For a given frequency of price adjustment, monetary non-neutrality is smaller if older prices are disproportionately more likely to change. Selection for the age of prices provides a complete characterization of price-setting frictions in time-dependent models. Selection for older prices is weaker and non-neutralities are larger if the hazard function of price adjustment is less strongly increasing. Selection is weaker if there is heterogeneity in price stickiness. Finally, selection is weaker if durations of price spells are more variable. In particular, the Taylor (1979) model exhibits maximal selection for older prices, whereas the Calvo (1983) model exhibits no selection.

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.

Nonlinear time series models, especially those with regime-switching and/or conditionally heteroskedastic errors, have become increasingly popular in the economics and finance literature. However, much of the research has concentrated on the empirical applications of various models, with little theoretical or statistical analysis associated with the structure of the processes or the associated asymptotic theory. In this paper, we derive sufficient conditions for strict stationarity and ergodicity of three different specifications of the first-order smooth transition autoregressions with heteroskedastic errors. This is essential, among other reasons, to establish the conditions under which the traditional LM linearity tests based on Taylor expansions are valid. We also provide sufficient conditions for consistency and asymptotic normality of the Quasi-Maximum Likelihood Estimator for a general nonlinear conditional mean model with first-order GARCH errors.

The Roy model predicts that migrants will be disproportionately drawn from 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 nancial

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 nancial constraints can explain the intermediate

selection of migrants observed in the data.

Existing tests for nonlinearity in vector error correction models are highly intensive computationally

and have nuisance parameters in the asymptotic distribution, what calls for

cumbersome bootstrap calculations in order to assess the distribution. Our work proposes

a consistent test which is implementable in any statistical package and has Chi-Squared

asymptotics. Moreover, Monte Carlo experiments show that in small samples our test

has nice size and power properties, often better than the preexisting tests. We also provide

a condition under which a two step estimator for the model parameters is consistent

and asymptotically normal. Application to international agricultural commodities prices

show evidence of nonlinear adjustment to the long run equilibrium on the wheat prices.

In this paper we exploit the parametric portfolio optimization in the Brazilian market. Our data consists of monthly returns of 306 Brazilian stocks in the period between 2001 and 2013. We tested the model both in and out of sample and compared the results with the value and equal weighted portfolios and with a Markowitz based portfolio. We performed statistical inference in the parametric optimization using bootstrap techniques in order to build the parameters empirical distributions. Our results showed that the parametric optimization is a very efficient technique out of sample. It consistently showed superior results when compared with the VW, EW and Markowitz portfolios even when transaction costs were included. Finally, we consider the parametric approach to be very flexible to the inclusion of constraints in weights, transaction costs and listing and delisting of stocks.

We use data on immigrants who live in the United States to study the effects of exposure to hyperinflation on occupational choice. To do so, we calculate the number of years an individual had lived under hyperinflation before arriving to the US. We find that its marginal effect on the probability of being self-employed instead of wage-earner is 0.87 percentage point. This finding suggests that the macroeconomic environment one lives in permanently affects his economic behavior. The estimated effect depends on the age individuals had when exposed to hyperinflation. In particular, it vanishes for those over the age of 40.

The British effort in the Second World War required massive external financing which depended on Lend-Lease and the accumulation of sterling balances. Indebtedness in sterling balances corresponded to almost 38 per cent of this total at the end of the war. Portuguese sterling balances, although a small share of the total, were important because of pre-emptive purchases, especially of wolfram, and because of the ‘gold clause’ which was to be applied to outstanding balances. Portugal's willingness to finance British purchases contrasts with the requirement of German payments in goods or cash for their purchases in Portugal. The settlement of Portuguese sterling balances in August 1945 was singular as it preceded the Anglo-American settlement of December 1945 which had important consequences for sterling balance holders, as the US insisted that the US$3.75 billion loan should not be used to settle British war debts. Postwar settlement of British debt through a long-term loan from Portugal to Britain contrasts with settlements that involved the sale of British assets. Salazar's concerns about the postwar international position of Portugal, the Portuguese Empire, and the survival of the Portuguese regime are relevant in explaining his pro-British stance during and after the war.

