Pro- and anti-market reforms in democratic Brazil

Instituto Brasileiro de Economia

Credit shocks and monetary policy in Brazil: a structural FAVAR approach

This paper investigates the implications of the credit channel of the monetary policy transmission mechanism in the case of Brazil, using a structural FAVAR (SFAVAR) approach. The term structural comes from the estimation strategy, which generates factors that have a clear economic interpretation. The results show that unexpected shocks in the proxies for the external nance premium and the bank balance sheet channel produce large and persistent uctuations in in ation and economic activity accounting for more than 30% of the error forecast variance of the latter in a three-year horizon. The central bank seems to incorporate developments in credit markets especially variations in credit spreads into its reaction function, as impulse-response exercises show the Selic rate is declining in response to wider credit spreads and a contraction in the volume of new loans. Counterfactual simulations also demonstrate that the credit channel ampli ed the economic contraction in Brazil during the acute phase of the global nancial crisis in the last quarter of 2008, thus gave an important impulse to the recovery period that followed.

Cultures at work: the case of italian expatriates in Brazil

Esta tese de mestrado tem por intenção entender quais são as mais importantes diferenças culturais para os expatriados Italianos que trabalham no Brasil e aprender as implicações práticas para o ambiente de trabalho. O método utilizado foi qualitativo, com 23 entrevistas em profundidade com expatriados italianos de nível médio ate top management, com experiência de trabalho no Brasil. Os resultados indicam que os expatriados Italianos experimentam dificuldades com as diferenças em termos de comunicação, distinção entre as esfera profissional e privada, distancia do poder e planejamento. Em contrapartida, outros fatores como a discriminação positiva para os estrangeiros, diferenças em geneder equality e masculinidade, assim como com a atitude positiva dos workplaces e uma economia em crescimento, todos influenciam de maneira positiva a experiência do expatriado. Enfim, algumas sugestões práticas sobre os efeitos das diferenças culturais e sobre a estruturação de um possível cross-cultural training são expostas.

Essays on the credit channel of monetary policy: a case study for Brazil

The onset of the financial crisis in 2008 and the European sovereign crisis in 2010 renewed the interest of macroeconomists on the role played by credit in business cycle fluctuations. The purpose of the present work is to present empirical evidence on the monetary policy transmission mechanism in Brazil with a special eye on the role played by the credit channel, using different econometric techniques. It is comprised by three articles. The first one presents a review of the literature of financial frictions, with a focus on the overlaps between credit activity and the monetary policy. It highlights how the sharp disruptions in the financial markets spurred central banks in developed and emerging nations to deploy of a broad set of non conventional tools to overcome the damage on financial intermediation. A chapter is dedicated to the challenge face by the policymaking in emerging markets and Brazil in particular in the highly integrated global capital market. This second article investigates the implications of the credit channel of the monetary policy transmission mechanism in the case of Brazil, using a structural FAVAR (SFAVAR) approach. The term “structural” comes from the estimation strategy, which generates factors that have a clear economic interpretation. The results show that unexpected shocks in the proxies for the external finance premium and the credit volume produce large and persistent fluctuations in inflation and economic activity – accounting for more than 30% of the error forecast variance of the latter in a three-year horizon. Counterfactual simulations demonstrate that the credit channel amplified the economic contraction in Brazil during the acute phase of the global financial crisis in the last quarter of 2008, thus gave an important impulse to the recovery period that followed. In the third articles, I make use of Bayesian estimation of a classical neo-Keynesian DSGE model, incorporating the financial accelerator channel developed by Bernanke, Gertler and Gilchrist (1999). The results present evidences in line to those already seen in the previous article: disturbances on the external finance premium – represented here by credit spreads – trigger significant responses on the aggregate demand and inflation and monetary policy shocks are amplified by the financial accelerator mechanism. Keywords: Macroeconomics, Monetary Policy, Credit Channel, Financial Accelerator, FAVAR, DSGE, Bayesian Econometrics

Inequality of opportunity in daycare and preschool services in Brazil

In this paper we measure inequality of opportunity in daycare and preschool services in Brazil. For this purpose, we construct an opportunity index that modifies the human opportunity index proposed in the literature and used in Barros et al. (2009) to measure inequality in basic opportunities in Latin America and the Caribbean. Specifically, we construct an opportunity measure that includes not only attendance but also parental choice not to enroll children in daycare or preschool, using data from a supplementary questionnaire included in the 2006 version of Pesquisa Nacional por Amostra de Domicílios (PNAD). The results show that there are large differences between our opportunity index and the human opportunity index for children aged 0-3 years old and considerably smaller differences for children aged 4-6 years old, which suggests that preschool may be closer to a basic opportunity than daycare.

