bluuebunny/crossref_metadata_2025 huggingface dataset:
Central Bank preferences and monetary rules under the inflation targeting regime in Brasil
Authors: Aragón Edilean Kleber da Silva Bejarano , Portugal Marcelo Savino
Published: June 2016

The estimated interest rate rules are reduced form equations and for that reason they do not directly reveal anything about the structural parameters of monetary policy. In this paper, we seek to further elucidate the Brazilian monetary policy under the inflation targeting regime by calibrating Central Bank preferences. More specifically, we calibrate the policymaker’s loss function by choosing the preference parameter values which minimize the deviation between the optimal and actual paths of the basic interest rate (Selic). Our results indicate that the Central Bank has adopted a flexible inflation target regime and placed some greater weight upon inflation stabilization. We also find out that the monetary authority’s concern with interest rate smoothing has been far deeper than with output stabilization
Political Economy and Tenure of Coaches in Brazilian Soccer
Authors: Rocha Bruno de Paula , Sanches Fábio A. Miessi , Souza Igor Viveiros , Da Silva José Carlos Domingos
Published: June 2016

In this paper we built a model of political economy to explain the tenure of coaches in Brazilian soccer. According to the model, a club’s board of directors maximizes its reputation by choosing the grade of the technical committee. Then, based on data from the Brazilian National Soccer League, we used coaching continuity as a proxy for the grade variable and duration analysis techniques to test the model’s propositions. According to the empirical analysis, and in line with the theoretical model, a coach’s performance is key to determining his continuity at a club. This model allows us to identify a parameter that gives, literally, the effect of the club’s performance upon the supporters’ perception about the board’s work. This parameter is an important determinant of the stability of a coach in charge of a soccer team.
Labor Supply, Criminal Behavior and Income Redistribution
Authors: Dos Santos Marcelo Rodrigues
Published: June 2016

This paper develops an overlapping generations model of criminal behavior, which extends prior research on crime by taking into account individuals’ labor supply decisions and the stigma effect that affects convicted offenders, lowering their likelihood of employment. I use the model to guide a quantitative assessment of the determinants of crime and of a counterfactual experiment in which an income redistribution policy is thought of as an alternative to greater law enforcement. The model economy considered in this paper is populated by heterogeneous agents who live for a realistic number of periods, have preferences over consumption and leisure, and differ in terms of their age, their skills as well as their employment shocks. In addition, savings may be precautionary and allow partial insurance against the labor income shocks. Because of the lack of full insurance, this model generates an endogenous distribution of wealth across consumers, enabling us to assess the welfare implications of the redistribution policy experiment. I calibrated the model using the U.S. data for 1980 and then used the model to investigate the changes in criminality between 1980 and 1996. The main results of this study are: 1) Law enforcement policy was the the most important factor behind the fall in criminality in the period, while the increase in inequality was the most important single factor promoting crime; 2) Stigmatization is not a free-cost crime control policy; 3) Income redistribution can be a powerful alternative policy to fight crime.
Social Security and Rural Poverty in Brazil
Authors: Assunção Juliano J. , Chein Flávia
Published: June 2016

This paper investigates the effectiveness of the social security system as a rural antipoverty policy. The source of econometric identification is a Brazilian legislative change implemented in 1991 that reduced the minimum eligibility age, increased the benefits, and extended the participation to non-head of the household members. Our findings indicate that the reform has reduced the incidence of poverty by 40% in eligible households.
Labor Adjustment Dynamics in Brazilian Manufacturing
Authors: Gonzaga Gustavo
Published: June 2016

In this paper we investigate the dynamics of labor adjustment at the firm level in Brazilian manufacturing, using information on average hours per worker to measure employment deviation from desired levels as in Caballero, Engel and Haltiwanger (1997). We use Brazilian manufacturing data at the establishment level and monthly frequency. The objective is to estimate the employment adjustment function, which relates the magnitude of employment changes to the size of employment gaps. The empirical results point to the presence of nonconvexities in employment adjustment costs in Brazilian manufacturing, with estimated employment adjustment rates increasing with the size of employment gaps. On average, employment adjustment rates range from 10% for small employment gaps to 35% for large employment gaps. The results also show that there is a large proportion of firms in the sample that do not adjust employment over two consecutive periods. We run several robustness tests with alternative ways of estimating the employment gaps, using other forms of dealing with measurement error and a problem of endogeneity of the hours change variable. Although the magnitudes of employment adjustment rates vary, we show that: i) the variations are in line with the expected directions of the biases in estimating the coefficient of the hours change variable; and ii) the format of employment adjustment functions do not change across specifications, always revealing employment adjustment rates increasing with the size of employment gaps, which is compatible with nonconvex costs of employment adjustment. We also study how the employment adjustment function varies by several establishment characteristics, such as skilled-labor intensity, size, payroll expenses, and overtime payments. We show that the employment adjustment function tends to have a higher mean and to display larger values when measured for establishments with characteristics that are arguably related to lower costs of employment adjustment: larger proportion of low-skilled workers, smaller size and lower overtime payments.
From a Miracle to a Disaster: the Brazilian Economy in the Last 3 Decades
Authors: Gomes Victor , Teixeira Arilton , Bugarin Mirta Sataka , Ellery Jr Roberto
Published: June 2016

