Rational expectations and the service of public debt: a recursive approach

This paper uses dynamic programming to study the time consistency of optimal macroeconomic policy in economies with recurring public deficits. To this end, a general equilibrium recursive model introduced in Chang (1998) is extended to include govemment bonds and production. The original mode! presents a Sidrauski economy with money and transfers only, implying that the need for govemment fmancing through the inflation tax is minimal. The extended model introduces govemment expenditures and a deficit-financing scheme, analyzing the SargentWallace (1981) problem: recurring deficits may lead the govemment to default on part of its public debt through inflation. The methodology allows for the computation of the set of alI sustainable stabilization plans even when the govemment cannot pre-commit to an optimal inflation path. This is done through value function iterations, which can be done on a computeI. The parameters of the extended model are calibrated with Brazilian data, using as case study three Brazilian stabilization attempts: the Cruzado (1986), Collor (1990) and the Real (1994) plans. The calibration of the parameters of the extended model is straightforward, but its numerical solution proves unfeasible due to a dimensionality problem in the algorithm arising from limitations of available computer technology. However, a numerical solution using the original algorithm and some calibrated parameters is obtained. Results indicate that in the absence of govemment bonds or production only the Real Plan is sustainable in the long run. The numerical solution of the extended algorithm is left for future research.

Economic recovery from the Argentine great depression : institutions, expectations, and the change of macroeconomic regime

This work explores how Argentina overcame the Great Depression and asks whether active macroeconomic interventions made any contribution to the recovery. In particular, we study Argentine macroeconomic policy as it deviated from gold-standard orthodoxy after the final suspension of convertibility in 1929. As elsewhere, fiscal policy in Argentina was conservative, and had little power to smooth output. Monetary policy became heterodox after 1929. The first and most important stage of institutional change took place with the switch from a metallic monetary regime to a fiduciary regime in 1931; the Caja de Conversión (Conversion Office, a currency board) began rediscounting as a means to sterilize gold outflows and avoid deflationary pressures, thus breaking from orthodox "mIes of the game." However, the actual injections of liquidity were small' and were not enough to fully offset the incipient monetary contractions: the "Keynes" effect was weak or negative. Rather, recovery derived from changes in beliefs and expectations surrounding the shift in the monetary and exchange-rate regime,and the delinking of gold flows and the money base. Agents perceivod a new regime, as shown by the path of consumption, investment, and estimated ex ante real interest rates: the "Mundell" effect was dominant. Notably, this change of regime predated a later, and supposedly more significant, stage of institutional reform, namely the creation of the central bank in 1935. Still, the extent of intervention was weak, and insufficient to fully offset externaI shocks to prices and money. Argentine macropolicy was heterodox in terms of the change of regime, but still conservative in terms of the tentative scope of the measures taken .

Demand expectations and the timing of stimulus policies

This paper proposes a simple macroeconomic model with staggered investment decisions. The model captures the dynamic coordination problem arising from demand externalities and fixed costs of investment. In times of low economic activity, a firm faces low demand and hence has less incentives for investing, which reinforces firms’ expectations of low demand. In the unique equilibrium of the model, demand expectations are pinned down by fundamentals and history. Owing to the beliefs that arise in equilibrium, there is no special reason for stimulus at times of low economic activity.

Inattention in individual expectations

This paper investigates the expectations formation process of economic agents about inflation rate. Using the Market Expectations System of Central Bank of Brazil, we perceive that agents do not update their forecasts every period and that even agents who update disagree in their predictions. We then focus on the two most popular types of inattention models that have been discussed in the recent literature: sticky-information and noisy-information models. Estimating a hybrid model we find that, although formally fitting the Brazilian data, it happens at the cost of a much higher degree of information rigidity than observed.

