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.

Price Dispersion in Dynamic Competition

N 675, 05/10/2020

In product markets, there exists substantial dispersion in prices for transactions of physically identical goods, and incumbent sellers sell at higher prices than entrants. This study develops a theory of dynamic pricing that explains these facts as results from the same fundamental friction: Buyers are imperfectly aware of which sellers are operating, and the degree of awareness about a seller is  ndogenous. The equilibrium is unique and efficient, and features randomized pricing strategies where incumbents post higher prices than entrants. If buyers' memory depreciation is low, then the equilibrium of the industry tends to approximate perfectly competitive conditions over time.

Rafael Roos Guthmann.

Online Action Learning in High Dimensions: A New Exploration Rule for Contextual et-Greedy Heuristics

N 674, 29/09/2020

Bandit problems are pervasive in various fields of research and are also present in  several practical applications. Examples, including dynamic pricing and assortment and the design of auctions and incentives, permeate a large number of sequential treat- ment experiments. Different applications impose distinct levels of restrictions on viable actions. Some favor diversity of outcomes, while others require harmful actions to be closely monitored or mainly avoided. In this paper, we extend one of the most popular bandit solutions, the original et-greedy heuristics, to high-dimensional contexts. Moreover, we introduce a competing exploration mechanism that counts with searching sets based on order statistics. We view our proposals as alternatives for cases where pluralism is valued or, in the opposite direction, cases where the end-user should carefully tune the range of exploration of new actions. We find reasonable bounds for the cumulative regret of a decaying et-greedy heuristic in both cases, and we provide an upper bound for the initialization phase that implies the regret bounds when order statistics are considered to be at most equal but mostly better than the case when random searching is the sole exploration mechanism. Additionally, we show that endusers have sufficient  exibility to avoid harmful actions since any cardinality for the higher-order statistics can be used to achieve stricter upper bound. In a simulation exercise, we show that the algorithms proposed in this paper outperform simple and adapted counterparts.


Claudio Cardoso Flores, Marcelo Medeiros.

Lockdown effects in US states: an artificial counterfactual approach

N 673, 15/09/2020

We adopt an artificial counterfactual approach to assess the impact of lockdowns on the short-run evolution of the number of cases and deaths in some US states. To do so, we explore the different timing in which US states adopted lockdown policies, and divide them among treated and control groups. For each treated state, we construct an artificial counterfactual. On average, and in the very short-run, the counterfactual accumulated number of cases would be two times larger if lockdown policies were not implemented

Carlos B. Carneiro, Iuri Honda Ferreira, Marcelo Medeiros, Henrique Fernandes Pires, Eduardo Zilberman.

From Zero to Hero: Realized Partial (Co)Variances

N 672, 10/07/2020

This paper proposes a generalization of the class of realized semivariance and semicovariance

measures introduced by Barndorff-Nielsen, Kinnebrock and Shephard (2010) and

Bollerslev, Li, Patton and Quaedvlieg (2020a) to allow for a finer decomposition of realized

(co)variances. The new “realized partial (co)variances” allow for multiple thresholds with

various locations, rather than the single fixed threshold of zero used in semi (co)variances.

We adopt methods from machine learning to choose the thresholds to maximize the out-ofsample

forecast performance of time series models based on realized partial (co)variances.

We find that in low dimensional settings it is hard, but not impossible, to improve upon the

simple fixed threshold of zero. In large dimensions, however, the zero threshold embedded

in realized semi covariances emerges as a robust choice.

Tim Bollerslev, Marcelo Medeiros, Andrew J. Patton, Rogier Quaedvlieg.

Transfers vs Credit Policy Macroeconomic Policy Trade-offs during Covid-19

N 671, 11/05/2020

The Covid-19 crisis has lead to a reduction in the demand and supply of sectors that produce goods that need social interaction to be produced or consumed. We interpret the Covid-19 shock as a shock that reduces utility stemming from “social” goods in a two-sector economy with incomplete markets. We compare the advantages of lump-sum transfers versus a credit policy. For the same path of government debt, transfers are preferable when debt limits are tight, whereas credit policy is preferable when they are slack. A credit policy has the advantage of targeting fiscal resources toward  agents that matter most for stabilizing demand. We illustrate this result with a calibrated model. We discuss various shortcomings and possible extensions to the model.

Publicado como  NBER Working paper no. 27118 




Saki Bigio, Mengbo Zhang, Eduardo Zilberman.

Short-Term Covid-19 Forecast for Latecomers

N 670, 17/04/2020

The number of Covid-19 cases is increasing dramatically worldwide. Therefore, the availability of reliable forecasts for the number of cases in the coming days is of fundamental importance. We propose a simple statistical method for short-term real-time forecasting of the number of Covid-19 cases and fatalities in countries that are latecomers – i.e., countries where cases of the disease started to appear some time after others. In particular, we  propose a penalized (LASSO) regression with an error correction mechanism to construct a model of a latecomer in terms of the other countries that were at a similar stage of the pandemic some days before. By tracking the number of cases and deaths in those countries, we forecast through an adaptive rolling-window scheme the number of cases and deaths in the latecomer. We apply this methodology to Brazil, and show that (so far) it has been performing very well. These forecasts aim to foster a better short-run management of the health system capacity.

Marcelo Medeiros, Alexandre Street, Davi Valladão, Gabriel F. R. Vasconcelos, Eduardo Zilberman.

Speculation-Driven Business Cycles

N 669, 06/01/2020

Speculation, in the spirit of Harrison and Kreps [1978], is introduced into a standard real business cycle model. Investors (speculators) hold heterogeneous beliefs about firm growth. Firm ownership, and thus, the firm’s discount factor varies with waves of optimism and leverage. These waves ripple into firm investments in hours. The firm’s discount discount factor links the equity premium and labor volatility puzzles. We obtain an upper bound to the amplification that can be generated by speculation for any model of beliefs -- a factor of 1.5. A calibration based on diagnostic beliefs amplifies hours volatility by a factor of 1.15 and produces a bubble component of 20 percent.

Saki Bigio, Eduardo Zilberman.

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 Gomes Pinto 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 Gomes Pinto 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 Viana de 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 Viana de Carvalho, Tiago Tavares Flórido, Eduardo Zilberman.

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