After showing a persistent and high growth rate since the World War II, in the beginning of the eighties the Brazilian growth rate of per capita GNP fell abruptly. In this paper we ask if this fall can be explained by the behavior of technological progress (measured by Total Factor Productivity or TFP). We study the period between 1970 and 1998. We divide this period in two sub-periods. In the first, the seventies, per capita GNP grew at 5.05% a year. In contrast with per capita GNP, TFP grew only until 1974, declining in the rest of the decade. After 1974, the growth rate of per capita GNP was sustained by an increasing investment as a share of GNP due to the increase in public (government plus state-owned firms) and private investments sustained by government subsidies that went from 1% to 4% of GNP in the second half of the seventies. In the second sub-period, the eighties and nineties, both TFP and per capita GNP decreased until 1993, increasing thereafter. We also find in thesecond half of the eighties that investment share was increasing while TFP was decreasing. In this second case it went up mainly as a result of the higher cost of capital relative to consumption. Our main conclusion is that the behavior of the technological progress can fairly describe the dynamics of the Brazilian economy during the period under study.
Stochastic Convergence Across Brazilian States
Authors: Mello Marcelo
Published: June 2016

We analyze the dynamic properties of the relative income of Brazilian states for the 1985-2008 period. Unit root tests suggest that shocks to relative income have permanent effects, contradicting the stochastic convergence hypothesis. On the other hand, interval estimates of the largest autoregressive root produce wide confidence intervals that include many alternatives consistent with stationarity. Additionally, the confidence interval estimate of the half-life suggests that relative income shocks die out relatively quick, within an average of 0 to 5 years. These results suggest that relative income shocks have a temporary effect, thus supporting the stochastic convergence hypothesis. Furthermore, we build a relative income series for the Brazilian states for the 1947-2008 period andredo the exercises above. Finally, all of our results remain the same when we extend the sample to the 1947-2008 period.
Self-Selection and the Impact of Migration on Earnings
Authors: Avelino Ricardo R. G.
Published: June 2016

This paper formulates and estimates a comparative advantage model of migration in which individuals maximize the value of log earnings, net of moving costs, by choosing between a pair of locations. Using a subsample of males from the 2003 wave of the PNAD, a comprehensive Brazilian national household survey, I construct six measures to assess the impact of migration on earnings. The results do not support the common notion that migrants constitute a positive selected subsample of the population, i.e., that they have unobservable traits which make them more productive than non-migrants at the destination, after controlling for observable characteristics.
Measuring the Cyclical Component of a Time Series: a New Proposed Methodology
Authors: Dias Maria Helena Ambrosio , Dias Joilson
Published: June 2016

The objective of this paper is to present a simple technique that estimates the true cycle of a time series. The robustness of the technique was tested under Monte Carlo simulations using several specifications, including deterministic and stochastic switching trends. The results showed that the proposed technique is able to explain the true cycles under several statistical tests. As an alternative, we used the Hodrick-Prescott (HP) filter to obtain the cycle component of the simulated series. This technique produced cycles opposite to the true ones in some cases. Several tests indicate that this technique is greatly influenced by the erratic component on the data generated processes. Further, we applied our technique to the real Brazilian GDP – Gross Domestic Product – series. According to our methodology, the Brazilian economy showed business cycles generated by short run economic policies up to 1994. After this period business cycle was no longer the influential factor and the long run growth component was the dominant one.
The formal-informal labor market segmentation hypothesis revisited
Authors: Ulyssea Gabriel
Published: June 2016

Despite the existence of a large empirical literature, there is no conclusive answer to whether labor markets in developing countries are segmented. Moreover, a prior and perhaps more fundamental question remains largely unanswered, namely, whether the formal-informal segmentation hypothesis actually has empirical content. This paper tackles the latter question by developing a stochastic dynamic discrete choice model to analyze workers' choices between unemployment, formal and informal jobs. This general framework is then used to assess the empirical implications of dierent models of labor market functioning. As a complete taxonomy exercise is beyond the scope of this paper, I focus on the two most polar cases in the present context: the fully integrated and fully segmented labor markets. The nal goal is to analyze to which extent these two extreme benchmarks can generate implications that are empirically distinguishable and, more broadly, whether the ndings in the empirical literature can be supported by a single model or by a broad array of models. The analysis shows that both models can support the observed regularities regarding formal-informal wage gaps, transitions and job duration. Hence, it does not seem possible to identify the existence of segmentation from the moments typically analyzed in the empirical literature.
On the empirical content of the formal-informal labor market segmentation hypothesis
Authors: Ulyssea Gabriel , Paes de Barros Ricardo
Published: June 2016

