Working Paper Series

Browse the categories to access the content of academic, scientific and opinion publications of the professors and students of the Department of Economics PUC-Rio.

Voting for Quality? The Impact of School Performance Information on Electoral Outcome

N 668, 21/10/2019

We use data from polling stations and public primary schools to estimate the electoral effects of making school quality information available to voters. We exploit the introduction of a school-level accountability system in Brazil that provides, for the first time, information about school quality and exploit variation in schools affected by the policy. We find that incumbent vote shares are 2.14 percentage points higher for schools in the top 20% of our sample’s distribution of school quality and 1.54 percentage points lower for schools in the bottom 20% of the distribution. These effects are mostly driven by the unpredicted component of school quality and are larger for more educated voters.

Marina Dias, Claudio Ferraz.


Latifúndio e pequena propriedade. Estrutura Fundiária e Economia no Brasil da Colônia ao Império

N 667, 26/02/2019

O objetivo do presente trabalho é examinar a situação fundiária no Brasil Imperial nos seus aspectos econômicos, mas também sociais e legais, a partir de seus antecedentes coloniais, e examinar criticamente a questão tradicionalmente enfatizada na historiografia da onipresença e predominância de latifúndios no período imperial. 

Luiz Aranha Corrêa do Lago.


Do Government Guarantees Really Matter in Fixed Exchange Rate Regimes?

N 666, 19/09/2018

Since the mid 1990s, theories of speculative attacks have argued that fixed exchange rate regimes induce excessive borrowing in foreign currency as an optimal response to implicit guarantees that the government will not devalue the domestic currency. Using data on Brazilian  firms before and after the end of the fixed exchange rate regime in 1999, we estimate the relevance of the government guarantees by comparing the changes in foreign debt of two groups of firms: those that hedged their foreign currency debt prior to the exchange rate float and those that did not. Using the difference-in-differences approach, in which firm-specific characteristics are introduced as control variables, we exclude the macroeconomic effects of the change in the exchange rate regime and the possible differences in foreign debt trends of the two groups of firms, thus obtaining an estimate of the impact of the government guarantees on borrowing in foreign currency. The results suggest that the guarantees do not induce  excessive borrowing in foreign currency

Marcio Magalhães Janot, Márcio Garcia.


Macroprudential Policies at Work: How do Government-Owned Banks affect Credit Markets?

N 665, 18/09/2018

How countercyclical macroprudential credit policies affect the loan spread?   To answer this question, we propose a microeconomic model of bank competition  that contemplates differences in the behavior of public and private banks and  the peculiarities of the market for corporate loans vis-a-vis the market for consumer loans. We solve the model and calibrate it using parameters of the Brazilian economy, where government-owned banks not only account for almost half of the outstanding loans in the credit market but also have played a strong countercyclical role in the economy. Subsequently, we use the equilibrium conditions of the model to study the effects of macroprudential credit policies on loan  preads. The results indicate that credit expansion by public banks is more effective to reduce loans interest rates during recession periods than during periods of economic expansion

Paulo Rodrigo Capeleti, Márcio Garcia, Fábio Miessi Sanches.


Gambling, Risk Appetite and Asset Pricing

N 664, 03/04/2018

A measure of the propensity to gamble in casinos constructed without any asset price data provides relevant information for asset pricing. This measure of risk appetite improves the fit of conditional asset pricing models such as the conditional CAPM, explains cross-sectional differences in future returns for portfolios sorted on various characteristics, and helps forecast market and portfolio excess returns. The relationship between risk appetite and asset prices appears to be mainly explained by simultaneous changes in risk and risk premia

Carlos Carvalho, Ruy Monteiro Ribeiro, Eduardo Zilberman, Daniel Cordeiro.


A dívida externa dos estados brasileiros, 1881-1943

N 663, 27/12/2017

A Constituição de 1891 permitia que estados e municípios tivessem acesso direto aos mercados financeiros internacionais. É possível, portanto, em princípio, diferenciar risco Brasil dos riscos específicos dos estados e municípios no período 1891-1930. Mas os estados e municípios estão localizados no Brasil e o pagamento do serviço de suas dívidas depende das condições do balanço de pagamentos da economia como um todo. Faz sentido avaliar a importância do endividamento externo estadual e municipal e analisar em que medida risco Brasil e riscos subnacionais estaduais estavam relacionados. Neste artigo a atenção está concentrada nos empréstimos estaduais. A base de dados disponível é de qualidade bem superior à dos empréstimos municipais. Em particular, a evidência disponível sobre a base fiscal dos municípios, essencialmente a arrecadação de impostos prediais e afins, é precária. 

