Testing unit root based on partially adaptive estimation

This paper proposes unit tests based on partially adaptive estimation. The proposed tests provide an intermediate class of inference procedures that are more efficient than the traditional OLS-based methods and simpler than unit root tests based on fully adptive estimation using nonparametric methods. The limiting distribution of the proposed test is a combination of standard normal and the traditional Dickey-Fuller (DF) distribution, including the traditional ADF test as a special case when using Gaussian density. Taking into a account the well documented characteristic of heavy-tail behavior in economic and financial data, we consider unit root tests coupled with a class of partially adaptive M-estimators based on the student-t distributions, wich includes te normal distribution as a limiting case. Monte Carlo Experiments indicate that, in the presence of heavy tail distributions or innovations that are contaminated by outliers, the proposed test is more powerful than the traditional ADF test. We apply the proposed test to several macroeconomic time series that have heavy-tailed distributions. The unit root hypothesis is rejected in U.S. real GNP, supporting the literature of transitory shocks in output. However, evidence against unit roots is not found in real exchange rate and nominal interest rate even haevy-tail is taken into a account.

The Brazilian credit market for small and medium-sized firms: an adaptive marketing approach

Neste trabalho, o mercado brasileiro de crédito para pequenas e médias empresas (PMEs) é analisado sob a perspectiva do marketing adaptativo, em que se assume que atividades mercadológicas como segmentação, gestão de relacionamento com clientes, apreçamento e desenvolvimento de produtos, são determinadas pela utilidade obtida por agentes de mercado ao atenderem a demanda. Identifica-se que a existência de assimetria de informações e de custos de transação limita e direciona as atividades de marketing no mercado estudado. A partir de uma amostra com 65.535 propostas de crédito, recebidas e avaliadas por um grande banco brasileiro entre janeiro de 2004 e setembro de 2006, estima-se a utilidade do banco em operações de crédito. Adicionalmente, 17.149 transações de empréstimos concedidos pelo banco ao segmento de pequenas empresas entre abril de 2006 e março de 2007, são investigadas. Finalmente, um conjunto de dados com 1,636 registros obtidos pela junção das bases de dados de propostas e de transações mencionados, é analisado em termos das relações entre taxas de juros e os totais de cobertura oferecidas por meio de garantias de crédito. Os resultados revelam a existência de um ambiente de marketing adaptativo, em que os pequenos tomadores de crédito produtivo são racionados, e aceitam pagar taxas de juros mais elevadas do que outros segmentos. Produtos de créditos baseados em garantias líquidas e com altas taxas de juros são desenvolvidos para suprir de maneira oportuna este segmento racionado de pequenas empresas. Ademais, a utilidade do banco em operações de crédito é afetada pela informação privada que captura ao longo de relacionamentos mantidos com seus cientes. Os resultados implicam que o sistema de marketing financeiro brasileiro não desempenha papel formativo no desenvolvimento econômico, que seria de fomento ao crédito produtivo por meio de empréstimos a baixo custo para pequenas e médias empresas. Um sistema formativo de marketing é improvável em um ambiente com informação imperfeita, como o mercado de crédito brasileiro. O estudo traz informações úteis àqueles interessados no desenvolvimento de mercados de crédito produtivo, tais como profissionais de instituições financeiras; agentes responsáveis por políticas públicas e monetárias de fomento ao crédito; e empreendedores de pequeno e médio porte que necessitem de financiamento externo para seus negócios.

Credit borrowing constraints in a DSGE framework: income vs. housing

Credit market in Brazil distinguishes from advanced economies in many aspects. One of them is related to collaterals for households borrowing. This work proposes a DSGE framework, based on Gerali et al.(2010), to analyse one pecularity of Brazillian credit market: payroll-deducted personal loans. To original model, we added the possibility to households contract long term debt and compare to differents types of credit constrains: one based on housing and other based on future income. We callibrate and estimate the model to Brazil, using Bayesian technique. Results show that, in a economy where credit constraints are based on income, responses to shocks appear to be stronger, at first, but dissipate faster. This occurs because income responds quickly to shock than housing prices, so does amount available to loans. In order to smooth consumption, agents compensate lower income and borrowing by increasing working hours, restoring loans and debt in a shorter time.