To date, the empirical literature on the formal-informal labor market segmentation hypothesis has largely focused on the analysis of wage determination in both sectors. The underlying premise in this literature is that, under segmentation, equally productive workers receive higher wages if located in the formal sector. Thus, identifying the existence of wage differentials between equally productive workers would imply that the labor market is segmented. The objective of this paper is to examine the extent to which the premise behind this literature actually has empirical content, and whether or not one can actually identify the existence of segmentation by analyzing wage data alone. For that, we develop a simple framework to describe the main determinants of the cross-sectional wage distributions in both sectors. We show that the evidence can be supported by completely different models of labor market functioning. It thus seems unlikely that one can actually identify the existence of labor market segmentation by analyzing data on wages alone.
Evaluation of Small-sample Compromised Randomization: Long-term Effects of Early Childhood Intervention on Health and Addictive Behavior
Authors: Pinto Rodrigo
Published: June 2016

Barros contribution to the literature of policy evaluation stems from advances in statistical methods applied to rigorous empirical analysis. Another central question of Barros research is the analysis of eficient policies for reducing economic inequality. In the pursue this question, Barros line of work has recently shifted towards the study of early childhood investment as a tool for promoting economic growth and improving the odds of children born in disadvantage families (Barros et al., 2011; Barros and Olinto, 2008). We follow Barros steps by developing a formal statistical evaluation of the Perry pre-school program, the oldest and most cited early childhood experiment in US. Evaluating the Perry program poses three statistical challenges. First, the small sample size cast doubts on standard inference methods that are based on asymptotic assumptions. Second, randomization compromises call into question the validity of the simple statistical procedures often applied to social experiments. Third, the large number of outcome variables gives rise to the danger of selectively reported signi cant estimates. We develop a statistical method that accounts for all these problems and is tailored to the problems we face in the Perry intervention. We focus on long-term impact on health and addictive behavior variables. We use new data at age 40 never analyzed before. We find that treated females have less negative effects of drug/alcohool usage in a range of later-life activities. For males, we find that treated participants use less hard drugs, such as heroine and hashish.
Nonparametric Estimation of Causal Effects in Observational Studies
Authors: Barros Ricardo Paes de
Published: June 2016

The paper develops a statistical procedure to provide consistent estimators for the average impact of an intervention or treatment (e.g., earnings) among subjects of a target population (e.g., young high school dropouts). The procedures we study belong to a class of estimators which can be expressed as a DIFFERENCE between the average outcome in the treated sample and an adequately chosen weighted average of the outcomes in the control group. We refer to estimators in this class as D-estimators. We show that D-estimators should only be used in circumstances in which subjects are randomly assigned to treatment given the vector of observed covariates. This condition has been referred to as the \strongly ignorable assumption" or \selection on observable model". The consistency of D-estimators is proved under very weak restrictions on the distribution of the covariates.
The Impact of Social Interventions: Nonparametric Identification from Choice-Based Samples
Authors: Barros Ricardo Paes de
Published: June 2016

This paper presents conditions for the identification of the AVERAGE effect of training CONSTRAINED to the population of trainees. All of the identification conditions we consider are based on a variety of conditional independence assumptions. More specifically, they assume the participation status and post-training latent earnings are conditionally (mean) independent. The identification conditions differ according to the conditioning set they use. Nowhere are any functional-form imposed. In either words, a nonparametric approach has been taken. Moreover, the conditions are robust to choice-based sampling.
Duration Dependence and Timevarying Variables in Discrete Time Duration Models
Authors: D'Addio Anna Cristina , Honoré Bo E.
Published: June 2016

This paper considers estimation of a dynamic discrete choice model with second order state dependence in the presence of strictly exogenous time-varying explanatory variables. We propose a new method for estimating such models, and a small Monte Carlo study suggests that the method performs well in practice. The method is used to test for duration dependence in labour market spells for young people in France. The novelty in the application is that we are able to control for time-varying explanatory variables. In a discrete time duration model, duration dependence will result in second order state dependence, and the paper therefore also adds to the literature on estimation of duration models with unobserved heterogeneity.
The Assumptions Underlying Evaluation Estimators
Authors: Heckman James J.
Published: June 2016

This paper reviews the basic principles underlying the identication of econometric evaluation estimators and their recent extensions. It considers the choice of the estimator in terms of the decision model used by agents and the information they have available. Building on Barros's pioneering work [Barros (1987), reprinted here] I apply the analysisto the method of matching.
Barros Introduction by James Heckman (University of Chicago and American Bar Foundation)
Authors: Heckman James J.
Published: June 2016

This special issue of the Brasilian Review of Econometrics recognizes some of the basic contributions to knowledge of Ricardo Paes de Barros.
Ricardo Paes de Barros Curriculum Vitae
Authors: Barros Ricardo Paes de
Published: June 2016

