of a country are higher than income/earnings. Capital Account It tracks the movements of funds for investment into and out of the country the capital account consist of four main components such as: Direct investment: Portfolio Investment Government Capital Official Reserve Direct investment: It refers to the foreign direct investment when the investor acquires ownership and control over these assets. Portfolio Investment It represents money that flows into and out of the country for the purchase of financial assets like stocks and bonds, whereas, the payment of the dividends and interest from these foreign investments will be the part of the current account and will not be counted towards capital account. Government Capital It refers to the Government borrowing from and repayments to overseas countries. Official Reserve The net foreign exchange transactions of central banks. Capital Account Surplus and Deficit The capital account surplus means more inflow of foreign capital into the country in the form of investments and the capital account deficit shows outflow of foreign capital from the country for investments compared to the domestic investment. A capital account surplus is usually being balanced by the current account deficit and vice versa. Together, these accounts constitute Balance of Payment (BOP), because of their offsetting nature the complete understanding of these two accounts is crucial for traders. How does the Reserve Bank of Australia, Institute monetary policy? Reserve Bank of Australia (RBA) was constituted under the Reserve Bank Act 1959, and is responsible for preparation and carrying out of monetary policy. By definition monetary policy has been a process by which the monetary authority holds the provision of money, often targeting interest rates to achieve economic targets of low inflation and long term growth stability. Objectives of Monetary policy In setting monetary policy RBA is responsible to maintain the pursuit: Stability of Australian currency Full Employment Economic Prosperity and welfare of the people of Australia. In order to achieve above mentioned objectives, the Reserve Bank of Australia sets a targeted official cash rate (interbank overnight rate). The cash rate adjustments influence the other interest rate in the economy, expectations of community, exchange rate and ultimately involve the pace of rising prices (inflation rate). The appropriate target inflation rate agreed by RBA and Govt is at 2 to 3 percent on average over the cycle, as this rate will not materially affect the spending and investment patterns in the economy. As monetary policy is a means of influencing the economy by controlling the supply of money. By Act of Parliament RBA can manage the quantity of circulation of money through changing cash rate, buying and selling Govt securities and by making changes to statutory reserve deposits. The RBA usually meets once in every month, examine the health of the economic system as a whole and by reviewing the checklist of different economic indicators both domestic and international to decide on their monetary policy. Any decision/changes needed at the conclusion of the meeting, then communicated publicly. There are two types of monetary policies which are as follows: Expansionary monetary policy: It stimulates production and employment through an increase in the supply of money on credit in the market. The RBA can implement this policy by decreasing the cash rate or lowering reserve requirements in order to promote borrowing and spending in the economy. Small businesses often benefit with the execution of the expansionary monetary policy, but it has some drawbacks like decrease in value of currency, raise in inflation, output shortage, higher demands of wage etc. The objective of the RBA is to balance the available money to interest rate in order to ensure expansionary effect on the economic system. Contractionary Monetary policy: The primary aim of this type of policy is to draw out money out of the economic system to prevent the rising prices, decrease consumer spending and increase the value of currency. The activities through which RBA tightens monetary policy includes decreasing the official cash rate or by increasing the reserve requirements from other banks make it harder for consumers and investors to borrow money and persuade them not to drop more money. A monetary contraction further stabilize the prices of goods as inflation goes down. This policy slows down production because there is reduce demand for their products. An investor can also plan to cease planned expansion and this may cause unemployment in the future. What are the implications of rising or high inflation? In simple language inflation means an overall increase in prices of goods and services in the economy or decrease in the purchasing power of money over time. Inflation is caused by an increase in demand for commodities and services strongly outweighs the supply of commodities and services in the economy. Inflation rate can easily be calculated on monthly or yearly basis by applying the CPI. Inflation rate in Australia as reported by the Australian Bureau of Statistic is 2.9% in the first three months of 2014, up from 2.7 percent in the previous quarter but still it is below market forecasts. This cost increase