Marcelo de Paiva Abreu.


O Brasil Império e a economia mundial

N 662, 12/12/2017

Este capítulo trata da economia brasileira durante o Império do ponto de vista das relações comerciais e financeiras com a economia mundial. Os aspectos mais gerais da economia brasileira no período são objeto de outros capítulos deste livro.

Marcelo de Paiva Abreu.


Whose “pound of flesh”? Egyptian sterling balances, 1939-1958

N 661, 11/12/2017

Sterling balances were a major issue from the point of view of British policy makers. They amounted to £3,555 million in mid-1945 corresponding to almost seven times British pre-war yearly exports. Egyptian sterling balances were importante as Egypt was the second holder of such balances only behind India. Moreover, the Egyptian case has not been adequately dealt in the literature. This is partly explained by the fact that Egypt was excluded from the Sterling Area as a result of the 1947 negotiations with Britain.

The strategic interest in the control of the Suez canal did not diminish after the war and provided the main justification to maintain at a very high cost 80,000-100,000 British troops stationed in the Canal Zone. This required not less than £20 million of yearly British military expenditures. Successive complications led  the Suez crisis of 1956 and the end of British influence in Egypt and in the Middle East. 

The paper is divided into four sections. The first section focuses on the war and the initial post war period up to the visit to Cairo of Wilfrid Eady, of the Treasury, and Cameron Cobbold, of the Bank of England, on their return from India in early 1947. The next section is a detailed discussion of the successive negotiations involving Egyptian sterling balances between 1947 and 1959. Section III analyses the main issues involved in the negotiations: sterling and dollar releases, cancellation and inflation in the creditor economy, gold guarantees and the interest rate on balances. The following section is on international comparisons of Egypt with other significant sterling balance holders: Argentina, Brazil, India and Portugal.  Egyptian losses with the delay in releases and consequent erosion by inflation, low interest rates and sterling devaluation are assessed. It concludes with an evaluation of the Egytian case in contrast with other sterling balance holders.

Marcelo de Paiva Abreu.


América Latina: o contexto externo, 1928-1982

N 660, 24/11/2017

Marcelo de Paiva Abreu.


Negócios britânicos no Brasil: da maturidade à irrelevância, 1850-1950

N 659, 23/11/2017

Este artigo considera as tendências de longo prazo das relações econômicas e financeiras britânicas com o Brasil desde 1850. Abrange investimentos e outas manifestações da presença britânica no Brasil, tais como as relacionadas a comércio e  intermediação financeira. O interesse fundamental é no envolvimento britânico com as atividades do setor privado no Brasil, seja através de investimento direto, seja  na intermediação financeira em benefício de firmas privadas que operavam no Brasil. O artigo também menciona o papel de Londres como centro financeiro no qual eram lançados empréstimos públicos brasileiros, a relevância do Reino Unido como mercado para as exportações brasileiras e como supridor de importações para o Brasil, e  a intermediação britânica no comércio brasileiro com terceiros países.  O artigo é dividido em seções cronológicas: os anos imperiais (1850- 1889); estagnação e boom (1889-1914); primeiros sinais de declínio (1914-1930); os anos de redução de  investimentos (1930-meados da década de 1950). A seção final apresenta as conclusões e menciona as tendências pós-1950.

Marcelo de Paiva Abreu.


Os Efeitos da Incerteza sobre a Atividade Econômica no Brasil

N 658, 14/07/2017

Este trabalho investiga os efeitos da incerteza sobre a atividade econômica no Brasil. Para isso, são construídas diversas proxies que buscam capturar o nível de incerteza vigente na economia brasileira (incerteza doméstica) e em vários de seus principais parceiros comerciais (incerteza externa). Em seguida, são estimados modelos de vetores autorregressivos (VAR) estruturais, cujas funções de resposta ao impulso sugerem efeitos contracionistas significativos da incerteza sobre a atividade, em particular sobre o investimento. Além disso, as estimativas indicam que os efeitos da incerteza doméstica são mais acentuados do que os da incerteza externa. Pode-se afirmar, portanto, que os níveis de incerteza vigentes no Brasil desde as eleições presidenciais de 2014 representam importante fator por trás da recessão subsequente. Estima-se que caso não houvesse a expansão de incerteza doméstica observada a partir do segundo semestre de 2014, a produção industrial em 2015 teria sido, em média, entre 0,9% e 3,9% maior, dependendo da variável proxy de incerteza utilizada. No caso do IBC-Br, este teria sido entre 0,4% e 1,3% maior. Os resultados encontrados são robustos para diversas alterações no modelo.