Social security effects on income distribution: a counterfactual analysis for Brazil

According to Diamond (1977), one of the reasons for the existence of social security systems is that they function as an income redistribution mechanism. There is an extensive literature that tests whether social security systems produce the desired results in developed countries (mainly for the U.S.A.). Nevertheless, there is not an obvious consensus about this social security property and there is little evidence for developing countries. In this article, we test this property for the Brazilian Social Security System. In addition, we also look at another question which has not been answered yet in the previous literature. Is the trend of social security systems increasingly progressive or regressive? We conclude that the changes in Brazilian Social Security legislation reduced inequality between 1987 and 1996, but only for the elderly. For the other age groups, there is a stable trend. Results for the period between 1996 and 2006 reveal that the Brazilian system is neutral for all cohorts. Therefore, we found out that social security systems are not an effective mechanism for income redistribution, as predicted by previous studies.

Enforcing international financial standards in Brazil: limits and possibilities for adoption of IOSCO principles

Foreign capital and institutional investors play a key role in the Brazilian capital and financial markets. Internationally promoted regulatory patterns, especially IOSCO principles, have been increasingly influencing administrative rule making by the Brazilian Securities and Exchange Commission (CVM) as well as the adoption of transnational rules in Brazil by means of self-regulatory activity. Even though there is a certain level of convergence of market regulatory standards at the transnational level, implementation and enforcement of rules remains essentially domestic. We analyze two case studies regarding the transposition of international standards into the Brazilian legal system, which illustrate this tension between the transnational and domestic dimensions of financial markets regulation. The first case concerns a CVM rule on disclosure of executive compensation and the its interpretation by local courts. The second case refers to the adoption of suitability rules.

An entry strategy with innovation and differentiation in Brazil and the United States

With the global rise of credit and debit card usage, acquirers play an increasingly important role within the payments industry by processing these types of payment transactions on behalf of merchants. This study focuses on examining two markets – Brazil and the United States – by providing an overview of the market dynamics, the state of the competitive landscape, and the role and impact of regulations and new technologies. In considering these factors, strategic recommendations are provided for new players interested in enter either market. Further, factors such as existing and future opportunities as well as risks are considered.

Performance of incentive contracts in highway PPP projects in Brazil

Private-Public Partnerships (P.P.P.) is a new contractual model institutionalized in 2004 that could be used to remedy to the infrastructure deficit in Brazil. In a context of a principal and agent relation, the public partner goal is to give incentives to the private partner in the contract so that their interests are aligned. This qualitative research presents the findings of an empirical study examining the performance of incentive PPP contracts in Brazil in the highway sector. The goal is to explain how the contracting parties can align their interests in an environment of asymmetric information. Literature identified the factors that can influence PPP design and efficient incentive contracts. The study assesses the contribution of these factors in the building of PPP contracts by focusing on the case of the first and only PPP signed in the highway sector in Brazil which is the MG-050. The first step is to describe the condition of the highway network and the level of compliance of the private partner with the contract PPP MG-050. The second step is to explain the performance of the private partner and conclude if the interests of both partners were aligned in contractual aspects. On the basis of these findings and the analysis of the contract, the study formulates suggestions to improve the draft of PPP contracts from the perspective of the incentive theory of contracts.

