Welfare and fiscal policy with public goods and infrastructure

We construct and simulate a model to study the welfare and macroeconomic impact of government actions when its productive role is taken into account. The trade-off between public investment and public consumption is also investigated, since public consumption is introduced as a public good that directly affects individuals' well-being. Our results replicate econometric evidence showing that part of the observed slowdown of U.S. productivity growth can be explained by the reduction of investment in infrastructure which also implied a sizable welfare 1085 to the popu1ation. Depending on the methodology used we found a welfare cost ranging from 4.2% to 1.16% of GNP. The impact of fiscal policy can be qualitative and quantitative distinct depending on Whether we assume a higher or smaller output elasticity to infrastructure. If it is high enough, increases in tax rates may stimulate accumulation and production, which is the opposite prediction of standard ncocJassica1 models.

A note on growth, welfare and public policy

In this note the growth anti welfare effects of fiscal anti monetary policies are investigated in three economies where public investment is part of the productive process It is shown that growth is maximized at positive levels of income tax and inflation but that there is no direct relationship between government size, productivity and growth or between inflation and growth. However, unless there are no transfers or public goods in the economy, maximization of growth does not imply welfare maximization and the optimal tax rate and government size are greater than those that maximize growth. Money is not superneutral anti the optimal rate of money creation is below the maximizing rate of growth.

Relations between regulation, competition policy and consumer protection in telecommunications, electricity and water supply

The purpose of this article is to discuss the relations between regulation, competition policy and consumer protection these relations in three key sectors of Brazil’s infrastructure: telecommunications, electricity and water supply. A study of the literature points to two general principles. First, the need for consumer protection depends on the “degree of sovereignty” enjoyed by consumers, defined in terms of the cost of consumer organization, consumers’ ability to evaluate services, and the level of competition in each sector. Second, the less sovereignty consumers enjoy the more consumer protection institutions are involved with regulation agencies. The evidence for the Brazilian case apparently corroborates these points. In addition, it is important to stress that consumer complaints in regulated sectors seem to have increased more intensely than in others. The article is divided into three sections. Section 1 presents theoretical elements and aspects of the relations between regulation, competition policy and consumer protection evidenced by international experience. Section 2 analyzes the Brazilian experience and in particular the available statistics on consumer complaints about telecommunications, electricity and water supply, submitted to Fundação Procon-SP during the nineties. The last section points to possible configurations of the institutional relations between competition policy, regulation and consumer protection, showing how the existing configuration of these areas in the three infrastructure sectors discussed confirms that the theoretical framework proposed has reasonable predictive power.

Brazilian regional development distribution, evidences for socio-economic policy

As to many Latin american countries, the impacts of the recent economic globalization on the Brazilian economy have revealed a diversified tendency in spatial development when regional economic indicators are observed. This is due to the specificities or each region, as regard their sector structure, the availability of human resources and the degree of technological innovation undertaken by local enterprises. From a situation of regional inequalities observed in lhe socio-economic levels of development at the beginning of the eighties the dynamics of the Brazilian regional evolution has presented different speeds and intensities in the several spaees. This paper aims to evaluate the dynamics of Brazilian regional development during the 1985-95 period and the impacts over the working population and regional disparities in order to offer some elements to assist social and economic policy. For this purpose Dispersion Quotients and Dispersion lntensity Coefficients were calculated based on two variables, the Regional Gross Domestic Product anel the Working Population. The results of the analysis confirm the existence of considerable regional disparities and it was observed that thc sector and regional redistribution of the GDP indicate that in a general way, no remarkable changes occurred in the regional development in the period. The results show that although the economic policies did stimulate a global convergence process of the per capita product among regions, those policies did not attenuate economic dynamism concentration to the desired extent.

Stochastic growth and monetary policy: the impacts on the term structure of interest rates

This paper builds a simple, empirically-verifiable rational expectations model for term structure of nominal interest rates analysis. It solves an stochastic growth model with investment costs and sticky inflation, susceptible to the intervention of the monetary authority following a policy rule. The model predicts several patterns of the term structure which are in accordance to observed empirical facts: (i) pro-cyclical pattern of the level of nominal interest rates; (ii) countercyclical pattern of the term spread; (iii) pro-cyclical pattern of the curvature of the yield curve; (iv) lower predictability of the slope of the middle of the term structure; and (v) negative correlation of changes in real rates and expected inflation at short horizons.

