The LDC debt problem: a game-theoretical analisys

We review the LDC debt crisis since 1982, by means of game theory. New insights are obtained into the reasons behind the formation of the creditors' carte1 and the nature of the difficu1ties invo1ved in the formation of the debtors' carte1. The standard view that Rubinstein's barganing mode1s are appropriate for dea1ing with debt re1ief is shown to be faulty, un1ess the debtor buys out the debt.

Processus stochastiques en finance (1ère partie)

Este documento é um texto didático destinado aos estudantes e pesquisadores em econometria e finanças. Baseia-se na experiência dos autores em cursos de pós-graduação nos dois lados do Atlântico: na ULB, Bruxelles e na FGV IEPGE, Rio. Não há a pretensão de rigor matemático, e nem a de cobrir todas as aplicações financeiras da teoria dos processos estocásticos. Esta primeira parte discute as martingales e o movimento browniano, os processos de difusão e a integral estocástica, o lema de Itô e o modelo de Black e Scholes.

Previdencia social no Brasil: por uma reforma mais duradoura

A reforma da previdência social tem sido uma preocupação de vários países: tanto no mundo desenvolvido como no em desenvolvimento. A motivação básica é o esgotamento do modelo de repartição, devido a fatores demográficos: queda de natalidade e aumento da longevidade. Analisando o fenômeno do esgotamento, o artigo propugna pela adesão, tal como no bem sucedido caso chileno, do sistema de capitalização.

First-price auction symmetric equilibria with a general distribution

In this paper I obtain the mixed strategy symmetric equilibria of the first-price auction for any distribution. The equilibrium is unique. The solution turns out to be a combination of absolutely continuous distributions case and the discrete distributions case.

Purchasing power parity and the unit root tests: a robust analysis

Empirical evidence suggests that real exchange rate is characterized by the presence of near-unity and additive outliers. Recent studeis have found evidence on favor PPP reversion by using the quasi-differencing (Elliott et al., 1996) unit root tests (ERS), which is more efficient against local alternatives but is still based on least squares estimation. Unit root tests basead on least saquares method usually tend to bias inference towards stationarity when additive out liers are present. In this paper, we incorporate quasi-differencing into M-estimation to construct a unit root test that is robust not only against near-unity root but also against nonGaussian behavior provoked by assitive outliers. We re-visit the PPP hypothesis and found less evidemce in favor PPP reversion when non-Gaussian behavior in real exchange rates is taken into account.

Debt ceiling and fiscal sustainability in Brazil: a quantile autoregression approach

In this paper we investigate fiscal sustainability by using a quantile autoregression (QAR) model. We propose a novel methodology to separate periods of nonstationarity from stationary ones, which allows us to identify various trajectories of public debt that are compatible with fiscal sustainability. We use such trajectories to construct a debt ceiling, that is, the largest value of public debt that does not jeopardize long-run fiscal sustainability. We make out-of-sample forecast of such a ceiling and show how it could be used by Policy makers interested in keeping the public debt on a sustainable path. We illustrate the applicability of our results using Brazilian data.

Monetary arrangements for emerging economies

In this paper we look at various alternatives for monetary regimes: dollarization, monetary union and local currency. We use an extension of the debt crisis model of Cole and Kehoe ([3], [4] and [5]), although we do not necessarily follow their sunspot interpretation. Our focus is to appraise the welfare of a country which is heavily dependent on international capital due to low savings, for example, and might suffer a speculative attack on its external public debt. We study the conditions under which countries will be better off adopting each one of the regimes described above. If it belongs to a monetary union or to a local currency regime, a default may be avoided by an ination tax on debt denominated in common or local currency, respectively. Under the former regime, the decision to inate depends on each member country's political inuence over the union's central bank, while, in the latter one, the country has full autonomy to decide about its monetary policy. The possibility that the government inuences the central bank to create ination tax for political reasons adversely affects the expected welfare of both regimes. Under dollarization, ination is ruled out and the country that is subject to an external debt crisis has no other option than to default. Accordingly, one of our main results is that shared ination control strengthens currencies and a common-currency regime is superior in terms of expected welfare to the local-currency one and to dollarization if external shocks that member countries suffer are strongly correlated to each other. On the other hand, dollarization is dominant if the room for political ination under the alternative regime is high. Finally, local currency is dominant if external shocks are uncorrelated and the room for political pressure is mild. We nish by comparing Brazil's and Argentina's recent experiences which resemble the dollarization and the local currency regimes, and appraising the incentives that member countries would have to unify their currencies in the following common markets: Southern Common Market, Andean Community of Nations and Central American Common Market.

A note on an application of Arrow's theorem: sufficient conditions for Lucas' inflation and welfare

Bellman's methods for dynamic optimization constitute the present mainstream in economics. However, some results associated with optimal controI can be particularly usefuI in certain problems. The purpose of this note is presenting such an example. The value function derived in Lucas' (2000) shopping-time economy in Infiation and Welfare need not be concave, leading this author to develop numerical analyses to determine if consumer utility is in fact maximized along the balanced path constructed from the first order conditions. We use Arrow's generalization of Mangasarian's results in optimal control theory and develop sufficient conditions for the problem. The analytical conclusions and the previous numerical results are compatible .