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Dissertations

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.

Internal migration and economic shocks: Evidence from droughts in semiarid Brazil

This article studies out-migration responses from Brazilian semiarid population following drought shocks. Migration acts as a coping strategy in poor and rural places as weather shocks exacerbate limited credit and liquidity availability. To find evidence of those mechanisms we compute migration rates at the municipality level starting in 1975 until 2010 using official Census data. Results show that migration rates from the semiarid rise following a drought, especially in the 70s and 80s. Furthermore, we investigate if mobility responses are less pronounced in municipalities where: (i) a larger share of its citizens is eligible to receive rural social security benefits, (ii) have an extended network of bank branches or (iii) built more drought mitigation infrastructure projects

Roberta Souza Costa Olivieri.


Orientador: Juliano Assunção.

Co-orientador: Gustavo Gonzaga.

Banca: Arthur Amorim Bragança. Francisco Junqueira Moreira da Costa.

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The Expectations Hypothesis Holds. At Times

The yield curve literature typically assumes long-term interest rates are given by expected future short-term rates and/or risk premia. We show that the relative importance of the expectational component vis-à-vis the risk premium component can be time-varying and state-dependent. Further, the likelihood of an "Expectations Hypothesis (EH) State" has a clear relation to the business cycle. Moreover, our results indicate that incorporating the probability of these EH states boosts the predictive power of the benchmark yield curve measure, the term spread, both for future excess bond returns and economic activity

Fernando Luiz Macedo Cardoso.


Orientador: Carlos Viana de Carvalho.

Co-orientador: Ruy Monteiro Ribeiro.

Banca: Marcelo Medeiros. Emanuel Monch.

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Inflation Targeting with a Fiscal Taylor Rule

Most national governments use the short-term interest rate as the main tool to stabilize the economy, raising the rate to contain upward pressures on inflation or output and lowering it when the opposite is needed. This framework has worked well in many places and periods but not everywhere nor all the time. Governments that were led to maintain high interest rates for long periods paid a high budgetary cost for it, and since 2008 many countries found themselves constrained by the effective lower bound. This work aims to study an alternative inflation targeting regime where the interest rate is kept constant and the consumption tax rate is used as the stabilizing tool that reacts to inflation and to the output gap, which we call a fiscal Taylor rule (FTR). Using a standard medium-scale DSGE model, we obtain Bayesian estimates of parameters and shocks to closely replicate the main macroeconomic variables of the US economy during the Great Moderation period (1985-2007) assuming a standard Taylor rule was in place, and we apply these estimated shocks to the model where the standard Taylor rule is replaced by the FTR. We find that compared to the standard Taylor rule, the FTR is capable of providing similar performance in terms of economic stabilization and thus constitutes a theoretically viable option for policy framework

Eduardo Henrique Leitner.


Orientador: Yvan Bécard.

Banca: Eduardo Zilberman. Bernardo Vasconcellos Guimarães.

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Immigrants' Networks and Trade: Evidence from Brazil

This paper investigates the impact of immigrants' (foreigners) links with their home-country on Brazilian imports and exports of goods. According to the literature, immigrants affect positively both imports and exports because they possess superior knowledge of home country markets aspects, language skills and business contacts that mitigate informal barriers to trade. However, most of the published studies focused on evaluating these matters in developed economies contexts. Differently, to test the empirical significance and magnitude of these effects we use Brazilian detailed data (unexplored by literature) from 2000 to 2016 at the municipality and worker level to estimate augmented gravity equations. According to the results, municipalities with relatively more immigrants from a particular country (especially the ones holding management positions in international trading firms) trade more with this country. The results also indicate larger effects for differentiated products and for countries with different religious beliefs and institutions from Brazil.

Carlos Henrique Gomes de Brito.


Orientador: Juliano Assunção.

Co-orientador: Thierry Verdier.

Banca: Emanuel Augusto Rodrigues Ornelas. Gustavo Gonzaga.