Revisto em fevereiro de 2018

Ricardo de Menezes Barboza, Eduardo Zilberman.


Transitions in Central Bank Leadership

N 657, 06/07/2017

We assemble a novel dataset on transitions in central bank leadership in several countries, and study how monetary policy is conducted around those events. We find that policy is tighter both at the last meetings of departing governors and first meetings of incoming leaders. This finding cannot be fully explained by endogenous transitions, the effects of the zero lower bound, surges in inflation expectations, omitted variables such as fiscal policy and uncertainty nor electoral cycles. We conclude by offering two possible, perhaps complementary, explanations for these results. One based on a simple signalling story, another based on career and reputation concerns.

Carlos Carvalho, Tiago Tavares Flórido, Eduardo Zilberman.


Money and Politics: The Effects of Campaign Spending Limits on Political Competition and Incumbency Advantage

N 656, 08/06/2017

This paper examines the effects of campaign spending limits on political competition and

incumbency advantage. We study a reform in Brazil that imposed limits on campaign spending

for mayoral elections. These limits were implemented with a discontinuous kink which we

exploit for causal identification. We find that stricter limits increase political competition by

creating a larger pool of candidates that is on average less wealthy. Moreover, we find that

stricter spending limits reduce the incumbency advantage, causing mayors to be less likely

to be reelected. These findings are consistent with a contest model with spending caps and

endogenous candidate entry

Eric Avis, Claudio Ferraz, Frederico Finan, Carlos Eduardo Sant´ Anna Varjão.


Sentiment, Electoral Uncertainty and Stock Returns

N 655, 08/03/2017

We study the effect of a huge sports sentiment shock, unrelated to economic conditions or government actions, on stock market outcomes. After Brazil's 7-1 humiliating defeat to Germany in the 2014 World Cup, which is likely to be one of the largest sports sentiment shocks ever, the stock market went up. We provide evidence of two opposing effects on stock prices. One is the usual negative effect due to the investor sentiment channel documented in the literature. This effect was, however, overwhelmed by the arguably rational response of investors to voters' sentiment. In particular, the 7-1 defeat was perceived by stock market participants as a political shock affecting the upcoming close presidential election. To decompose these two effects, we devise an empirical strategy that allows us to compute the component of daily returns associated with political news. 

 Atualizado em agosto/2017

 

Carlos Carvalho, Eduardo Zilberman, Ruy Monteiro Ribeiro.


The Perils of Counterfactual Analysis with Integrated Processes

N 654, 27/12/2016

Recently, there has been a growing interest in developing econometric tools to conduct counterfactual analysis with aggregate data when a "treated" unit suffers an intervention, such as a policy change, and there is no obvious control group. Usually, the proposed methods are based on the construction of an arti cial counterfactual from a pool of "untreated" peers, organized in a panel data structure. In this paper, we investigate the consequences of applying such methodologies when the data are formed by integrated process of order 1. We find that without a cointegration relation (spurious case) the intervention estimator diverges resulting in the rejection of the hypothesis of no intervention effect regardless of its existence. Whereas, for the case when at least one cointegration relation exists, we have a √T-consistent estimator for the intervention effect albeit with a non-standard distribution. However, even in this case, the test of no intervention effect is extremely oversized if nonstationarity is ignored. When a drift is present in the data generating processes, the estimator for both cases (cointegrated and spurious) either diverges or is not well de ned asymptotically. As a fi nal recommendation we suggest to work in first-differences to avoid spurious results.

Carlos Carvalho, Marcelo Medeiros, Ricardo Pereira Masini.


