Consumption smoothing in Latin America: an empirical assessment of present value models

The study aims to assess the empirical adherence of the permanent income theory and the consumption smoothing view in Latin America. Two present value models are considered, one describing household behavior and the other open economy macroeconomics. Following the methodology developed in Campbell and Schiller (1987), Bivariate Vector Autoregressions are estimated for the saving ratio and the real growth rate of income concerning the household behavior model and for the current account and the change in national cash ‡ow regarding the open economy model. The countries in the sample are considered separately in the estimation process (individual system estimation) as well as jointly (joint system estimation). Ordinary Least Squares (OLS) and Seemingly Unrelated Regressions (SURE) estimates of the coe¢cients are generated. Wald Tests are then conducted to verify if the VAR coe¢cient estimates are in conformity with those predicted by the theory. While the empirical results are sensitive to the estimation method and discount factors used, there is only weak evidence in favor of the permanent income theory and consumption smoothing view in the group of countries analyzed.

Brazilian international and inter-state trade flows: an exploratory analysis using the gravity model

Recent efforts toward a world with freer trade, like WTO/GATT or regional Preferential Trade Agreements(PTAs), were put in doubt after McCallum's(1995) finding of a large border effect between US and Canadian provinces. Since then, there has been a great amount of research on this topic employing the gravity equation. This dissertation has two goals. The first goal is to review comprehensively the recent literature about the gravity equation, including its usages, econometric specifications, and the efforts to provide it with microeconomic foundations. The second goal is the estimation of the Brazilian border effect (or 'home-bias trade puzzle') using inter-state and international trade flow data. It is used a pooled cross-section Tobit model. The lowest border effect estimated was 15, which implies that Brazilian states trade among themselves 15 times more than they trade with foreign countries. Further research using industry disaggregated data is needed to qualify the estimated border effect with respect to which part of that effect can be attributed to actual trade costs and which part is the outcome of the endogenous location problem of the firm.

Income inequality in a job-search model with heterogeneous discount factors: (revised version, forthcoming 2006, Revista Economia)

This paper investigates the income inequality generated by a jobsearch process when di§erent cohorts of homogeneous workers are allowed to have di§erent degrees of impatience. Using the fact the average wage under the invariant Markovian distribution is a decreasing function of the discount factor (Cysne (2004, 2006)), I show that the Lorenz curve and the between-cohort Gini coe¢ cient of income inequality can be easily derived in this case. An example with arbitrary measures regarding the wage o§ers and the distribution of time preferences among cohorts provides some insights into how much income inequality can be generated, and into how it varies as a function of the probability of unemployment and of the probability that the worker does not Önd a job o§er each period.

Estimating the stochastic discount factor without a utility function

Using the Pricing Equation in a panel-data framework, we construct a novel consistent estimator of the stochastic discount factor (SDF) which relies on the fact that its logarithm is the serial-correlation ìcommon featureîin every asset return of the economy. Our estimator is a simple function of asset returns, does not depend on any parametric function representing preferences, is suitable for testing di§erent preference speciÖcations or investigating intertemporal substitution puzzles, and can be a basis to construct an estimator of the risk-free rate. For post-war data, our estimator is close to unity most of the time, yielding an average annual real discount rate of 2.46%. In formal testing, we cannot reject standard preference speciÖcations used in the literature and estimates of the relative risk-aversion coe¢ cient are between 1 and 2, and statistically equal to unity. Using our SDF estimator, we found little signs of the equity-premium puzzle for the U.S.

A stochastic discount factor approach to asset pricing using panel data

Using the Pricing Equation, in a panel-data framework, we construct a novel consistent estimator of the stochastic discount factor (SDF) mimicking portfolio which relies on the fact that its logarithm is the ìcommon featureîin every asset return of the economy. Our estimator is a simple function of asset returns and does not depend on any parametric function representing preferences, making it suitable for testing di§erent preference speciÖcations or investigating intertemporal substitution puzzles.

The effect of guia exame's ratings on the brazilian fund industry: an analysis of net-worth flows

This paper infers the impact the publication Guia Exame (the guide) has on the Brazilian fund industry, more specifically on the ability the concerned funds develop on attracting new investment. The impact is measured using the event-study analysis based on the variation of net worth subsequently to the event of being rated, according to the methodology applied by the guide to rank the funds. We used five years of fund ratings according to Guia Exame (2000-2004) and analyzed the changes of these funds net worth. We also compared the event amongst different categories of funds. The results found confirm the expected effects according to star rankings and asset manager size in all years.

A stochastic discount factor approach to asset pricing using panel data asymptotics

Using the Pricing Equation in a panel-data framework, we construct a novel consistent estimator of the stochastic discount factor (SDF) which relies on the fact that its logarithm is the "common feature" in every asset return of the economy. Our estimator is a simple function of asset returns and does not depend on any parametric function representing preferences. The techniques discussed in this paper were applied to two relevant issues in macroeconomics and finance: the first asks what type of parametric preference-representation could be validated by asset-return data, and the second asks whether or not our SDF estimator can price returns in an out-of-sample forecasting exercise. In formal testing, we cannot reject standard preference specifications used in the macro/finance literature. Estimates of the relative risk-aversion coefficient are between 1 and 2, and statistically equal to unity. We also show that our SDF proxy can price reasonably well the returns of stocks with a higher capitalization level, whereas it shows some difficulty in pricing stocks with a lower level of capitalization.