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Forecasting Employment and Unemployment in US: A Comparison between models

Forecasting employment and unemployment is of great importance for mainly all agents in the economy. Employment is one of the main variables analyzed as an an economic indicator, and unemployment serves to policy makers as a guide to their actions. On this essay, I study what features of both series we can use on data treatment and methods used to add to the forecasting predictive power. Using an AR model as a benchmark, I compare machine (Random Forest) and deep (Long Short Term Memory) learning methods, seeking to capture non linearities of both series dynamics. Our findings shows that an AR model with a Random Forest on residuals (as a way to separate linear and non linear part) is the best model for employment forecast, and LSTM is the best for unemployment forecast in longer horizons

Marcos Lopes Muniz.


Orientador: Marcelo Medeiros.

Banca: Diogo Abry Guillén. Eduardo Zilberman.

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Nowcasting GDP with Machine Learning Models: Evidence from the US

This paper examines the use of Machine Learning (ML) models to compute estimates of current-quarter US Real GDP growth rate (nowcasts). The methods used can handle large data sets with unsynchronized release dates, and nowcasts are updated each time new data are released along the quarter. A pseudo-out-of-sample exercise is proposed to assess the forecasting performance and to analyze the variable selection pattern of these models. The ML method that deserves more attention is the Target Factor, which overcomes the usually adopted dynamic factor model for some predictions vintages in the quarter. We also analyze the variables selected, which are consistent between models and intuition

Lucas Seabra Maynard da Silva.


Orientador: Marcelo Medeiros.

Banca: Diogo Abry Guillén. Eduardo Zilberman.

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Demographics and Real Interest Rate in the US economy

I develop an overlapping generations model with life cycle wage profile (LCWP), age-dependent mortality rate, liquidity constraints, and nominal rigidities. The model is calibrated to capture US demographic transition, LCWP estimations, and other salient features of the US economy during 1950-2017. The model is then used to examine the relationship between demographics and real interest rates and the main transmission mechanisms in play. I find that the rapid increase in the working age population from 1950-1980s has significantly contributed to the rise of real interest rates. The reversion of this process together with the increase in life expectancy triggered a rapid decline in the interest rates ever since. The heterogeneity in the marginal propensity to consume among workers plays a major role in connecting these fertility and real interest rate movements.

In an additional exercise, due to the evidence on large life expectancy forecast errors, I introduce a learning process about longevity and find that it can significantly augment the relevance of demographic factors in explaining real interest rate movements. Finally, I find that the central banks’ failure to recognize the relationship between demographics and interest rates can generate, due to unaccounted changes in the natural interest rate, inflation rate variations.

Alex Avelino Carrasco Martinez.


Orientador: Carlos Viana de Carvalho.

Banca: Andrea Ferrero. Eduardo Zilberman.

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Brazilian mutual funds life cycle analysis

Funds close and open over time. The existing evidence is that those that close are those with lower cumulative returns in the period prior to closing. This dissertation shows that this closing dynamic also appears in the Brazilian stock funds market. In a sample of 1192 equity funds, from 2002 to 2016, 448 funds closed. Of these, 39 funds lead to the opening of another under the same management. I show that open-ended closing is typically accompanied by increased return volatility, which I interpret as an attempt to change the investment strategy previously followed. However, this change does not change the manager’s abnormal return, as estimated by Carhart’s 4-factor model. Finally, I show that the likelihood of fund closure increases with the number of funds opened by the manager in the month prior to closing. This suggests that managers open new funds before closing others to minimize the chance of losing investors.

Yan Moreira do Rego Barros.


Orientador: Ruy Monteiro Ribeiro.

Co-orientador: Walter Novaes.

Banca: Marcelo Medeiros. Márcio Gomes Pinto Garcia. Walter Novaes.

