Robustness and stabilization properties of monetary policy rules in Brazil

Based on three versions of a small macroeconomic model for Brazil, this paper presents empirical evidence on the effects of parameter uncertainty on monetary policy rules and on the robustness of optimal and simple rules over different model specifications. By comparing the optimal policy rule under parameter uncertainty with the rule calculated under purely additive uncertainty, we find that parameter uncertainty should make policymakers react less aggressively to the economy's state variables, as suggested by Brainard's "conservatism principIe", although this effect seems to be relatively small. We then informally investigate each rule's robustness by analyzing the performance of policy rules derived from each model under each one of the alternative models. We find that optimal rules derived from each model perform very poorly under alternative models, whereas a simple Taylor rule is relatively robusto We also fmd that even within a specific model, the Taylor rule may perform better than the optimal rule under particularly unfavorable realizations from the policymaker' s loss distribution function.

Firm financial constraints and the impact of monetary policy: evidence from financial conglomerates

Building on recent evidence on the functioning of internal capital markets in financial conglomerates, this paper conducts a novel test of the balance sheet channel of monetary policy. It does so by comparing monetary policy responses of small banks that are affiliated with the same bank holding company, and this arguably face similar constraints in accessing internal/external sources of funds, but that operate in different geographical regions, and thus face different pools of borrowers. Because these subsidiaries typically concentrate their lending with small local businesses, we can use cross-sectional differences in state-level economic indicators at the time of changes of monetary policy to study whether or not the strength of borrowers' balance sheets influences the response of bank lending. We find evidence that the negative response of bank loan growth to a monetary contraction is significantly stronger when borrowers have 'weak balance sheets. Our evidence suggests that the monetary authority should consider the amplification effects that financial constraints play following changes in basic interest rates and the role of financial conglomerates in the transmission of monetary policy.

Public debt management, monetary policy and financial institutions

Despite the large size of the Brazilian debt market, as well the large diversity of its bonds, the picture that emerges is of a market that has not yet completed its transition from the role it performed during the megainflation years, namely that of providing a liquid asset that provided positive real returns. This unfinished transition is currently placing the market under severe stress, as fears of a possible default from the next administration grow larger. This paper analyzes several aspects pertaining to the management of the domestic public debt. The causes for the extremely large and fast growth ofthe domestic public debt during the seven-year period that President Cardoso are discussed in Section 2. Section 3 computes Value at Risk and Cash Flow at Risk measures for the domestic public debt. The rollover risk is introduced in a mean-variance framework in Section 4. Section 5 discusses a few issues pertaining to the overlap between debt management and monetary policy. Finally, Section 6 wraps up with policy discussion and policy recommendations.

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.

Optimal monetary policy under administered prices

This work aims to analyze the interaction and the effects of administered prices in the economy, through a DSGE model and the derivation of optimal monetary policies. The model used is a standard New Keynesian DSGE model of a closed economy with two sectors companies. In the first sector, free prices, there is a continuum of firms, and in the second sector of administered prices, there is a single firm. In addition, the model has positive trend inflation in the steady state. The model results suggest that price movements in any sector will impact on both sectors, for two reasons. Firstly, the price dispersion causes productivity to be lower. As the dispersion of prices is a change in the relative price of any sector, relative to general prices in the economy, when a movement in the price of a sector is not followed by another, their relative weights will change, leading to an impact on productivity in both sectors. Second, the path followed by the administered price sector is considered in future inflation expectations, which is used by companies in the free sector to adjust its optimal price. When this path leads to an expectation of higher inflation, the free sector companies will choose a higher mark-up to accommodate this expectation, thus leading to higher inflation trend when there is imperfect competition in the free sector. Finally, the analysis of optimal policies proved inconclusive, certainly indicating that there is influence of the adjustment model of administered prices in the definition of optimal monetary policy, but a quantitative study is needed to define the degree of impact.

Monetary policy, default risk and the exchange rate

In a country with high probability of default, higher interest rates may render the currency less attractive if sovereign default is costly. This paper develops that intuition in a simple model and estimates the effect of changes in interest rates on the exchange rate in Brazil using data from the dates surrounding the monetary policy committee meetings and the methodology of identification through heteroskedasticity. Indeed, we find that unexpected increases in interest rates tend to lead the Brazilian currency to depreciate. It follows that granting more independence to a central bank that focus solely on inflation is not always a free-lunch.

Non-conventional yeasts

In the beginning there was yeast, and it raised bread, brewed beer, and made wine. After many not days but centuries and even millenia later, it was named Saccharomyces cerevisiae. After more years and centuries there was another yeast, and it was named Schizo-saccharomyces pombe; now there were two stars in the yeast heaven. In only a few more years there were other yeasts, and then more, and more, and more. The era of the non-conventional yeasts had begun.

Non-conventional applications of computerized tomography: Analysis of solid dosage forms produced by pharmaceutical industry

X-ray computed tomography (CT) refers to the cross-sectional imaging of an object measuring the transmitted radiation at different directions. In this work, we describe a non-conventional application of computerized tomography: visualization and improvements in the understanding of some internal structural features of solid dosage forms. A micro-CT X-ray scanner, with a minimum resolution of 30 μm was used to characterize some pharmaceutical tablets, granules, controlled-release osmotic tablet and liquid-filled soft-gelatin capsules. The analysis presented in this work are essentially qualitative, but quantitative parameters, such as porosity, density distribution, tablets dimensions, etc. could also be obtained using the related CT techniques. © 2010 American Institute of Physics.

Study of antioxidant activity of non-conventional Brazilian fruits

This study aimed to analyze the proximate composition of seeds from some non-conventional Brazilian fruits, as well as to evaluate the antioxidant activity through DPPH • free radical and to quantify the total phenolic compounds. To obtain the extracts, dried and crushed seeds were extracted with ethanol for 30 min, in a ratio of 1:3 (seeds:ethyl alcohol), under continuous agitation, at room temperature. Then, the mixtures were filtered and the supernatants were subjected to rotary evaporator under pressure reduced to 40 °C. The results report that the seeds of non-conventional fruits are remarkable sources of lipids, and the extraction of oil from these seeds could be an alternative for the commercial utilization of waste. They also presented significant percentages of protein and carbohydrates. Ethanol extracts of seeds from non-conventional Brazilian fruits showed relevant antioxidant activity and high amount of phenolic compounds. Therefore Brazilian non-conventional fruits can be used as functional food products or feed. © 2011 Association of Food Scientists & Technologists (India).

A logical approach to the management of object identifiers in non-conventional database management systems

Non-conventional database management systems are used to achieve a better performance when dealing with complex data. One fundamental concept of these systems is object identity (OID), because each object in the database has a unique identifier that is used to access and reference it in relationships to other objects. Two approaches can be used for the implementation of OIDs: physical or logical OIDs. In order to manage complex data, was proposed the Multimedia Data Manager Kernel (NuGeM) that uses a logical technique, named Indirect Mapping. This paper proposes an improvement to the technique used by NuGeM, whose original contribution is management of OIDs with a fewer number of disc accesses and less processing, thus reducing management time from the pages and eliminating the problem with exhaustion of OIDs. Also, the technique presented here can be applied to others OODBMSs. © 2011 IEEE.