Ricardo Paes de Barros Curriculum Vitae
Some Alternatives for Robust Estimation of the Spectrum in Stationary Processes
Authors: Fajardo Fabio Alexander
Published: June 2016

This paper is dedicated to estimation of the spectral density of stationary linear processes in the presence of additive outliers. We suggest the use of robust periodogram proposed by Fajardo et. al. (2009) (LPR) with different smoothing windows. Empirical results showed the robustness of the estimator under additive outliers. A real data application is presented with IGP-DI series.
Monetary Policy and Exchange Rate Shocks in Brazil: Sign Restrictions versus A New Hybrid Identification Approach
Authors: Lima Elcyon Caiado Rocha , Maka Alexis , Alves Paloma
Published: June 2016

This paper analyzes the impacts of monetary policy, exchange rate, demand, and supply exogenous disturbances on the Brazilian economy using a structural vector autoregression model identified by two alternative methodologies. The first uses sign restrictions on impulse responses based on an open-economy macroeconomic model.  The second (hybrid) is a new methodology that combines the first with restrictions on the contemporaneous causal interrelationships among variables, derived by Directed Acyclic Graphs.   A comparison of the results shows that while the effects of exchange rate shocks are nearly the same, the effects of monetary policy shocks depend on the methodology adopted. There is a strong response of the exchange rate to demand shocks and to shocks originating in the foreign exchange market. Exchange rate shocks have an important role in explaining short-run fluctuations of prices and output. We conclude that the exchange rate is an independent source of shocks and a shock absorber.
Leading Indicators for the Capital Goods Industry
Authors: Morais Igor Alexandre C. , Chauvet Marcelle
Published: June 2016

The goal of this paper is to build leading indicators to predict the capital goods business cycle in Brazil. We propose a probit model with autoregressive dynamics consisting of series with predictive power to anticipate contractions in this sector. The model is especially suitable for this sector as it includes information about the characteristics of cycle phases and their duration in the estimation of recession probability, and adapts well to the high volatility of the capital goods business cycle. The results indicate that the dynamic probit model has a better forecasting performance than the simple probit model in several aspects, both within and out of sample and in real time.
The Relation between Expected Returns and Volatility in the Brazilian Stock Market
Authors: Avelino Ricardo R. G.
Published: June 2016

This paper applies the Markov switching regression model of stock returns with volatility feedback of Turner, Startz and Nelson (1989), suitably extended to incorporate endogenous regime shifts, as in Kim, Piger and Startz (2008), to examine the intertemporal relationship between the risk premium and volatility in the Brazilian stock market over the period 1995-2011. The results suggest that there is a positive relationship between the risk premium and the expected volatility once the volatility feedback effect is taken into account. Unanticipated increases in volatility, in contrast, have a negative impact on the risk premium. This negative impact increasesby 50% when I account for endogeneity of regime shifts.
Bayesian mixture of parametric and nonparametric density estimation: A Misspecification Problem
Authors: Lopes Hedibert F. , Dias Ronaldo
Published: June 2016

In this paper we study the effect of model misspecifications for probabilitydensity function estimation. We use a mixture of a parametric and nonparametricdensity estimation. The former can be modeled by any suitable parametricprobability density function, including mixture of parametric models. The latteris given by the known B-spline estimation. The procedure also deals withthe situation when a highly structured data are collected so that it is difficultto propose a parametric model with a large number of mixture components.Then a nonparametric part would help to postulate an appropriate model. Inaddition, in order to reduce the computational cost of getting a nonparametricdensity for high dimensional data a parametric mixture of densities could beused as the starting point for modeling such dataset. Our procedure is computedby using EM-type algorithm for a non-Bayesian approach and MCMCalgorithm under a Bayesian point of view. Simulations and real data analysisshow that our proposed procedure have performed quite well even for nonstructured datasets.
Modeling and Forecasting of Realized Volatility: Evidence from Brazil
Authors: Wink Junior Marcos Vinício , Pereira Pedro Luiz Valls
Published: June 2016

Using intraday data for the most actively traded stocks of BOVESPA, this work has considered two recently developed models in the literature of the estimation and forecasting of realized volatility; The Heterogeneous Autorregressive Model of Realized Volatility (HAR-RV), developed by Corsi (2009) and the Mixed Data Sampling (MIDAS-RV), developed by Ghysels et al. (2004). Through statistical comparison of forecasts in-sample and out-of-sample, it was found that superior results of the MIDAS-RV modeloccurred only for the in-sample forecasting. However, for out-of-sample forecasts no statistically different results were found between the models. Also, there are evidences that the use of realized volatility inducesnormality in standardized returns.
Are Dual and Primal Estimations Equivalent in the Presence of Stochastic Errors in Input Demand?
Authors: Bittencourt Mauricio Vaz Lobo , Sampaio Armando Vaz
Published: June 2016