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Local content in Brazilian oil and gas auctions

In this paper, we study the case of Brazilian oil and gas auctions to assess the impact of local content requirements in bidding behavior, allowing us to estimate its impact on government revenue. The Brazilian case is particularly appealing, as there were significant changes in these requirements throughout the years. In the sales with increased local content requirements there was a dramatic change in the bidders behavior: the average signing bonus for offshore tracts dropped from an average of R$ 57 million in the first sales to only R$ 10.6 million and the average number of bids per tract plunged from 0.92 to 0.12. We aim to answer how much the increased local content requirements affected participation and revenue in the auctions. We develop and estimate a structural auction model within the mineral rights framework that includes an entry decision and bids in multiple dimensions, including a bonus and a local content percentage. Our results show that local content requirements increase costs in deep water areas in 14%. Government revenue in auctions in these areas could be much larger in a counterfactual with no local content requirements, amounting to an extra R$ 17 billion in signing bonus only for deep-water tracts. For onshore areas, we did not find any significant difference between local and foreign costs.

Davi Doneda Mittelstadt.


Orientador: Leonardo Rezende.

Banca: Nathalie Gimenes. Marcelo Sant'Anna.

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Two essays on weak identification in Macroeconomic Models

The weak identification problem arises naturally in macroeconomic models. Consequently, instrumental variables methods produce puzzling results more often than what is empirically plausible. We propose novel methods to address puzzles usually featured in two of the main equations in macro models, namely the New-Keynesian Phillips Curve (NKPC) and the Euler Equation (EE). For the former, difficulties to estimate a positive slope without incurring a degree of stickiness incompatible with the micro evidence are widely known. We address the matter in the first chapter, proposing a richer framework of a multi-sector economy with price-setting heterogeneity. The procedure generates positive and roughly unchanging slope coefficients across econometric settings, as well as degrees of stickiness in line with the micro data, both regarding the entire economy and the cross section of sectors. Importantly, all of these estimates move consistently with implications by theory when modifying the model assumptions. The second chapter focuses on the estimation of the elasticity of intertemporal substitution (EIS), central parameter of the EE in models of dynamic choice. There, we argue that the use of officially reported consumption data – which is usually filtered, smoothed, interpolated, etc – distorts estimates of the EIS. A generalised model to “unfilter” available consumption data is proposed, suitable for several types of data – macro and micro – at different frequencies. Estimations based on unfiltered consumption produce considerably more stable estimates of the EIS, regardless of the econometric approach and the type of consumption data used. Results also seem less sensitive to the presence of weak instruments, compared to officially reported data.

Marcus Vinícius Fernandes Gomes de Castro.


Orientador: Carlos Viana de Carvalho.

Co-orientador: Ruy Monteiro Ribeiro.

Banca: João Vitor Issler. Marco Bonomo.

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The Effect of Incarceration on Employment: Evidence from Randomly Assigned Court Divisions in Brazil

In Americas imprisonment policy has increasingly been adopted to deal with law offenders, and a steep increase in countries incarceration rates has been observed since the 1980s. Nevertheless, we still lack evidence on how such penalty affects labour market outcomes of ex-inmates, specially in developing countries. This work exploits the variation in detention tendencies of randomly-assigned judges as an instrumental variable to estimate the impacts of incarceration on formal labour market outcomes. We construct a unique panel dataset merging data from São Paulo city court, containing judicial sentence information with formal employment records. Essentially, we compare individuals who were sentenced to prison with those who were not. We find that the immediate negative impact of sentence to prison on employment tends to fade over time and disappear after release.

Ruan Valente Staffuzza.


Orientador: Pedro Carvalho Loureiro de Souza.

Banca: Claudio Ferraz. Gustavo Gonzaga. Francisco Junqueira Moreira da Costa.

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Ciclos e atividade no mercado de IPO: o papel da inovação e das oportunidades de investimento

A idade média das firmas que abrem capital em bolsas de valores varia significativamente entre países, mesmo entre aqueles com níveis similares de proteção a acionistas minoritários. Nesta dissertação, a variação entre países do tempo para abertura de capital é explicada pela frequência com que oportunidades de novos investimentos aparecem em cada país.

