Measuring core inflation as the common trend of prices

In recent years, many central banks have adopted inflation targeting policies starting an intense debate about which measure of inflation to adopt. The literature on core inflation has tried to develop indicators of inflation which would respond only to "significant" changes in inflation. This paper defines a measure of core inflation as the common trend of prices in a multivariate dynamic model, that has, by construction, three properties: it filters idiosyncratic and transitory macro noises, and it leads the future leveI of headline inflation. We also show that the popular trimmed mean estimator of core inflation could be regarded as a proxy for the ideal GLS estimator for heteroskedastic data. We employ an asymmetric trimmed mean estimator to take account of possible skewness of the distribution, and we obtain an unconditional measure of core inflation.

Interests prices and the Barosky - Summers resolution of the Gibson paradox under the gold standard

This paper presents a structural monetary úamework featunng a demand function for non-monetary uses of gold, such as the one drawn by Barsky and Summers in their 1988 analy8ÚI of the Gibson Paradox as a natural concomitant of the gold standard period. That structural model predicts that the laws of behavior of nominal prices and interest rates are functions of the rules set by the government to command the money supply. !ta fiduciary vemon obtaina Fisherian relationships &8 particular cases. !ta gold atandard 801ution yields a modelsimilar to the Barsky and Summers model, in which interest rates are exogeneous and subject to shocb. This paper integrates governnment bonds into the analysis, treats interest rates endogenously, and ahifts the responsibility for the shocb to the government budgetary financing policies. The Gibson paradox appears as "practically" the only cl&18 of behavioral pattern open for interest rates and price movements under apure gold standard economy. Fisherian-like relationshipe are utterly ruled out.

Export-led recoveries in small open industrialized economies

This paper studies the role of Vertical Specialization-based trade and foreign damand push as elements capable of explaining export-led recoveries in small open industrialized economies. The empirical evidence on export-led recoveries is reviewed. Data supporting the growing importance of vertical specialization for international trade are presented. I compare the performance of two versions of a small open economy model, calibrated to mimic Canadian Business Cycles. The …rst one is based upon Schmitt-Grohe(1998). The second incorporates Vertical- Specialization-based trade. I show that an arti…cial economy featuring Vertical-Specializationbased trade in conjunction with an exogenous AR(2) process for foreign output displays improved impulse responses to a foreign output shock and is able to mimic the contribution of Canadian exports to output growth during economic recoveries.

Inflation persistence and flexible prices

The inability of rational expectation models with money supply rules to deliver inflation persistence following a transitory deviation of money growth from trend is due to the rapid adjustment of the price level to expected events. The observation of persistent inflation in macroeconomic data leads many economists to believe that prices adjust sluggishly and/or expectations must not be rational. Inflation persistence in U.S. data can be characterized by a vector autocorrelation function relating inflation and deviations of output from trend. In the vector autocorrelation function both inflation and output are highly persistent and there are significant positive dynamic cross-correlations relating inflation and output. This paper shows that a flexible-price general equilibrium business cycle model with money and a central bank using a Taylor rule can account for these patterns. There are no sticky prices and no liquidity effects. Agents decisions in a period are taken only after all shocks are observed. The monetary policy rule transforms output persistence into inflation persistence and creates positive cross-correlations between inflation and output.

The effects of government deficit on equilibrium real exchange rates and stock prices

This paper studies the effect of government deficits on equilibrium real exchange rates and stock prices. The theoretical part modifies a two-country cash-in-advance model like used in Lucas(1982) and Sargent(1987) in order to accommodate an exchange rate market and a government that pursues fiscal and monetary policy targets. The implied result is that unanticipated shocks in government deficits raise expectations of both taxes and inflation and, therefore, are associated with real exchange rate devaluations and lower stock prices. This finding is strongly supported by empirical evidence for a group of 19 countries, representing 76% of world production

WTO-plus commitments on the elimination of export duties: evidence of a two-tier membership?