was primarily due to seasonal increases in the cost of health care, school fees, transport and by large increases in tobacco duties. Impact of High Inflation on the Economy: High inflation is harmful to the economy as it moves in many ways such as: Distort Consumer Behavior: Consumer purchases their future required goods in advance because of the fear of price increase this can create a sudden shortage of goods in the market. Higher Wage Demands: Prices increase lead to higher wage demand as the fixed income earners require more money to keep their previous living standard. This process is called wage-price spiral. Greater Uncertainity: During inflation, rapid fluctuation in inflation rate can undermine business confidence. As it makes difficult for business organizations to accurately determine prices for their products and their returns from investment i.e. budgeting and investment valuation become difficult Firms may postpone their investment expansion because of lower consumer spending and this will adversely affect the economic growth in the economy. Savings Decrease: At high inflation times, people spend more money to keep their previous living standard therefore least amount they keep. As savings in the economy decrease less loanable funds are available for the firms to invest. Unemployment Rise: When the firms decide to curtail their current production or lay off their planned expansions they will not hire more workers this leads to lower job opportunities available in the economy. Damage to Export Competitiveness: Due to high inflation, the production cost of goods rise and their export will become less competitive in the international marketplace. This has an adverse result on the Balance of payments. Social Unrest: High inflation lead to a general feeling of discomfort for households as their purchasing power is falling and they have to postpone many of their desires. Hoarding in Economy Increase: Rapid increase in prices can sometime result in hoarding of basic commodities to gain more profit margins. What is the main economic indicator of growth in the economy? Economic indicator shows in which the direction of the economy is going. There are three primary types of economic Indicators i.e Leading, Coincident and Lagging indicators. In monitoring the economic growth and health, Govt, reserve bank (RBA) and other economist not only observe one indicator, simply stick with a large no domestic and of key economic indicators like inflation, GDP, inflation, Employment, wages, consumer an international d investment spending, interest rate, Balance of payment, Exchange rate etc. But the most comprehensive measure of economic performance is GDP (Gross Domestic Product). It is the best measure as it includes the output of all sectors and gives overall performance of the economy. It is likewise applied to evaluate the quality and success of Govt policy to attempt to attain the target economic growth. GDP by definition is the total value of all final goods and services produced in a country within a year. There are two methods normally applied to calculate GDP: Expenditure Approach Income Approach Expenditure Approach:- The total amounts spent on the goods a and services produced in a nation by households, firms, Govt and foreigners. Households consumptions (C) include all spending for the consumption of goods and services, business firms also consumes product in the form of investment (I) in capital goods. Capital goods means the tools and technology firms purchase to use in the production. Govt also consume products in the form of infrastructure goods (roads, bridges), services like education (public schools), health care (old age/poor persons medical coverage). Foreigners when purchase our nations goods (X) it increase GDP in the form of and when our other nation purchase other countries (M) products it decreases nations GDP. The formula to calculate GDP by expenditure Approach:- GDP = C + I + G + ( X – M ) Income Approach In an economy in different ways, such as rentals (Land), Wages depending on skilled /unskilled Capital income (Interest income from their savings at banks or other savings institutions) and in of profits from managing their own businesses (Enterpreurship). If we add all these types of incomes, we get the total of the nations income. The formula to calculate GDP by income approach is given below. GDP = Rentals (R) + Wages (W) + Interest (I) + Profits (P) For the economy as a whole total Income is equal to total expenditure because every dollar spend by a buyer is a dollar income for a seller. The limitations of using GDP as economic indicator:- GDP does not count for volunteer work which people do freely. People work freely in schools, hospitals etc.. GDP didnt include the effect of rebuilding after a natural disaster or war. Rebuilding increase the GDP. GDP does not consider the quality of goods. The consumer may go for cheap/low quality goods instead of expensive one this may lead to repetitive buying as of low quality aspect. More buying pattern affects the affect the GDP. Nevertheless despite of its few limitations economist uses GDP as to assess whether the purchasing ability of the nation increase / decline in the economy and also to quantify the relative growth, wealth and prosperity of different countries.