Mapping digital media: Brazil

The impact of digitization was felt before it could be described and explained. The Mapping Digital Media project is a way of catching up, an ambitious attempt at depicting and understanding the progress and effects of digitization on media and communications systems across the world. The publication of over 50 country reports provides the most comprehensive picture to date on the changes undergone by journalism, news production, and the media as a result of the transition of broadcasting from analog to digital and the advent of the internet. These extensive reports, all sharing the same structure, cover issues such as media consumption, public media, changes in journalism, digital activism, new regulation, and business models. Reports have been published from nine Latin American countries: Mexico, Argentina, Colombia, Peru, Chile, Brazil, Guatemala, Nicaragua, and Uruguay. Given the recent evolution of Brazil’s media landscape and regulation, and its position as a regional reference, few reports have generated as much expectation as the Brazilian one. This excellent text is key to understanding digitization in Brazil, in Latin America, and in the world at large.

Exchange students in Brazil: some factors behind its choice - empirical evidences from a Brazilian school

O Brasil sempre foi um lugar conveniente para se visitar em termos de cultura, diversão e entretenimento. No entanto, este estudo visa o lado educacional do país, particularmente, os estudantes estrangeiros que escolhem o Brasil para programas de intercâmbio. Fins e razões por trás das escolhas dos estudantes foram identificados através de pesquisas quantitativas e qualitativas, juntamente com a revisão da literatura já existente. A pesquisa primária foi feita por meio de entrevistas com estudantes de intercâmbio já no Brasil. Os dados coletados foram analisados e são apresentados de forma estatística, juntamente com a representação gráfica. O seguinte estudo apontou que os denominados “turistas” e, assim chamados, “money seekers”, serem os principais fatores por trás da escolha de estudantes. A pesquisa também mostra que os alunos mais satisfeitos foram os que escolheram o Brasil por causa da qualidade da universidade sede, assim como para explorar as perspectivas de emprego, juntamente com iniciar uma carreira no Brasil.

The establishment mode choise of German multinational enterprises in Brazil: a comparative approach

We examine the drivers behind the establishment mode choice of German multinational enterprises (MNEs) in the sectors of Automotive, Chemicals and Mechanical Engineering in Brazil for the years 1993-2013 using a novel sample of primary data obtained directly from German MNEs. Based on prevalent theories found in the literature, we test the most common hypotheses on our sample. Firms with high R&D activities and firms with prior market knowledge in Brazil in from of previous sales offices are more likely to enter Brazil by a Greenfield investment. We also show that it is the specific private ownership of the German so-called hidden champions that drive those specific SMEs to enter Brazil by Greenfield, a sneaking suspicion that has been made before. Finally, we show that the establishment mode choice between Brazil and the USA only deviates to a low extent, with German MNEs preferring to enter Brazil by Greenfield and the USA by M&A. Thereby, we provide valuable insights for future research in this field.

Rent-sharing in Brazil: using trade liberalization as a natural experiment

This paper examines the extent of rent-sharing in Brazil, between 1988 and 1995, combining two different data sets: annual industrial surveys (pIA) and annual household surveys (PNADs). The aim is to use the trade liberalization policies that took place in Brazil in the early 1990s as a "natural experiment" to examine the impact ofproduct market rents on wages. We first estimate inter-industry wage differentials in Brazil, using the household surveys, afier controlling for various observable workers' characteristics. In a reduced form fixed effects equation, these controlled inter-industry differentials are seen to depend on the industries' rate of effective tariff. We also find that LSDV estimates of the effect of value-added per worker (computed using the industrial surveys) on the wage differentials are positive, but somewhat small. However, we find that instrumenting the valued-added with the effective tariffs more than doubles the estimated rent-sharing coefficient. The paper concludes that rent-sharing is prevalent in the Brazilian manufacturing sector, and this mechanism transferred part of the productivity gains due to trade liberalization to manufacturing workers in the form ofhigher (controlled) wage premium.

Optimal rules for monetary policy in Brazil

This paper presents optimal rules for monetary policy in Brazil derived from a backward looking expectation model consisting of a Keynesian IS function and an Augmented Phillips Curve (ISAS). The IS function displays'a high sensitivity of aggregate demand to the real interest rate and the Phillips Curve is accelerationist. The optimal monetary rules show low interest rate volatility with reaction coefficients lower than the ones suggested by Taylor (1993a,b). Reaction functions estimated through ADL and SUR models suggest that monetary policy has not been optimal and has aimed to product rather than inflation stabilization.