Macroeconomic policy and poverty in Brazil

O Brasil é um país onde os 50% mais pobres se apropriam aproximadamente de 10% da renda agregada, e os 10% mais ricos detêm quase 50% deste mesmo. O colorário desse alto grau de desigualdade é que se uma pessoa está somente preocupada em maximizar o nível de GPD, a função de bem–estar social implícita adotada devota parte do seu peso ao bem-estar de 10% da população. Em outras palavras, a concentração brasileira de renda cria uma anomalia dentro da perspectiva de agente representativo implícito na análise macroeconômica aonde as pessoas valem aquilo que ganham. A análise da pobreza inverte esse peso estrutural da população, estipulando zero de peso para o segmento não pobre da sociedade e atribuindo pesos aos indivíduos que aumentam com suas necessidades insatisfeitas. Esse projeto estuda as conexões entre a evolução macroeconômica Brasileira recente e da pobreza. A análise é dividida em duas partes: A primeira parte descreve a evolução da pobreza brasileira e seus principais determinantes macroeconômicos durante os últimos 15 anos. A segunda parte tira proveito das mudanças da pobreza e desigualdades medidas durante o período 1993-96 para estudar seus principais determinantes macroeconômicos. Dado a maior importância do Plano Real, uma especial atenção foi dada a análise dos impactos da desinflação no nível e na distribuição de renda e a possível sinergia entre essas duas dimensões de determinação da pobreza. A terceira parte do projeto decompõe as mudanças dos diversos índices de pobreza através dos diferentes grupos dado pelas características dos chefes de família (i.e.; sexo, anos de estudo, raça, classe trabalhadora, setores de atividades, região, densidade populacional). Depois essa decomposição é avançada um passo desatrelando as mudanças nessa diferentes células de pobreza em termos de suas respectivas mudanças em termos de desigualdade da renda per capita. Esse perfil de pobreza ajuda a mapear as diferentes fontes de mudança da pobreza na análise histórica e fornece consistência interna para os exercícios de análises contra-factuais.

Government policy and private investment in Brazil (1955/82)

The questlon of the crowding-out of private !nvestment by public expenditure, public investment in particular , ln the Brazilian economy has been discussed more in ideological terrns than on empirical grounds. The present paper tries to avoid the limitation of previous studies by estlmatlng an equation for private investment whlch makes it possible to evaluate the effect of economic policies on prlvate investment. The private lnvestment equation was deduced modifylng the optimal flexible accelerator medel (OFAM) incorporating some channels through which public expendlture influences privateinvestment. The OFAM consists in adding adjustment costs to the neoclassical theory of investrnent. The investment fuction deduced is quite general and has the following explanatory variables: relative prices (user cost of capitaljimput prices ratios), real interest rates, real product, public expenditures and lagged private stock of capital. The model was estimated for private manufacturing industry data. The procedure adopted in estimating the model was to begin with a model as general as possible and apply restrictions to the model ' s parameters and test their statistical significance. A complete diagnostic testing was also made in order to test the stability of estirnated equations. This procedure avoids ' the shortcomings of estimating a model with a apriori restrictions on its parameters , which may lead to model misspecification. The main findings of the present study were: the increase in public expenditure, at least in the long run, has in general a positive expectation effect on private investment greater than its crowding-out effect on priva te investment owing to the simultaneous rise in interst rates; a change in economlc policy, such as that one of Geisel administration, may have an important effect on private lnvestment; and reI ative prices are relevant in determining the leveI of desired stock of capital and private investrnent.

Courts as healthcare policy-makers: the problem, the responses to the problem and problems in the responses

This article starts by analysing healthcare litigation in Brazil by means of a literature review of articles that contribute with empirical findings on this phenomenon. Based on this review, I argue that health care litigation in Brazil makes the public health system less fair and rational. In the second part of this article, I discuss the three most overarching responses to control the level of litigation and its impact on the public health system: (i) the public hearing held by the Supreme Federal Court and the criteria the court established thereafter; (ii) the recommendations by the National Council of Justice aimed at building courts’ institutional capacity; and (iii) the enactment of the Federal Law 12.401/11, which created a new health technology assessment system. I argue that latter is the best response because it keeps the substantive decisions on the allocation of healthcare resources in the institution that is in the best position to make them. Moreover, this legislation will make the decisions about provision of health treatments more explicit, making easier for courts to control the procedure and the reasons for these decisions.

Investment coordination failures and the confidence channel of fiscal policy

Este trabalho desenvolve um novo "canal de Confiança" da política fiscal e caracteriza a política ótima quando esse canal é levado em consideração. Para esse objetivo, utilizamos um modelo estático com (i) concorrência monopolística, (ii) custos de ajustamento fixos para investir, (iii) complementaridade estratégica devido a informação imperfeita com respeito a produtividade agregada, e (iv) bens privados como substitutos imperfeitos de bens privados. Este arcabouço acomoda a possibilidade de falhas de coordenação nos investimentos, mas apresenta um equilíbrio único. Mostramos que a política fiscal tem efeitos importantes na coordenação. Um aumento dos gastos do governo leva a uma maior demanda por bens privados. Mais importante, este também afeta as expectativas de ordem superior com relação a demanda das demais firmas, que amplifica os efeitos do aumento inicial da demanda devido a complementaridade estratégica nas decisões de investimento. Como as demais firmas estão se deparam com uma demanda maior, espera-se que estas invistam mais, que por sua vez, aumenta a demanda individual de cada firma, que aumenta os incentivos a investir. Denominamos isto como o "canal de confiança" da política fiscal. Sob a ameaça de falhas de coordenação, a política fiscal ótima prescreve produzir além do ponto em que o benefício marginal resultante do consumo de bens públicos é igual ao custo marginal desses bens. Este benefício adicional vem do fato de que a política fiscal pode ampliar a coordenação dos investimentos.