This study investigates the primal and dual approaches for production in the presence of stochastic errors in output and input demands, and policy implications when such errors are not taken into account. A synthetic dataset is used to econometrically estimate the primal and dual functions associated with a given technology. Results show that both formulations are unbiased, consistent and efficient, even in the presence of a Cobb-Douglas technology. Not accounting for such errors can lead to wrong policy recommendations in a productive sector. Any kind of policy created to improve the total production of a particular sector should consider these issues before applying them to real data.
Is the Bank Interest Rate Pass-Through of Selic Rate Movements Asymmetric?
Authors: Mello João Manoel Pinho de , Castro Pedro Henrique Rosado de
Published: June 2016

This paper tests and find evidence that support the view that credit interest rates respond more to increases than to decreases in the Central Bank basic interest rate (Selic). This asymmetry is robust to an event analysis, in which the availability of a dataset containing daily information is explored in order to isolate monetary policy shocks on interest rates as the cause of the assymetric response of interest rates, as a shift in the basic interest rate is akin to an increase in marginal cost and thus corresponds to a shift in the supply curve of banks. The econometric identification hypothesis is that banks (supply) react faster to monetary shocks than consumers (demand for credit). The empirical evidence of greater rigidity to Selic decreases contributes to the literature of bank behavior in credit markets and the transmission mechanism of monetary policy in Brazil.
Non-Parametric Pricing of Interest Rates Options
Authors: Laurini Márcio Poletti , Mauad Roberto Baltieri
Published: June 2016

The pricing models for interest rates derivatives largely used today employ, many times,excessively restrictive premises in regards to the underlying assets' volatility. The Black and Scholes and the Vasicek methods, for example, consider the variance of the series as constant in time and among different maturities, assumption that may not be themost adequate in all cases. In this paper we discuss the non-parametric estimation of the volatility function using a kernel regression technique and later the pricing of options in a Gaussian HJM model. We analyzed different possible specifications for the non-parametric estimation using the Monte Carlo simulations to price options on zero coupon bonds. We also carried out an empirical study using the proposed methodologyfor the pricing of IDI Index options in the Brazilian market..
Credit Shocks and Monetary Policy in Brazil: A Structural Favar Approach
Authors: Valls Pereira Pedro L. , Da Silva Fonseca Marcelo Gonçalves
Published: June 2016

This paper investigates the implications of the credit channel of the monetary policy transmission mechanism in the case of Brazil, using a structural FAVAR (SFAVAR) approach. The term structural comes from the estimation strategy, which generates factors that have a clear economic interpretation. The results show that unexpected shocks in the proxies for the external finance premium and the bank balance sheet channel produce large and persistent fluctuations in inflation and economic activity – accounting for more than 30% of the error forecast variance of the latter in a three-year horizon.  The Central Bank seems to incorporate developments in credit markets – especially variations in credit spreads – to its reaction function, as impulse-response exercises show the Selic rate declining in response to wider credit spreads and contraction in the volume of new loans. Counterfactual simulations also demonstrate that the credit channel amplified the economic contraction in Brazil during the acute phase of the global financial crisis in the last quarter of 2008, and gave an important impulse to the recovery period that followed through.
The Finite-Sample Size of the BDS Test for GARCH Standardized Residuals
Authors: Fernandes Marcelo , Preumont Pierre-Yves
Published: June 2016

This paper uses a multivariate response surface methodology to analyze the size distortion of the BDS test when applied to standardized residuals of rst-order GARCH processes. The results show that the asymptotic standard normal distribution is an unreliable approximation even in large samples. On the other hand, a simple log-transformation of the squared standardized residuals seems to correct most of the size problems. The estimated response surfaces can nonetheless provide not only a measure of the size distortion, but also more adequate critical values for theBDS test in small samples.
Does the Growth Acceleration Program Accelerate Growth?
Authors: Mereb Julio , Zilberman Eduardo
Published: June 2016

In this paper, we introduce the required time lag for the public investment to be turned into public capital (time-to-build process) in the neoclassical growth model, as well as distortionary tax rates that are adjusted according to the level of public debt. The purpose is to quantitatively isolate the macroeconomic effects of the increase in public investment observed in PAC (Portuguese acronym for Growth Acceleration Program). Depending on the time lag associated to the time-to-build process and the fiscal adjustment policy,PAC could have led to a GDP decrease between 0.2% and 0.4% in up to four years.
Optimal Exchange Rate Policy and Business Cycles
Authors: Cunha Alexandre
Published: June 2016

Implementation and collapse of exchange rate pegging schemes are recurrent events. A currency crisis (pegging) is often followed by an economic downturn (boom). In this essay I study why a benevolent Central Bank should pursue a monetary policy that leads to those recurrent currency crises and subsequent periods of pegging. I show that the optimal policy induces a competitive equilibrium that displays a boom in periods of below average devaluation and a recession in periods of above average devaluation. Therefore, a currency crisis (pegging) can be understood as an optimal policy answer to a recession (boom).
Financial Constraints, Endogenous Educational Choices and Self-Selection of Migrants
Authors: Assunção Juliano Junqueira , Carvalho Leandro
Published: June 2016

