A new perspective on the PPP hypothesis

This paper the stastistical properties of the real exchange rates of G-5 countries for the Bretton-Woods peiod, and draw implications on the purchasing power parity (PPP) hypothesis. In contrast to most previous studies that consider only unit root and stationary process to describe the real exchange tae, this paper also considers two in-between processes, the locally persistent process ans the fractionally integrated process, to complement past studies. Seeking to be consistent with tha ample evidence of near unit in the real exchange rate movements very well. This finding implies that: 1) the real exchange movement is more persistent than the stationary case but less persistent than the unit root case; 2) the real exchange rate is non-stationary but the PPP reversion occurs and the PPP holds in the long run; 3) the real exchange rate does not exhibit the secular dependence of the fractional integration; 4) the real exchange rate evolves over time in a way that there is persistence over a range of time, but the effect of shocks will eventually disappear over time horizon longer than order O (nd), that is, at finite time horizon; 5) shocks dissipation is fasters than predicted by the fractional integracion, and the total sum of the effects of a unit innovation is finite, implying that a full PPP reversion occurs at finite horizons. These results may explain why pasrt empirical estudies could not provide a clear- conclusion on the real exchange rate processes and the PPP hypothesis.

Essays on asymmetric information problems without the single-crossing property: applications to corporate finance

The objective of this dissertation is to re-examine classical issues in corporate finance, applying a new analytical tool. The single-crossing property, also called Spence-irrlees condition, is not required in the models developed here. This property has been a standard assumption in adverse selection and signaling models developed so far. The classical papers by Guesnerie and Laffont (1984) and Riley (1979) assume it. In the simplest case, for a consumer with a privately known taste, the single-crossing property states that the marginal utility of a good is monotone with respect to the taste. This assumption has an important consequence to the result of the model: the relationship between the private parameter and the quantity of the good assigned to the agent is monotone. While single crossing is a reasonable property for the utility of an ordinary consumer, this property is frequently absent in the objective function of the agents for more elaborate models. The lack of a characterization for the non-single crossing context has hindered the exploration of models that generate objective functions without this property. The first work that characterizes the optimal contract without the single-crossing property is Araújo and Moreira (2001a) and, for the competitive case, Araújo and Moreira (2001b). The main implication is that a partial separation of types may be observed. Two sets of disconnected types of agents may choose the same contract, in adverse selection problems, or signal with the same levei of signal, in signaling models.

Global governance, currency and trade: implications of one on the other, common problems and how to address cooperation through law at the international level

How to deal with the impacts of the exchange rate on the trade balance of Brazil? There is not a single answer to such question. In order to find out some legal approaches for this matter, this paper aims to describe and analyze the role of the IMF, WTO and the governments of Brazil and the United States on the currency misalignments, especially the extraterritorial effects of such misalignment on the Brazil’s bilateral trade with the United States. The article concludes that the Currency Swap Agreements and other bilateral solutions may minimize the distortions that the Brazilian balance of payment against the USA is carrying, due to the lack of legal solutions for the problem of the exchange rate misalignments that Brazil is facing.

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

Line extension influence on brand image: a study on the alcoholic beverage market in Brazil

The present study has the objective of understanding the influence of line extensions on the image of vodka brands. The research was performed by organizing various focus groups with vodka consumers in São Paulo. These focus groups allowed exploring and analyzing how the last line extensions of vodka brands have modified the image the consumers had of the brand. Three hypotheses were distinguished as an outcome of the research: (1) The influence of a line extension on brand image depends heavily on the initial image the consumers have of the brand. For a vodka brand with an average or bad image, launching a line extension with a perceived average or bad quality does not modify the brand image. On the contrary, for a vodka brand with a positive initial brand image, launching a line extension with perceived high quality led to a positive change in the brand image. (2) For vodka brands, a vertical line extension recognized as having high authenticity provokes a transfer of attributes from the extended product to the brand. (3) Among Keller’s (1993) dimensions of brand image, non-product related attributes and especially packaging are the one that are the most influenced by line extensions of vodka brands.

Main problems with the taxation of civil society organizations in Brazil: certifications and impact on payroll

The objective of this paper is to identify and analyze the main problems in the taxation—regarding both taxes themselves and compliance costs of taxation—of civil society organizations in Brazil. This study is qualitative descriptive research. A multiple case study with 26 organizations was performed. The results show that the problems mainly affect organizations with lower revenue and that do not work in the areas of education, health or social care. The main problems involve the taxation of the payroll and the difficulties related to obtaining and maintaining certifications. The study concludes with suggestions for the improvement of the regulatory framework.

Notes on cyclical tendency to the overvaluation of the real

This note addresses the question “To what extent financial regulation in Brazil was effective in neutralizing the tendency to the overvaluation of the exchange rate in Brazil since the 1994 Real Plan?” Aiming at answering this question, this note is organized as follows: after this short introduction, we briefly describe the Brazilian exchange rate behavior after the Real Plan, emphasizing its key role in keeping prices stable. In section 3, the recent measures adopted by the Brazilian Central Bank (BCB) aiming at avoiding the overvaluation of real will be summarized. In section 4, we argue in favor of a new policy mix that could avoid overvaluation of the currency. Finally, some issues will be raised in order to effectively neutralize the overvaluation of real.