Emerging markets yield curve dynamics

This work extendes Diebold, Li and Yueís (2006) about global yield curve and proposes to extend the study by including emerging countries. The perception of emerging market su§ers ináuence of external factors or global factors, is the main argument of this work. We expect to obtain stylized facts.that obey similar pattern found by those authors. The results indicate the existence of global level and global slope factors. These factors represent an important fraction in the bond yield determination and show a decreasing trend of the global level factor low ináuence of global slope factor in these countries when they are compared with developed countries. Keywords: Kalman Filter, Emerging Markets, Yield Curve, and Bond.

Essays in macroeconomy and dynamic term-structure models

This thesis is composed of three articles with the subjects of macroeconomics and - nance. Each article corresponds to a chapter and is done in paper format. In the rst article, which was done with Axel Simonsen, we model and estimate a small open economy for the Canadian economy in a two country General Equilibrium (DSGE) framework. We show that it is important to account for the correlation between Domestic and Foreign shocks and for the Incomplete Pass-Through. In the second chapter-paper, which was done with Hedibert Freitas Lopes, we estimate a Regime-switching Macro-Finance model for the term-structure of interest rates to study the US post-World War II (WWII) joint behavior of macro-variables and the yield-curve. We show that our model tracks well the US NBER cycles, the addition of changes of regime are important to explain the Expectation Theory of the term structure, and macro-variables have increasing importance in recessions to explain the variability of the yield curve. We also present a novel sequential Monte-Carlo algorithm to learn about the parameters and the latent states of the Economy. In the third chapter, I present a Gaussian A ne Term Structure Model (ATSM) with latent jumps in order to address two questions: (1) what are the implications of incorporating jumps in an ATSM for Asian option pricing, in the particular case of the Brazilian DI Index (IDI) option, and (2) how jumps and options a ect the bond risk-premia dynamics. I show that jump risk-premia is negative in a scenario of decreasing interest rates (my sample period) and is important to explain the level of yields, and that gaussian models without jumps and with constant intensity jumps are good to price Asian options.

A structuralist Philips curve

This paper presents a structuralist model of the Philips curve and applies it to the US and Brazilian economies. The theoretical model starts from a simple markup rule to build a Philips curve based on the assumptions that firms have a desired rate of profit and wokers have a target real wage. Inflation expectations are modeled in terms of current inflation and the governments’ target, and the model shows that relative prices can have both a short-run and long-run influence on inflation. When applied to the US, the structuralist Philips curve results in a nonlinear model in which there are two steady states for inflation, and where the wageshare of income becomes the main instrument to drive inflation to the governments’ target. When applied to Brazil, the structuralist Philips curve reveals a nonlinear relationship between long-run inflation and the real exchange rate, so that the same inflation target can be consistent with more than one value of the exchange rate. The main conclusion of the paper is that a structuralist specification of the Philips curve is a useful instrument to model many macroeconomic topics as well as alternative theoretical closures.