The Roy model predicts that migrants will be disproportionately drawnfrom the lower half of the educational distribution of the sending country if the sending country has a higher return to schooling. However, Mexican immigrants in the U.S. tend to be disproportionately drawn from the middle of the distribution. We argue that financial constraints may explain why. We study migrants' selectivity when agents that face credit constraints make joint decisions about how much to invest in education and whether to migrate. Our results show that financial constraints can explain the intermediate selection of migrants observed in the data.
Forecasting the Brazilian Term Structure Using Macroeconomic Factors
Authors: Almeida Caio , Faria Adriano
Published: June 2016

This paper studies the forecasting of the Brazilian interest rate term structure using common factors from a wide database of 171 macroeconomic series, from the period of January 2000 to May 2012. Firstly the model proposed by Moench (2008) was implemented, in which the dynamic of the short term interest rate is modeled using a FAVAR and the term structure is derived using the restrictions implied by no-arbitrage. Similarly to the original study, this model resulted in better predictive performance when compared to the usual benchmarks, but presented deterioration of the results with increased maturity. To avoid this problem, we proposed that the dynamic of each rate be modeled in conjunction with the macroeconomic factors, thus eliminating the no-arbitrage restrictions. This attempt produced superior forecasting results. Finally, the macro factors were inserted in the model proposed by Diebold and Li (2006).
Voting Premium in the Brazilian Equity Market
Authors: Fernandes Marcelo , Frango de Souza Vitor
Published: June 2016

This study aims to estimate the control premium in the Brazilian stock market, based on the dual-class price differential. We first show that the average control premium is positive from July 2003 to June 2013. This is in contrast with the extant findings in the literature, which indicate the presence of a voting discount. We then investigate the determinants of the difference in common and preferred share prices. In particular, we examine how the voting premium relates to the relative liquidity, the difference in dividends, the extension of tag along rights to non-voting shares, the issuance of ADR in the New York Stock Exchange, the level of corporate governance, the shareholders’ composition, and the government’s equity participation
Wage Differentials: Trade Openness and Wage Bargaining
Authors: Gonzaga Gustavo , Terra Cristina , Muriel Hernandez Beatriz
Published: June 2016

We build a theoretical model that incorporates unionization in thelabor market into a Heckscher-Ohlin-Samuelson (HOS) framework to in-vestigate the impact of unionization on the Stolper-Samuelson Theorem.To capture the American economy case, we assume that unskilled labor inthe manufactured goods sector is unionized, and that sector is intensivein skilled labor, and that trade liberalization increases the relative priceof manufactured goods. In the HOS model, trade liberalization inducesa reallocation of production towards the sector that uses intensively thecountry's most abundant factor. The resulting change in relative labor de-mand impacts wage bargaining in the unionized sector, which, in turn, hasa dampening eect on the Stolper-Samuelson eect. Moreover, wages ofunionized workers are even less responsive to trade liberalization. Throughtraditional mandated-wages regressions, we show that skilled-wage dier-entials changes were less pronounced among more unionized sectors in theU.S. economy for the 1979-1990 period.
Non-linear Demand and Price: An Empirical Analysis of the Brazilian Industrial Electricity Consumption
Authors: Lucinda Claudio Ribeiro , Anuatti Neto Francisco
Published: June 2016

In this paper we proposed an econometric model for industrial electricity demand in Brazil. Differently from residential customers, industries in Brazil, in addition to purchasing energy and capacity, also face a tariffmenu with Time of Use pricing. Each item in this menu also has different components and price discrimination structure. All these characteristics pose an empirical problem that, so far, has not been faced together in the literature. This methodology was applied in a non-experimental micro data sample of 646 large Brazilian industrial customers (with demands over 300 KW) between January 2002 and December 2006. The results indicate demands for the various services (capacity and energy, separated between peak and non-peak hours) are price elastic, and at least in the AZUL tariff, there is complementarity between energy and capacity in the different periods. Thus, policies on tariff structures based on assumptions of an inelastic aggregate electricity demand could have effects that are quite different from what was intended.
Brazilian Corporate Debt Issuance: Should You Invest in Local or International Bonds?
Authors: Fernandes Marcelo , Nunes Ricardo
Published: June 2016

The goal of this study is to analyze the yield difference between corporate debt issuance of Brazilian companies in local and foreign markets. From the perspective of the investor, we attempt to answer whether it is better, on average, to acquire a local debenture or an international bond from the same issuer after controlling for risk. To this end, we examine 177 local and 119 international bond issuances of 31 Brazilian non-financial companies from January 2004 to April 2013. Panel regressions with fixed effects to control for the issuer’s characteristics show that, on average, international bonds yield 164 to 197 bps more than local debentures, and that this difference is statistically significant.
Immunization of Fixed-Income Portfolios Using an Exponential Parametric Model
Authors: Almeida Caio , Lund Bruno
Published: June 2016