Inattention in Individual Expectations

This paper investigates the expectations formation process of economic agents about infl ation rate. Using the Market Expectations System of Central Bank of Brazil, we perceive that agents do not update their forecasts every period and that even agents who update disagree in their predictions. We then focus on the two most popular types of inattention models that have been discussed in the recent literature: sticky-information and noisy-information models. Estimating a hybrid model we fi nd that, although formally fi tting the Brazilian data, it happens at the cost of a much higher degree of information rigidity than observed.

A combination of implicit and adaptative upwind tools for the numerical solution of incompressible free surface flows

This paper is concerned with the numerical solutions of time dependent two-dimensional incompressible flows. By using the primitive variables of velocity and pressure, the Navier-Stokes and mass conservation equations are solved by a semi-implicit finite difference projection method. A new bounded higher order upwind convection scheme is employed to deal with the non-linear (advective) terms. The procedure is an adaptation of the GENSMAC (J. Comput. Phys. 1994; 110: 171-186) methodology for calculating confined and free surface fluid flows at both low and high Reynolds numbers. The calculations were performed by using the 2D version of the Freeflow simulation system (J. Comp. Visual. Science 2000; 2:199-210). In order to demonstrate the capabilities of the numerical method, various test cases are presented. These are the fully developed flow in a channel, the flow over a backward facing step, the die-swell problem, the broken dam flow, and an impinging jet onto a flat plate. The numerical results compare favourably with the experimental data and the analytical solutions. Copyright (c) 2006 John Wiley & Sons, Ltd.

High expectations, varying outcomes: Decentralization and participation in Brazil, Japan, Russia and Sweden

In the past 20 years, decentralization has been proposed as a strategy for enhancing public participation. Aid-providing organizations, such as the World Bank, stimulated decentralization processes in several countries in the hope that this would promote civic empowerment, diminish corruption, enhance efficiency, and improve public service delivery. This assumption forms the basis for a comparative analysis into the relation between decentralization and participation at the local level in Brazil, Japan, Russia and Sweden. A multi-level regression analysis using the data of the Democracy and Local Governance Project was undertaken in order to test the 'one size fits all' and the 'diversity in development' hypotheses. The results show that the second hypothesis was corroborated. Perceived autonomy had a different impact on openness to participation depending on the country considered; in one country (Japan), perceived autonomy diminished public officials' willingness to be open to public participation.

Patients' Expectations of and Satisfaction with Implant-Supported Fixed Partial Dentures and Single Crowns

Fundação de Amparo à Pesquisa do Estado de São Paulo (FAPESP)

Patients' Expectations Before and Evaluation After Dental Implant Therapy

Conselho Nacional de Desenvolvimento Científico e Tecnológico (CNPq)

Expectations and final evaluation of complete dentures by patients, dentist and dental technician

There is a poor association between the dentist's evaluation of denture quality and patients' satisfaction with their dentures. Possible differences between dental professionals and patients' expectations might help explain differences in outcome evaluations. This study compared scores given by a dentist, a dental technician and patients for their expectations before and their final evaluation after complete dentures treatment. Twenty completely edentulous patients, a prosthodontist and a dental technician provided scores for the expected aesthetic and functional results of their dentures based on a visual analogue scale at baseline. Post-treatment completion ratings were given after adjustments, by dentist and patients. The dental technician provided post-treatment completion ratings after completing the dentures. The patients had higher expectations than the dental technician and the dentist perceived for both aesthetic and function (P < 0.001). The patients also presented higher post-treatment completion ratings than the dental professionals perceived for final aesthetics (P = 0.016, Kendall's W = 0.207). and function (P = 0.002, Kendall's W = 0.303). Only the dentist presented a statistically significant difference between expectations (lower) and final (higher) outcomes for aesthetics (P = 0.017) and function (P = 0.003). There was no correlation between expectations and post-treatment completion ratings according to the patients' age. There was also no correlation between the patients' gender and expectation scores. Patients presented higher expectations regarding their dentures than dental professionals. The dentist believed that dentures would bring fewer benefits than patients did, but his perception of denture benefits post-treatment was significantly higher than his expectations.