Intuitivamente, novas oportunidade de investimento implicam necessidades de financiamento que permitem à empresa de capital fechado se expor aos mercados bancário e de capitais, gerando um fluxo de informações que aumentam a probabilidade de a devedora atingir um nível de avaliação de crédito que dá acesso ao mercado acionário. O modelo prevê ondas de IPO concentradas em épocas de crescimento econômico e otimismo no país.

Pedro Kenzo de Alencar Ohi.


Orientador: Walter Novaes.

Banca: Humberto Moreira. Vinicius Nascimento Carrasco.

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Value Premium and Growth Expectations

Value stocks tend to have higher returns on average. Their performance is particularly stronger when the value spread, defined by differences in B/M ratios, between value and growth stocks is wider. In this paper, we show that this predictability becomes even stronger when we account for the spread in growth, measured by short-term expectations, long-term expectations, and past growth. We use analyst expectations on individual firm´s earnings to construct a range of proxies for earnings growth expectations. We find that adding the growth spread greatly increases the predictive power also in out-of-sample tests.

Kaian Arantes Oliveira.


Orientador: Ruy Monteiro Ribeiro.

Banca: Walter Novaes. Axel André Simonsen.

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Wealth inequality in heterogeneous agent models: the role of portfolio choice

We introduce households’ portfolio decisions in a heterogeneous agents model to evaluate how this affects wealth inequality. To do so, we alter the Krusell and Smith (1998) model, incorporating a decreasing returns to scale technology, so that the representative firm issues risk-free bonds to raise capital for production and distributes profits (or losses) to equity holders. We also make use of Epstein-Zin preferences to augment the model’s equity premium, by increasing households risk aversion. The model is able to replicate stylized facts: (i) poorest households seldom participate in the equity markets; (ii) households allocate higher proportions of their savings to equity investments as they get wealthier; (iii) households’ expected return on savings increases with wealth. Inequality of wealth does increase in the model with portfolio decisions. Nevertheless, the effect on wealth inequality is small due to the low level of equity premium generated by the model. The result in unchanged even when we set very high values for risk aversion, and it is related to the lack of consumption growth volatility delivered by this class of model. Finally, we document that taking into account endogenous portfolio decisions enhances the effects of other sources of inequality.

Cesar Augusto Mendonça Zambrano.


Orientador: Eduardo Zilberman.

Co-orientador: Márcio Gomes Pinto Garcia.

Banca: Yvan Bécard. Felipe Iachan.

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Capital Controls in Latin American Economies: Stylized Facts, Optimality and Welfare Analysis

The present work investigates the relationship between capital controls and external accounts in Latin American economies and addresses the idea of capital control’s optimality in a small open economy. The work presents capital controls as countercyclical, where they are intended to mitigate adverse shocks in the current account. Also, using data for the Brazilian economy, the results suggest that capital controls may mitigate the volatility of the economy and allow welfare gains in the steady state. At the same time, the work shows that, at excessive taxation, an ad-hoc capital control loses its capacity to generate welfare gains, which in turn alludes certain parsimony in their introduction.

Vitor Araujo de Holanda Jó.


Orientador: Márcio Gomes Pinto Garcia.

Co-orientador: Diogo Abry Guillén.

Banca: Cristina Terra. Eduardo Zilberman. Marcel Scharth.

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Anchored Expectations and the Term Structure of Bond Yelds

The relation between asset prices, monetary policy expectations, and macroeconomic data releases has long been assessed by the literature. This dissertation addresses the implications of the anchoring or unanchoring of long-run inflation expectations, as a stance of monetary policy, to the term structure of bond yields. In particular, it aims to understand how this mechanism is connected to the time-varying pattern of both the volatility of nominal yields and their sensitivity to macroeconomic surprises. To that matter, we present a New-Keynesian model with two main characteristics. First, agents have subjective beliefs instead of rational expectations. They learn about the inflation target set by the central bank and their expectations may become anchored or unanchored over time, given the state of the economy. Second, agents face time-varying risk aversion. The model has one main prediction: the sensitivity of the term structure to inflation surprises is not only time-varying, but state-dependent.