Litterman e Scheinkman (1991) mostram que mesmo uma carteira de renda fixa duration imunizada (neutra) pode sofrer grandes perdas e, portanto, propõem fazer hedge de carteiras utilizando a análise de componentes principais. O problema é que tal abordagem só é possível quando as taxas de juros são observáveis. Assim, quando as taxas de juros não são observáveis, como é o caso da maior parte dos mercados de dívida externa e interna de diversos países emergentes, o método não é diretamente aplicável. Este artigo propõe uma abordagem alternativa que é realizar o hedge baseado nos fatores de um modelo paramétrico da estrutura a termo. A imunização seguindo esta abordagem não só se mostra simples como também equivalente ao procedimento proposto por Litterman e Scheinkman quando as taxas são observáveis. Exemplos do método para operações de hedge e alavancagem nos mercados de títulos de dívida pública brasileira indexada a inflação são apresentados. O trabalho ainda discute como montar a apreçar carteiras que replicam fatores de risco, o que permite extrair alguma informação sobre a expectativa dos agentes acerca do comportamento futuro da curva de juros.
Approximating Risk Premium on a Parametric Arbitrage-free Term Structure Model
Authors: Almeida Caio , Ardison Kym , Kubudi Daniela
Published: June 2016

In this paper we approximate the risk factors of a polynomial arbitrage-free dynamic term structure model by running a sequential set of linear regressions independent across time. This approximation avoids the cost of a full optimization procedure allowing for a simple method to extract the risk premium embedded in interest rate assets. Closed-form bond pricing formulas provide interpretation of each source of aggregate risk as known term structure movements. Assuming, for illustrative purposes, an economy with three sources of aggregate risk (level, slope and curvature), we test the validity of our approximation adopting a dataset of Brazilian zero coupon interest rates. The new methodology generates accurate parameters, standard deviations and risk premium dynamics when compared to the exact dynamic model. Moreover, an empirical illustration comparing the out-of-sample forecasting performance of the exact model, our approximation, and a standard Gaussian affine model against the Random Walk, reveals that the proposed approximation obtains favorable forecasting results providing a reliable substitute to the exact estimation method with a much smaller computational time.
Selection of Minimum Variance Portfolio Using Intraday Data: An Empirical Comparison Among Different Realized Measures for BM&FBovespa Data
Authors: Ziegelmann Flávio Augusto , Borges Bruna , Caldeira João F.
Published: June 2016

This paper explores different covariance matrix estimators, either the conditional or the unconditional versions, obtained via intradaily data and named realized measures, to the minimum variance portfolio selection problem. Intradaily data are sampled in a synchronized manner as well as in a unsynchronized version. For sake of comparison, we alsouse daily data estimators. The major contribution of this work has an empirical nature focused on the Brazilian scenario. We evaluate some out-of-sample performance indexes of the obtained portfolios for a set of 30 stocks traded on the São Paulo stock exchange (BM&FBovespa). The results show that the estimator of the conditional covariance matrix of returns coming from a scalar vt-VECH model based on higher frequency data leads to substantial earnings, reducing the portfolio risk, increasing the average adjustedby risk return and decreasing the turnover
Unobserved Heterogeneity in Regression Models: A Semiparametric Approach Based on Nonlinear Sieves
Authors: Medeiros Marcelo C , Burity Priscilla , Assunção Juliano
Published: June 2016

This paper proposes a semiparametric approach to control for unobserved heterogeneity in linear regression models, based on an artificial neural network extremum estimator. We present a procedure to specify the model and use simulations to evaluate its finite sample properties in comparison to alternative methods. The simulations show that our approach is less sensitive to increases in the dimensionality and complexity of the problem. We also use the model to study convergence of per capita income across Brazilian municipalities.
Price Discovery in Brazilian FX Markets
Authors: Santos Francisco Luna , Garcia Márcio Gomes Pinto , Medeiros Marcelo Cunha
Published: June 2016

We study price discovery in the Brazilian Foreign Exchange (FX) markets and indicate which market (spot or futures) adjusts more quickly to the arrival of new information. We find that futures market dominates price discovery since it responds for 66.2% of the variation in the fundamental price shock and for 97.4% of the fundamental price composition, corroborating the result provided in previous studies that, in a unique world example, the exchange rate is formed in the futures market. In a dynamic perspective, the futures market is also more efficient since, when markets are subjected to a shock in the fundamental price, it is faster to recover to equilibrium. By computing price discovery according to calendar semesters, we find evidence of the correlation between price discovery metrics and market factors, such as spot market supply-demand disequilibrium, central bank interventions and institutional investors’ pressure.
What lf Brazil Hadn't Floated the Real in 1999?
Authors: Carvalho Carlos Viana de , Vilela André D.
Published: June 2016