Measuring the Effect of the Zero Lower Bound on Monetary Policy

N 649, 03/12/2016

The Zero Lower Bound (ZLB) on interest rates is often regarded as an important constraint on monetary policy. To assess how the ZLB affected the Fed's ability to conduct policy, we estimate the effects of Fed communication on yields of different maturities in the pre-ZLB and ZLB periods. Before the ZLB period, communication affects both shortand long-dated yields. In contrast, during the ZLB period, the reaction of yields to communication is concentrated in longer-dated yields. Our ndings support the view that the ZLB did not put such a critical constraint on monetary policy, as the Fed retained some ability to affect long-term yields through communication.

Eric Hsu, Carlos Carvalho, Fernanda Feitosa Nechio.


ARCO: An Artificial Counterfactual Approach from High-Dimensional Panel Time-Series Data

N 653, 16/08/2016

We consider a new method to estimate causal effects when a treated unit suffers a shock or an intervention, such as a policy change, but there is not a readily available control group or counterfactual. We propose a two-step approach where in the first stage an artificial counterfactual is estimated from a large-dimensional set of variables from pool of untreated units (“donors pool”) using shrinkage methods, such as the Least Absolute Shrinkage Operator (LASSO). In the second stage, we estimate the average intervention effect on a vector of variables belonging to the treated unit, which is consistent and asymptotically normal. Our results are valid uniformly over a wide class of probability laws. Furthermore, we show that these results still hold when the date of the intervention is unknown and must be estimated from the data. Tests for multiple interventions and for contamination effects are also derived. By a simple transformation of the variables of interest, it is also possible to test for intervention effects on several moments (such as the mean or the variance) of the variables of interest. Finally, we can disentangle the actual intervention effects from confounding factors that usually bias “before-and-after” estimators. A detailed Monte Carlo experiment evaluates the properties of the method in finite samples and compares our proposal with other alternatives such as the differences-in-differences, factor models and the synthetic control method. An empirical application to evaluate the effects on inflation of a new anti tax evasion program in Brazil is considered. Our methodology is inspired by different branches of the literature such as: the Synthetic Control method, the Global Vector Autoregressive models, the econometrics of structural breaks, and the counterfactual analysis based on macro-econometric and panel data models.

Carlos Carvalho, Marcelo Medeiros, Ricardo Pereira Masini.


Do Government Audits Reduce Corruption? Estimating the Impacts of Exposing Corrupt Politicians

N 652, 15/07/2016

Political corruption is considered a major impediment to economic development, and yet it remains pervasive throughout the world. This paper examines the extent to which government audits of public resources can reduce corruption by enhancing political and judiciary accountability. We do so in the context of Brazil’s anti-corruption program, which randomly audits municipalities for their use of federal funds. We find that being audited in the past reduces future corruption by 8 percent, while also increasing the likelihood of experiencing a subsequent legal action by 20 percent. We interpret these reduced-form findings through a political agency model, which we structurally estimate. Based on our estimated model, the reduction in corruption comes mostly from the audits increasing the perceived threat of the non-electoral costs of engaging in corruption.

Frederico Finan, Eric Avis, Claudio Ferraz.


Apprenticeship as a stepping stone to better jobs: evidence from brazilian matched employer-employee data

N 651, 07/06/2016

The objective of this paper is to evaluate the Brazilian Apprenticeship program (Lei do Aprendiz). This program is a youth-targeted ALMP that has been adopted at a large scale since 2000 in Brazil. The program concedes payroll subsidies to firms that hire and train young workers under special temporary contracts aiming to help them successfully complete the transition from school to work. We make use of a very rich longitudinal matched employee-employer dataset covering the universe of formally employed workers in Brazil, including apprentices. Our identification strategy exploits a discontinuity by age in the eligibility to enter the program in the early 2000’s, when 17 was the age limit to take part in the program. We examine the impacts on employability, wage growth and attachment to the formal labor market using other temporary workers as a control group. We find that the program increases the probability of employment in permanent jobs in 2-3- and 4-5-year horizons. We also find a positive impact on real wages that increases over time. These results hold when we isolate the effects of the training dimension of the program by using an alternative control group composed of subsidized temporary workers. We show evidence that the positive effects of the program are much larger for less-educated workers and for workers who had their first jobs in large firms. These results are robust to other choices of methods to address selection into the program based on unobservables.

Revisto em fevereiro de 2018

Carlos Henrique Corseuil, Gustavo Gonzaga, Miguel Nathan Foguel.


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