We combine questions from the Michigan Survey about future inflation, unemployment, and interest rates to investigate whether households are aware of the basic features of U.S. monetary policy. Our findings provide evidence that some households form their expectations in a way that is consistent with a Taylor (1993)-type rule. We also document a large degree of variation in the pattern of responses over the business cycle. In particular, the negative relationship between unemployment and interest rates that is apparent in the data only shows up in households׳ answers during periods of labor market weakness.

Propomos e implementamos uma medida da credibilidade do

Banco Central do Brasil, fazendo uso de uma base de dados com

expectativas desagregadas. A hipótese é de que a heterogeneidade

das expectativas de longo prazo advenha de crenças distintas com

relação à aversão do Banco Central à inflação. Desse modo, a existência

de agentes persistentemente otimistas ou pessimistas indicaria falta

de credibilidade. Com base neste argumento, construímos um

índice utilizando Cadeias de Markov. Nosso índice inova em

relação aos disponíveis na literatura por considerar a dispersão das

expectativas. Nossos resultados são comparados com os de outros

artigos, corroborando o aprimoramento advindo da nova medida da

credibilidade

Diversification through a financial intermediary has the benefit of transforming loans that need costly monitoring into bank deposits that do not. We show that financial intermediation in a costly state verification model has a cost not yet analyzed: it allows for the existence of multiple equilibria, some of which are characterized by borrowers defaulting on their loans because they expect other borrowers to do the same (i.e. bad equilibria arise due to strategic complementarities in entrepreneurs’ actions). We propose two mechanisms that fully implement the desired equilibrium allocation.

This paper performs a thorough statistical examination of the time-series properties of the daily market

volatility index (VIX) from the Chicago Board Options Exchange (CBOE). The motivation lies not only on

the widespread consensus that the VIX is a barometer of the overall market sentiment as to what concerns

investors’ risk appetite, but also on the fact that there are many trading strategies that rely on

the VIX index for hedging and speculative purposes. Preliminary analysis suggests that the VIX index

displays long-range dependence. This is well in line with the strong empirical evidence in the literature

supporting long memory in both options-implied and realized variances. We thus resort to both parametric

and semiparametric heterogeneous autoregressive (HAR) processes for modeling and forecasting

purposes. Our main findings are as follows. First, we confirm the evidence in the literature that there

is a negative relationship between the VIX index and the S&P 500 index return as well as a positive contemporaneous

link with the volume of the S&P 500 index. Second, the term spread has a slightly negative

long-run impact in the VIX index, when possible multicollinearity and endogeneity are controlled for.

Finally, we cannot reject the linearity of the above relationships, neither in sample nor out of sample.

As for the latter, we actually show that it is pretty hard to beat the pure HAR process because of the very

persistent nature of the VIX index.

We derive the asymptotic distribution of the ordinary least squares estimator in a regression with cointegrated variables under misspecification and/or nonlinearity in the regressors. We show that, under some circumstances, the order of convergence of the estimator changes and the asymptotic distribution is non-standard. The t-statistic might also diverge. A simple case arises when the intercept is erroneously omitted from the estimated model or in nonlinear-in-variables models with endogenous regressors. In the latter case, a solution is to use an instrumental variable estimator. The core results in this paper also generalise to more complicated nonlinear models involving integrated time series.

We exploit a 2004 credit reform in Brazil that simplified the sale of repossessed cars used as collateral for auto loans. We show that the change has led to larger loans with lower spreads and longer maturities. The reform expanded credit to riskier, low-income borrowers for newer, more expensive cars. Although the credit reform improved riskier borrowers’ access to credit, it also led to increased incidences of delinquency and default. Our results shed light on the consequences of a credit reform, highlighting the crucial role that collateral and repossession play in the liberalization and democratization of credit.

Neste artigo, introduz-se ao modelo de crescimento neoclássico a defasagem necessária para que o investimento público se consolide em capital público (processo time-to-build,0), assim como alíquotas tributárias distorcivas que se ajustam de acordo com a dívida acumulada pelo setor público. O objetivo é isolar quantitativamente o efeito do aumento do investimento público observado no Programa de Aceleração do Crescimento (PAC). Dependendo da defasagem associada ao processo time-to-build e da política de ajuste fiscal consideradas, o PAC pode ter induzido uma queda do produto entre 0,2% e 0,4% em um horizonte de até quatro anos.