We estimate a dynamic, stochastic general equilibrium model  for the Brazilian economy taking into account  the transition from a currency  peg to inflation  targeting that took place  in 1999. The estimated model exhibits quite different dynamic under the two monetary regimes. We use it to the produce counterfactual histories of  the transition from one regime to another, given estimated history of structural  shocks. Our results  suggest that the maintaining the currency peg would have been too costly, as interest  rates  would have  had  to remain at extremely high levels for several quarters, and  GDP  would  have  collapsed. Accelerating e the pace of nominal  exchange rate  devaluations  after  de  Asian Crisis would have lead to  higher inflation and  interest rates, and slightly lower GDP. Finally, the  first half of 1998 arguably provided a window of opportunity for a smooth transition between the two monetary regimes.
SAMBA: Stochastic Analytical Model with a Bayesian Approach
Authors: Castro Marcos R. de , Gouvea Solange N. , Minella Andre , Santos Rafael , Souza-Sobrinho Nelson F.
Published: June 2016

We develop and estimate a DSGE model for the Brazilian economy as part of the macroe-conomic modeling framework of the Central Bank of Brazil. The model combines the building blocks of standard DSGE models (e.g., price and wage rigidities and adjustment costs) with the following features that better describe the Brazilian economy: (i) a fiscal authority pursuing an explicit target for the primary surplus; (ii) administered or regulated prices as part of the consumer price index; (iii) external nance for imports,which amplies the eects of changes in external nancial conditions on the economy;and (iv) imported goods used in the production of intermediate goods. It also includes the presence of nancially constrained households. We estimate the model with Bayesian techniques, using data since 1999, when in ation targeting was implemented in Brazil.Evaluation based on impulse response functions, moment conditions, variance error decomposition, and initial forecasting exercises suggests that the model can be a useful toolfor policy analysis and forecasting.
Investment-Specific Technological Change and the Brazilian Macroeconomy
Authors: Teles Vladimir K. , Costa Junior Celso Jose , Rosa Rafael Mouallem
Published: June 2016

This study discusses the importance of investment-specific technological change for the brazilian macroeconomy. We document evidence that a model that takes this specific type of technical progress into account is better suited to explain the Brazilian economy over the long term. We then present a DSGE [Dynamic Stochastic General Equilibrium] model with two sectors that incorporates technical progress in the investment goods sector and estimate the model for Brazil. The results demonstrate that productivity shocks in the investment goods sector are more volatile and persistent than in the final goods sector and that the output gap has a greater variance in the two-sector model. In addition, these results recommend a more rigorous monetary policy prescription to improve the economy’s well-being.
Pricing Options Embedded in Debentures with Credit Risk
Authors: Almeida Caio , Pereira Leonardo Tavares
Published: June 2016

In this article, we develop a strategy to simultaneously extract a yield curve and price call options embedded in debentures subject to credit risk. The implementation is based on a combination of two methods: term structure estimation adopting the Nelson-Siegel model sequentially followed by the use of the spread-curve (term structure of debentures minus local inter-bank risk-free rate) to calibrate a trinomial tree for short-term interest rates making use of the Hull and White model (1993). The proposed methodology allows us to price embedded options making debentures with and without embedded options comparable on a common basis. As a consequence, since a large number of the existing Brazilian debentures contain embedded options, our methodology increases the number of debentures available to estimate a term structure for Brazilian local fixed income bonds. We illustrate the method by pricing a call option for a debenture issued by the company “Telefonica Brasil”.
Time-dependent or State-dependent Pricing? Evidence from Firms' Response to Inflation Shocks
Authors: Guimaraes Bernardo , Mazini Andre , Prince Diogo de
Published: June 2016

This paper proposes a test for distinguishing between time-dependent and state-dependent pricing based on whether the timing of pricing changes is affected by realized or expeted inflation. Using Brazilian data and exploring a large discrepancy between realized and expected inflation surrounding the election of President Lula in 2002-3, we obtain a strong relation between expected inflation and duration of price spells, but little effect of inflation shocks on the frequency of price adjustment. The results thus support models with time-dependent pricing, where the timing for following changes is optimally chosen whenever firms adjust prices.
The Forecast Ability of Option-implied Densities from Emerging Markets Currencies
Authors: Ornelas José Renato Haas
Published: June 2016

This paper empirically evaluates Risk-Neutral Densities (RND) and Real-World Densities (RWD) as predictors of emerging markets currencies. The dataset consists of volatility surfaces from 11 emerging market currencies, with approximately six years of daily data, using options with one-month expiration. Therefore, there is a strong overlapping in data, which is tackled with specific econometric techniques. Results of the out-of-sample assessment show that both RND and RWD underweight the tails of the actual distribution. This is probably due to the lack of options with extreme strikes. Although the RWDs perform better than RND in terms of Kolmogorov distance, they still have problems in fitting the tails of actual data. Thus, the risk-aversion adjustment may improve the forecast ability, but it does not solve the tails misfitting.