Targeting the poor: a macroeconomic analysis of cash transfer programs

This paper introduces cash transfers targeting the poor in an incomplete markets model with heterogeneous agents facing idiosyncratic risk. These transfers change the degree of insurance in the economy and affect precautionary motives asymmetrically, leading the poorest households to decrease savings proportionally more than their richer counterparts. In a model economy calibrated to Brazil, once the cash transfer program is adopted, wealth inequality and social welfare increase, poverty decreases, while employment and income inequality remain about the same. Imperfect access to financial markets is important for these results, whereas whether the program is funded with lump sum or distortive taxes is not.

Políticas de cash holdings: uma abordagem dinâmica das empresas brasileiras

Essa dissertação investiga como as empresas brasileiras ajustaram o nível de cash holdings durante o período da crise 2008-2009 em que o crédito de curto prazo é escasso. Utilizamos um modelo dinâmico de caixa para avaliar os principais determinantes da velocidade de ajuste do nível de cash holdings em direção ao nível ótimo, principalmente em períodos de crise quando há um aumento dos custos de ajustes em decorrência da dificuldade de acesso ao crédito bancário. Encontramos evidências empíricas que: a) o comportamento dinâmico de caixa é significativo e os custos de ajustes das empresas brasileiras são altos, impedindo o ajuste imediato para o nível ideal de caixa; b) a baixa velocidade de ajuste da estrutura de caixa é decorrente da pouca disponibilidade de crédito e do alto custo da dívida bancária; c) durante a crise, o capital de giro está positivamente relacionado ao nível de cash holdings, mas como esse recurso é escasso, há retração no capital de giro líquido; d) A falta de linha de crédito bancário que financie o crescimento das empresas, estimula a utilização da dívida de longo prazo para reter caixa e implica em uma relação negativa entre investimentos e cash holdings.

Área de influência no atacado cash & carry

Trata da área de influência de lojas de atacado cash e carry, traçamdo uma analogia com a área de influência do varejo de supermercados. Tenta ainda encontrar uma relação entre o valor da compra e a distância percorrida pelo cliente, buscando subsídios no lote econômico de compra

Evidence of eligibility manipulation for conditional cash transfer programs

This paper assesses whether eligibility for conditional cash transfer programs have been manipulated, as well as the impact of this phenomenon on time allocation within households. To perform this analysis, we use data from the 2006 PNAD (Brazilian national household survey) and investigate the eligibility manipulation for the Bolsa Família (Family Stipend) program during this time period. The program assists families with a monthly per capita income of around R$120.00 (US$60.00). By applying the tests developed by McCrary (2008), we find suggestive evidence that individuals manipulate their income by voluntarily reducing their labor supply in order to become eligible to the program. Moreover, the reduction in labor supply is greater among women, especially single or divorced mothers. This evidence raises some concern about the unintended consequences related to the eligibility criteria utilized by Bolsa Família, as well as the program’s impact on individuals living in extreme poverty.

Balance of payment crises and capital flows : the role of liquidity

A model of externaI CrISIS is deveIoped focusing on the interaction between Iiquidity creation by financiaI intermediaries and foreign exchange collapses. The intermediaries' role of transforming maturities is shown to result in larger movements of capital and a higher probability of crisis. This resembles the observed cycle in capital fiows: large infiows, crisis and abrupt outfiows. The mo deI highlights how adverse productivity and international interest rate shocks can be magnified by the behavior of individual foreign investors linked together through their deposits in the intermediaries. An eventual collapse of the exchange rate can link investors' behavior even further. The basic model is then extended, quite naturally, to study the effects of capital fiow contagion between countries.

Conditional cash transfers, schooling and child labor : micro-simulating bolsa escola

Cash transfers targeted to poor people, but conditional on some behavior on their part, such as school attendance or regular visits to health care facilities, are being adopted in a growing number of developing countries. Even where ex-post impact evaluations have been conducted, a number of policy-relevant counterfactual questions have remained unanswered. These are questions about the potential impact of changes in program design, such as benefit levels or the choice of the means-test, on both the current welfare and the behavioral response of household members. This paper proposes a method to simulate the effects of those alternative program designs on welfare and behavior, based on microeconometrically estimated models of household behavior. In an application to Brazil’s recently introduced federal Bolsa Escola program, we find a surprisingly strong effect of the conditionality on school attendance, but a muted impact of the transfers on the reduction of current poverty and inequality levels.

On impatience, education, returns, and inequality

In this paper we investiga te the impact of initial wealth anel impatience heterogeneities, as wcll as differential access to financia! markets on povcrty anel inequality, anel cvaluate some mechanisms that could be used to alleviate situations in which these two issues are alarming. To address our qucstion we develop a dynamic stochastic general cquilibrium modo! of educational anel savings choicc with heterogeneous agents, where individuais differ in their initial wealth anel in their discount factor. We find that, in the long run, more patient households tend to be wealthier anel more educated. However, our baseline model is not able to give as much skewness to our income distribution as it is rcquircd. We then propose a novel returns structure based on empírica! observation of heterogeneous returns to different portfolios. This modification solves our previous problem, evidencing the importance of the changes made in explaining the existing levels of inequality. Finally, we introducc two kinds of cash transfers programs- one in which receiving thc benefit is conditional on educating the household's youngster (CCTS) anel one frec of conditionalities (CTS) - in order to evaluate the impact of these programs on the variables of concern1 Wc fine! that both policies have similar qualitativo rcsults. Quantitatively, howcvcr, the CCTS outperforms its unconclitional version in all fielcls analyzecl, revealing itself to be a preferable policy.