Essays on the credit channel of monetary policy: a case study for Brazil

The onset of the financial crisis in 2008 and the European sovereign crisis in 2010 renewed the interest of macroeconomists on the role played by credit in business cycle fluctuations. The purpose of the present work is to present empirical evidence on the monetary policy transmission mechanism in Brazil with a special eye on the role played by the credit channel, using different econometric techniques. It is comprised by three articles. The first one presents a review of the literature of financial frictions, with a focus on the overlaps between credit activity and the monetary policy. It highlights how the sharp disruptions in the financial markets spurred central banks in developed and emerging nations to deploy of a broad set of non conventional tools to overcome the damage on financial intermediation. A chapter is dedicated to the challenge face by the policymaking in emerging markets and Brazil in particular in the highly integrated global capital market. This second article investigates the implications of the credit channel of the monetary policy transmission mechanism in the case of Brazil, using a structural FAVAR (SFAVAR) approach. The term “structural” comes from the estimation strategy, which generates factors that have a clear economic interpretation. The results show that unexpected shocks in the proxies for the external finance premium and the credit volume produce large and persistent fluctuations in inflation and economic activity – accounting for more than 30% of the error forecast variance of the latter in a three-year horizon. Counterfactual simulations demonstrate that the credit channel amplified the economic contraction in Brazil during the acute phase of the global financial crisis in the last quarter of 2008, thus gave an important impulse to the recovery period that followed. In the third articles, I make use of Bayesian estimation of a classical neo-Keynesian DSGE model, incorporating the financial accelerator channel developed by Bernanke, Gertler and Gilchrist (1999). The results present evidences in line to those already seen in the previous article: disturbances on the external finance premium – represented here by credit spreads – trigger significant responses on the aggregate demand and inflation and monetary policy shocks are amplified by the financial accelerator mechanism. Keywords: Macroeconomics, Monetary Policy, Credit Channel, Financial Accelerator, FAVAR, DSGE, Bayesian Econometrics

Does monetary policy stabilize the exchange rate following a currency crisis?

This paper provides evidence on the relationship between rnonetary policy and the exchange rate in the aftermath of currency crises. It ana1yzes a large data set of currency crises in 80 countries in the period 1980 to 1998. The rnain question addressed is: can rnonetary policy significantly alter the probability of reversing the post-crisis undervaluation through nominal appreciation rather than higher int1ation? We find that tight rnonetary policy facilitates the reversal of currency undervaluation through nominal appreciation rather than inflation. When the econorny is also facing a banking crisis, depending on the specification, tight rnonetary policy rnay not have the same effect.

A model of rural conflict : violence and land reform policy in Brazil

In the past ten years the struggle for land in Brazil has taken the shape of invasions of private land by welI organized groups of land less squatters. It is argued in this paper that these invasions and the resulting contlicts are a direct response to the land reform program which has been adopted by the govemment since 1985. which is based on the expropriation of farms and the creation of settlement projects. The set of formal and informal institutions which compromise the land reform program are used as the background for a game-theory model of rural contlicts. T estable implications are derived trom this model with particular emphasis on the etfect of policy variables on violence. These are then tested with panel data at state levei from 1988 to 1995. - It is shown that govemment policy which has the intent of reducing the amount of violence has the opposite etfect of leading to more incentives for contlicts.

Effects of trade policy on technology adoption and investment

This paper studies the consequences of trade policy for the adoption of new technologies. It develops a dynamic international trade model with two sectors. Workers in manufacturing decide if new technologies are used, capital owners then choose investment. We analyze three different arrangements: free trade, tariffs, and quotas. In the model economy, free trade as well as tariffs guarantee that the most productive technology available will be used. In contrasL under a quota the most productive technology available will not be used at all times. Further, in the latter case investment and the capital stock are smaller than in the former one. Finally, there exists parameter values for which the computed difference in GDP is a factor of thirty.

Optimal exchange rate policy, optimal incomplete taxation and business cycles

Implementation and collapse of exchange rate pegging schemes are recur- rent events. A currency crisis (pegging) is usually followed by an economic downturn (boom). This essay explains why a benevolent government should pursue Þscal and monetary policies that lead to those recurrent currency crises and subsequent periods of pegging. It is shown that the optimal policy induces a competitive equilibrium that displays a boom in periods of below average de- valuation and a recession in periods of above average devaluation. A currency crisis (pegging) can be understood as an optimal policy answer to a recession (boom).

Environmental policy and growth when inputs are differentiated in pollution intensity

Environmental policy affects the distribution of market shares if intermediate goods are differentiated in their pollution intensity. When innovations are environment-friendly, a tax on emissions skews demand towards new goods which are the most productive. In this case, the tax has to increase along a balanced growth path to keep the market shares of goods of different vintages constant. Comparing balanced growth paths, we find that an increase in the burden of environmental taxation spurs innovation because it increases the market share of recent vintages. As a result the cost of environmental policy in terms of slower growth is weaker and may even be absent.