This descriptive paper examines the prevalence of ‘WTO-plus’ commitments in accession protocols of newly acceded Members, with a focus on commitments on the elimination of export duties. It presents preliminary results of a mapping exercise carried out with respect to these commitments and seeks to answer two questions. First, can any general conclusions be drawn as to the prevalence of these commitments or are they, per definition, country-specific. Second, has the political nature of the WTO accession process allowed for the creation of a two-tier membership. The first question is answered by relying on data gathered as part of the ongoing PhD-research project conducted by the author. The project aims to construct a typology of WTO-plus commitments to allow for a more detailed analysis of the relationship between these commitments and the baseline obligations in the covered agreements. The accession of China to the WTO is commonly considered as the prime example of the inclusion of WTO-plus obligations in accession protocols. The paper tries to answer the question whether this particular accession was truly unique in nature, or whether the inclusion of “Plus” obligations is less exceptional than often assumed. Additionally, the accession protocols of other recently acceded-Members are examined to establish whether the hypothesis holds. In the PhD-research project this comparative methodology will also be applied to map WTO-plus commitments in other areas, such as anti-dumping and transparency. The second question will be answered in two stages. In a preliminary stage, international institutional law will be used to by analyzing the way in which the WTO’s Dispute Settlement Body has dealt with this type of WTO-plus commitment in its jurisprudence. The second stage deals with the question of hierarchy: Accession Protocols are negotiated with the WTO Membership, by each country willing to accede to the WTO. This poses questions as to their exact position in the system of WTO law. To establish whether evidence of a two-tier membership is present, one first has to turn back to the question whether Accession Protocols are a separate (or independent) legal instrument or an “integral part” of the WTO system of covered agreements. If newly acceded Members do not benefit from the general exceptions in order to balance their more stringent, WTO-plus, obligations, this may support the conclusion that the membership of the World Trade Organization is becoming, in fact, two-tiered.

Optimal monetary policy under administered prices

This work aims to analyze the interaction and the effects of administered prices in the economy, through a DSGE model and the derivation of optimal monetary policies. The model used is a standard New Keynesian DSGE model of a closed economy with two sectors companies. In the first sector, free prices, there is a continuum of firms, and in the second sector of administered prices, there is a single firm. In addition, the model has positive trend inflation in the steady state. The model results suggest that price movements in any sector will impact on both sectors, for two reasons. Firstly, the price dispersion causes productivity to be lower. As the dispersion of prices is a change in the relative price of any sector, relative to general prices in the economy, when a movement in the price of a sector is not followed by another, their relative weights will change, leading to an impact on productivity in both sectors. Second, the path followed by the administered price sector is considered in future inflation expectations, which is used by companies in the free sector to adjust its optimal price. When this path leads to an expectation of higher inflation, the free sector companies will choose a higher mark-up to accommodate this expectation, thus leading to higher inflation trend when there is imperfect competition in the free sector. Finally, the analysis of optimal policies proved inconclusive, certainly indicating that there is influence of the adjustment model of administered prices in the definition of optimal monetary policy, but a quantitative study is needed to define the degree of impact.

Volatility of returns, variations in prices and volume traded: evidence from the main stocks in Brazil

We study the relationship between the volatility and the price of stocks and the impact that variables such as past volatility, financial gearing, interest rates, stock return and turnover have on the present volatility of these securities. The results show the persistent behavior of volatility and the relationship between interest rate and volatility. The results also showed that a reduction in stock prices are associated with an increase in volatility. Finally we found a greater trading volume tends to increase the volatility.

Brazilian competitiveness on international trade

In recent years, Brazil benefited from foreign trade expansion and its exports of goods grew by 16.5%. If this strong growth trend keeps up for the next years, today’s bottlenecks may have a negative impact on the competitiveness of the country’s products in the global market. This is especially critical for one of the main “green fuels” producers in a scenario where the demand for this energy source grows due to rising oil prices and environmental concerns. Based on a survey that collected data from 250 Brazilian exporters, this study focuses on the constraints that reduce the competitiveness of exports. This study differs from previous ones in that it considers the professionals directly involved with export activities and evaluates different aspects, including logistics, operations, taxes, legal, bureaucratic and informational ones. Results show that the most important constraints strongly affect costs and delivery reliability