The importance of common cyclical features in VAR analysis: a Monte-Carlo study

Despite the commonly held belief that aggregate data display short-run comovement, there has been little discussion about the econometric consequences of this feature of the data. We use exhaustive Monte-Carlo simulations to investigate the importance of restrictions implied by common-cyclical features for estimates and forecasts based on vector autoregressive models. First, we show that the ìbestî empirical model developed without common cycle restrictions need not nest the ìbestî model developed with those restrictions. This is due to possible differences in the lag-lengths chosen by model selection criteria for the two alternative models. Second, we show that the costs of ignoring common cyclical features in vector autoregressive modelling can be high, both in terms of forecast accuracy and efficient estimation of variance decomposition coefficients. Third, we find that the Hannan-Quinn criterion performs best among model selection criteria in simultaneously selecting the lag-length and rank of vector autoregressions.

The importance of Common-Cyclical Features in VAR analysis: a Monte-Carlo study (Preliminary Version)

Despite the belief, supported byrecentapplied research, thataggregate datadisplay short-run comovement, there has been little discussion about the econometric consequences ofthese data “features.” W e use exhaustive M onte-Carlo simulations toinvestigate theimportance ofrestrictions implied by common-cyclicalfeatures for estimates and forecasts based on vectorautoregressive and errorcorrection models. First, weshowthatthe“best” empiricalmodeldevelopedwithoutcommoncycles restrictions neednotnestthe“best” modeldevelopedwiththoserestrictions, duetothe use ofinformation criteria forchoosingthe lagorderofthe twoalternative models. Second, weshowthatthecosts ofignoringcommon-cyclicalfeatures inV A R analysis may be high in terms offorecastingaccuracy and e¢ciency ofestimates ofvariance decomposition coe¢cients. A lthough these costs are more pronounced when the lag orderofV A R modelsareknown, theyarealsonon-trivialwhenitis selectedusingthe conventionaltoolsavailabletoappliedresearchers. T hird, we…ndthatifthedatahave common-cyclicalfeatures andtheresearcherwants touseaninformationcriterium to selectthelaglength, theH annan-Q uinn criterium is themostappropriate, sincethe A kaike and theSchwarz criteriahave atendency toover- and under-predictthe lag lengthrespectivelyinoursimulations.

Essays on the general equilibrium effects of barriers to trade on economic growth, foreign trade and the location of economic activity in Brazil

This work presents a fully operational interstate CGE model implemented for the Brazilian economy that tries to quantify both the role of barriers to trade on economic growth and foreign trade performance and how the distribution of the economic activity may change as the country opens up to foreign trade. Among the distinctive features embedded in the model, modeling of external scale economies, port efficiency and land-maritime transport costs provides an innovative way of dealing explicitly with theoretical issues related to integrated regional systems. In order to illustrate the role played by the quality of infrastructure and geography on the country‟s foreign and interregional trade performance, a set of simulations is presented where barriers to trade are significantly reduced. The relative importance of trade policy, port efficiency and land-maritime transport costs for the country trade relations and regional growth is then detailed and quantified, considering both short run as well as long run scenarios. A final set of simulations shed some light on the effects of liberal trade policies on regional inequality, where the manufacturing sector in the state of São Paulo, taken as the core of industrial activity in the country, is subjected to different levels of external economies of scale. Short-run core-periphery effects are then traced out suggesting the prevalence of agglomeration forces over diversion forces could rather exacerbate regional inequality as import barriers are removed up to a certain level. Further removals can reverse this balance in favor of diversion forces, implying de-concentration of economic activity. In the long run, factor mobility allows a better characterization of the balance between agglomeration and diversion forces among regions. Regional dispersion effects are then clearly traced-out, suggesting horizontal liberal trade policies to benefit both the poorest regions in the country as well as the state of São Paulo. This long run dispersion pattern, on one hand seems to unravel the fragility of simple theoretical results from recent New Economic Geography models, once they get confronted with more complex spatially heterogeneous (real) systems. On the other hand, it seems to capture the literature‟s main insight: the possible role of horizontal liberal trade policies as diversion forces leading to a more homogeneous pattern of interregional economic growth.

The importance of clusters for the development of small & medium enterprises

This thesis aims to open a theoretical discussion on the importance of cluster for the development of Small and Medium Enterprises. The methodology applied was based on bibliographical and qualitative research. The basic questions raised by this study can be summarized as follows: How the creation of a cluster will help in the development of the SME?. Consequently, the final objective of the work is to identify which are the characteristics that help into the success of a Small & Medium Enterprises inserted in a cluster. The answer to this question led the research to a better understanding of (i) the characterization of the Small & Medium Enterprises; (ii) the clusters theory; (iii) evidence for a developed (Italy) and a developing (Chile) country that support our proposition to verify. The main results confirm the relevance of the cluster for the development of the Small and Medium Enterprises because of the collective efficiency that generates, improving the funding conditions, the exporter capacity and diminishing the activities costs of the small companies that are part of the conglomerate.

The importance of firms' strategic resources and capabilities in crisis situations

The general idea of this research is to analyze overall firm performance before and after the global financial crisis of 2008. The main question is: What kind of strategies did companies adopt that led to positive business performance after the crisis? Are there any particular competitive advantages that bring better performance in the case of an economic downturn? This research focuses on competitive advantage gained by resource-based view attributes of a product (quality, durability and prestige) and dynamic capabilities (strategic flexibility in product development and technological innovation ability). The economic crisis setting provides a proper background to analyze the competitive advantage strategies in a dynamic, low-probability environment to determine which are most worth adopting in the business world. I employ an OLS regression analysis in order to measure the business performance of 136 Brazilian firms across four years – 2002, 2005, 2008 and 2012. The findings indicate that even though all of the strategic resources and capabilities positively influence firm performance in expansionary periods, only the superior product characteristics are pertinent in surviving an economic downturn.