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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.

International Reserves and Interest Rates

Over the past two decades, the level of international reserves in emerging economies increased significantly. In Brazil, the 2019 level of around 360 billion dollars was considered high by some metrics, based on the precautionary motive. On the other hand, in addition to the opportunity cost, Latin America is also characterized by historically high costs of holding reserves, due to the payment of positive and high interest rates. Behind any model in the literature that studies the optimal level of reserves, there is a trade-off between the insurance benefits and the costs associated with the accumulation of reserves, so that a significant change in this rate is expected to be relevant in the optimization made by the Central Bank. In that sense, recently, the policy-related interest rate in Brazil (Selic) decreased considerably, from 14.25% until October 2016 to 2.25% until June 2020, an all-time low. Addressing this issue, this thesis studies the effect of this change in the direction of Brazil’s monetary policy in the management of foreign exchange reserves. Our counterfactual results show that the net FX reserves level —a benchmark adopted by the Central Bank since August 2019 —, would have fallen in this period, but the decline in the interest rates made it possible for the Central Bank to keep a roughly stable level until 2019.

Alice Oliveira Drumond.


Orientador: Márcio Garcia.

Banca: Marcelo Medeiros. Fabio Kanczuk.

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Debt Collection in peer-to-peer lending market

P2P Lending connects borrowers and lenders via an online platform,
cutting out traditional banking intermediation. By bearing the risk of
borrowers defaulting on their loans, investors rely on the debt collection
process. This paper investigates whether state debt collection laws affect
the ability of debt collectors to recover charged-off debts. Results show that
stricter regulation are linked with lower recovery rates, which in turn leads
to extension of credit to safer borrowers.

Felipe Chokin Tanaka Kotinda.


Orientador: Juliano Assunção.

Banca: Christiano Arrigoni Coelho. Gabriel de Abreu Madeira.

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Political turnover, electoral incentives and public inefficiencies: evidence from unfinished infrastructure projects in Brazil

Public infrastructure projects like roads and schools have been regarded as drivers of development, yet developing democracies systematically fail to deliver such investments, and half-finished projects are a common issue. Using a novel database of over 75,000 small development projects in Brazil, we estimate that more than 40\% of projects that start are never completed. Employing a close races regression discontinuity design on Brazilian mayoral elections, we find that turnover negatively impacts the delivery of projects inherited in a construction stage, while causes positive responses on the delivery of more recent projects. We argue that our results are consistent with a theory linking project non-conclusion to electoral incentives, where inefficiencies on project procurement are driven by a credit-claim dynamics that disincentives the conclusion of works inherited from the opposition. Our findings highlight the importance of insulating policies from the electoral process in local politics.

Gabriel Anesi S. Granato Ferreira.


Orientador: Claudio Ferraz.

Banca: Juliano Assunção. Marcos Yamada Nakaguma.

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Productive and Allocative Efficiency of State Owned Enterprises: Evidence from the Brazilian Privatization Program

In the early 1990s, the Brazilian government carried out one of the largest privatization programs in the world. With microdata on Brazilian firms, we study whether privatization has reduced the costs of production of State-Owned Enterprises (SOEs). Past literature has assessed whether privatization has increased firms’ total factor productivity (TFP). We argue that privatization could impact the costs of production by another mechanism besides TFP: SOEs may exhibit distortions that prevent them from choosing the cost-minimizing mix of inputs, and privatization may mitigate these distortions. By estimating the production function, we can not only estimate the TFP of firms but also write the first-order conditions of the cost minimization problem and obtain a measure of these distortions. Our results suggest firms enhance their TFP following privatization and make better allocations of capital. According to our results, in the long run, the improvement in the allocation decision accounts for 14.37% of the cost reduction after privatization.

Roberto Simonelli Lee.


Orientador: Leonardo Rezende.

Co-orientador: Gustavo Gonzaga.

Banca: Daniel Veloso Chaves. Pedro Cavalcanti Ferreira.

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Monetary and Fiscal Policy in an Open Economy: a Welfare-based Approach

In this paper, we present a New Keynesian two-country Open Economy model featuring consumption home bias, distortionary taxation and stochastic government debt. Within this modeling we compare, in a welfare-based sense, different fiscal and monetary rules with a benchmark constituted by a cooperative Ramsey-policy equilibrium. Additionally, we perform a comparative statics among the policy prescriptions by varying the degree of integration of the two economies, i.e., the consumption home bias parameter

Raffael Russo.


Orientador: Tiago Couto Berriel.

Co-orientador: Yvan Becard.

Banca: Eduardo Zilberman. Marco Bonomo.

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Information asymmetry in Brazilian credit market of SMEs’ investment loans

This paper investigates the presence of moral hazard and adverse selection in the credit market of investment loans granted to micro, small and medium enterprises in Brazil. Using a novel database of over 15 thousand indirect credit operations from BNDES, we explore BNDES distinct credit granting policy and the horizontal changes over time in the offered credit conditions conditions for identification. The results indicate that moral hazard is a relevant phenomenon and that its effect is partially attenuated by advantageous selection in loans with subsidized interest rates.

Daniel Cardoso de Salles.


Orientador: Leonardo Rezende.

Banca: Klênio de Souza Barbosa. Vinicius Nascimento Carrasco.

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A stock market-based political factor

We show that a political factor that exploits cross-sectional variation in individual stock returns can forecast national election results, including net house seat gains and the president. Using US presidential elections since 1928, we also find that this long-short portfolio constructed around the election period delivers information on presidential approval for a long period after the election

Rui Terra Neto.


Orientador: Carlos Viana de Carvalho.

Co-orientador: Ruy Monteiro Ribeiro.

Banca: Eduardo Zilberman. Marcelo Medeiros. Felipe Farah Schwartzman.

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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 Becard.

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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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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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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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 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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