Marcela Carvalho Ferreira de Mello.


Orientador: Carlos Viana de Carvalho.

Banca: Marco Bonomo. Stefano Eusepi.

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School Time and Crime: Incapacitation Effects in Brazil

Juvenile crime imposes non-trivial costs to societies, which have made its determinants and deterrents increasingly subject of study by economists. School-based interventions are often proposed in order to mitigate the rise in criminal careers and the perpetuation of violence. However, the directions and channels through which schooling may affect crime vary. This paper studies one of them - namely the incapacitation effects - exploiting a federal program that extended school hours in Brazilian public schools. Using quasiexperimental variation in the probability of receiving the program and georeferenced crime data from the state of São Paulo, it is possible to estimate the causal effect of the program on criminal activity in the surroundings of the schools. Results suggest incapacitation does prevent juveniles from engaging in less offensive crimes, with stronger evidence for drug-related crimes and for schools with poorer students.

Eduardo Fagundes de Carvalho.


Orientador: Claudio Ferraz.

Banca: Daniel Ricardo de Castro Cerqueira. Gustavo Gonzaga.

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The tax benefits of interest on Equity: Why so many firms forgo them?

Desde 1996, a legislação fiscal brasileira permite que as empresas distribuam lucros para os seus acionistas em duas maneiras distintas: Dividendos e Juros sobre o Capital Próprio. Os Juros sobre o Capital Próprio pagos aos acionistas são dedutíveis do imposto de renda da firma pagadora, mas são tributados no nível do acionista beneficiário. Os dividendos pagos, por outro lado, não podem ser deduzidos do imposto de renda da firma pagadora, mas em contrapartida, não são tributados ao nível do acionista. Tudo o mais, há uma vantagem fiscal em distribuir lucros em Juros sobre o Capital Próprio ao invés de dividendos. Entretanto, muitas empresas brasileiras de capital aberto dispensam essa vantagem fiscal ao distribuir lucros exclusivamente via dividendos. Eu proponho que problemas de agência seriam responsáveis por esse puzzle. Caso uma firma opte por pagar dividendos, os custos fiscais de não distribuir lucros em Juros sobre Capital Próprio são igualmente divididos entre todos os acionistas. Os acionistas controladores, por outro lado, arcam com grande parte do ônus fiscal dos Juros sobre o Capital Próprio recebidos caso a firma possua uma estrutura acionária piramidal. Apresento evidência de que tal assimetria na distribuição dessa carga fiscal pode ser a razão pela qual tantas firmas abdicam de distribuir lucros via Juros sobre Capital Próprio.

Matheus Almeida Dalalana D´Amico.


Orientador: Walter Novaes.

Banca: Ruy Monteiro Ribeiro. Patrick Behr.

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Pretrial detention and rearrest: evidence from Brazil

In most legal systems, detaining individuals pretrial is a common practice. Pretrial detention prevents that defendants commit crimes while they wait for their trials, but prison experiences can also encourage future criminal activity. In this paper, we use novel data on detention hearings and in flagrante delicto arrests in the state of Rio de Janeiro to assess the effect of pretrial detention on future crime. Since detention assignment is endogenous to defendants’ characteristics, we adopt an instrumental variable approach that exploits randomly assigned judges who differ in terms of their idiosyncratic tendencies of ordering pretrial detention. Our findings suggest that pretrial incarceration reduces rearrest in the medium term, and that this effect is entirely driven by incapacitation effects. We also provide evidence that pretrial detention increases the probability and the severity of post-release crime.

Beatriz Machado Ribeiro.


Orientador: Claudio Ferraz.

Banca: Joana da Costa Martins Monteiro. Rodrigo Reis Soares.

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