The Market for borrowing securities in Brazil

We report the results of an exploratory data analysis of the Brazilian securities lending market. The analysis is performed over the full historical data set of each individual loan offer and loan contract negotiated between January 2007 and August 2013. We give a quantitative description of volume and loan fee trends and fee dependence on asset characteristics. We also unveil new stylized facts specific to the Brazilian market on market access asymmetries between different types of investors. The emerging picture is that the Brazilian securities lending market is a complex environment with specific frictions and strong asymmetries among players. In particular, we describe a tax arbitrage operation performed by domestic mutual funds which generates a significant distortion in the data. In one such event, we estimate additional aggregate profits of 24.25 million Reais (around 10 million Dollars).

A unit root test based on partially adaptive estimation

This paper constructs a unit root test baseei on partially adaptive estimation, which is shown to be robust against non-Gaussian innovations. We show that the limiting distribution of the t-statistic is a convex combination of standard normal and DF distribution. Convergence to the DF distribution is obtaineel when the innovations are Gaussian, implying that the traditional ADF test is a special case of the proposed testo Monte Carlo Experiments indicate that, if innovation has heavy tail distribution or are contaminated by outliers, then the proposed test is more powerful than the traditional ADF testo Nominal interest rates (different maturities) are shown to be stationary according to the robust test but not stationary according to the nonrobust ADF testo This result seems to suggest that the failure of rejecting the null of unit root in nominal interest rate may be due to the use of estimation and hypothesis testing procedures that do not consider the absence of Gaussianity in the data.Our results validate practical restrictions on the behavior of the nominal interest rate imposed by CCAPM, optimal monetary policy and option pricing models.

Do borrowing constraints decrease intergenerational mobility? evidence from Brazil

In this paper, we find evidence that suggests that borrowing constraints may be an important determinant of intergenerational mobility in Brazil. This result contrasts sharply with studies for developed countries, such as Canada and the US, where credit constraints do not seem to play an important role in generating persistence of inequality. Moreover, we find that the social mobility is lower in Brazil in comparison with developed countries. We follow the methodology proposed by Grawe (2001), which uses quantile regression, and obtain two results. First, the degree of intergenerational persistence is greater for the upper quantiles. Second, the degree of intergenerational persistence declines with income at least for the upper quantiles. Both findings are compatible with the presence of borrowing constraints affecting the degree of intergenerational persistence, as predicted by the theory.

The marginal cost of funds from public sector borrowing

An expression for the welfare cost of a marginal increase in the public debt is derived using a simple AK endogenous growth model. This measure of the marginal cost of public funds (MCF) can be interpreted as the marginal benefit-cost ratio that a debtfinanced public project needs in order to generate a net social gain. The model predicts an increase in the public debt ratio will have little effect on the optimal public expenditure ratio and that most of the adjustment will occur on the tax side of the budget.

Endogenous borrowing constraints and default when markets are incomplete

Incomplete markets and non-default borrowing constraints increase the volatility of pricing kernels and are helpful when addressing assetpricing puzzles. However, ruling out default when markets are in complete is suboptimal. This paper endogenizes borrowing constraints as an intertemporal incentive structure to default. It modeIs an infinitehorizon economy, where agents are allowed not to pay their liabilities and face borrowing constraints that depend on the individual history of default. Those constraints trade off the economy's risk-sharing possibilities and incentives to prevent default. The equilibrium presents stationary properties, such as an invariant distribution for the assets' solvency rate.

Household borrowing constraints and monetary policy in emerging economies

Credit markets in emerging economies can be distinguished from those in advanced economies in many respects, including the collateral required for households to borrow. This work proposes a DSGE framework to analyze one peculiarity that characterizes the credit markets of some emerging markets: payroll-deducted personal loans. We add the possibility for households to contract long-term debt and compare two different types of credit constraints with one another, one based on housing and the other based on future income. We estimate the model for Brazil using a Bayesian technique. The model is able to solve a puzzle of the Brazilian economy: responses to monetary shocks at first appear to be strong but dissipate quickly. This occurs because income – and the amount available for loans – responds more rapidly to monetary shocks than housing prices. To smooth consumption, agents (borrowers) compensate for lower income and for borrowing by working more hours to repay loans and erase debt in a shorter time. Therefore, in addition to the income and substitution effects, workers consider the effects on their credit constraints when deciding how much labor to supply, which becomes an additional channel through which financial frictions affect the economy.