The long-run performance of IPOs: the case of the Stock Exchange of Mauritius

This study examines the long-run performance of initial public offerings on the Stock Exchange of Mauritius (SEM). The results show that the 3-year equally weighted cumulative adjusted returns average −16.5%. The magnitude of this underperformance is consistent with most reported studies in different developed and emerging markets. Based on multivariate regression models, firms with small issues and higher ex ante financial strength seem on average to experience greater long-run underperformance, supporting the divergence of opinion and overreaction hypotheses. On the other hand, Mauritian firms do not on average time their offerings to lower cost of capital and as such, there seems to be limited support for the windows of opportunity hypothesis.

Long-run restrictions and survey forecasts of output, consumption and investment

We consider the extent to which long-horizon survey forecasts of consumption, investment and output growth are consistent with theory-based steady-state values, and whether imposing these restrictions on long-horizon forecasts will enhance their accuracy. The restrictions we impose are consistent with a two-sector model in which the variables grow at different rates in steady state. The restrictions are imposed by exponential-tilting of simple auxiliary forecast densities. We show that imposing the consumption-output restriction yields modest improvements in the long-horizon output growth forecasts, and larger improvements in the forecasts of the cointegrating combination of consumption and output: the transformation of the data on which accuracy is assessed plays an important role.

Testing the long-run implications of the expectation hypothesis using cointegration techniques with structural change

This paper investigates whether or not multivariate cointegrated process with structural change can describe the Brazilian term structure of interest rate data from 1995 to 2006. In this work the break point and the number of cointegrated vector are assumed to be known. The estimated model has four regimes. Only three of them are statistically different. The first starts at the beginning of the sample and goes until September of 1997. The second starts at October of 1997 until December of 1998. The third starts at January of 1999 and goes until the end of the sample. It is used monthly data. Models that allows for some similarities across the regimes are also estimated and tested. The models are estimated using the Generalized Reduced-Rank Regressions developed by Hansen (2003). All imposed restrictions can be tested using likelihood ratio test with standard asymptotic 1 qui-squared distribution. The results of the paper show evidence in favor of the long run implications of the expectation hypothesis for Brazil.

Infrastructure and productivity in Latin America: is there a relationship in the long run?

This article analyses the relationship between infrastructure and total factor productivity (TFP) in the four major Latin American economies: Argentina, Brazil, Chile and Mexico. We hypothesise that an increase in infrastructure has an indirect effect on long-term economic growth by raising productivity. To assess this theory, we use the traditional Johansen methodology for testing the cointegration between TFP and physical measures of infrastructure stock, such as energy, roads, and telephones. We then apply the Lütkepohl, Saikkonen and Trenkler Test, which considers a possible level shift in the series and has better small sample properties, to the same data set and compare the two tests. The results do not support a robust long-term relationship between the series; we do not find strong evidence that cuts in infrastructure investment in some Latin American countries were the main reason for the fall in TFP during the 1970s and 1980s.

Model selection, estimation and forecasting in VAR models with short-run and long-run restrictions

We study the joint determination of the lag length, the dimension of the cointegrating space and the rank of the matrix of short-run parameters of a vector autoregressive (VAR) model using model selection criteria. We consider model selection criteria which have data-dependent penalties for a lack of parsimony, as well as the traditional ones. We suggest a new procedure which is a hybrid of traditional criteria and criteria with data-dependant penalties. In order to compute the fit of each model, we propose an iterative procedure to compute the maximum likelihood estimates of parameters of a VAR model with short-run and long-run restrictions. Our Monte Carlo simulations measure the improvements in forecasting accuracy that can arise from the joint determination of lag-length and rank, relative to the commonly used procedure of selecting the lag-length only and then testing for cointegration.

Model selection, estimation and forecasting in VAR models with short-run and long-run restrictions

We study the joint determination of the lag length, the dimension of the cointegrating space and the rank of the matrix of short-run parameters of a vector autoregressive (VAR) model using model selection criteria. We consider model selection criteria which have data-dependent penalties as well as the traditional ones. We suggest a new two-step model selection procedure which is a hybrid of traditional criteria and criteria with data-dependant penalties and we prove its consistency. Our Monte Carlo simulations measure the improvements in forecasting accuracy that can arise from the joint determination of lag-length and rank using our proposed procedure, relative to an unrestricted VAR or a cointegrated VAR estimated by the commonly used procedure of selecting the lag-length only and then testing for cointegration. Two empirical applications forecasting Brazilian inflation and U.S. macroeconomic aggregates growth rates respectively show the usefulness of the model-selection strategy proposed here. The gains in different measures of forecasting accuracy are substantial, especially for short horizons.

The long run economic impact of AIDS

This paper studies the long-run impact of HIV/AIDS on per capita income and education. We introduce a channel from HIV/AIDS to long-run income that has been overlooked by the literature, the reduction of the incentives to study due to shorter expected longevity. We work with a continuous time overlapping generations mo deI in which life cycle features of savings and education decision play key roles. The simulations predict that the most affected countries in Sub-Saharan Africa will be in the future, on average, a quarter poorer than they would be without AIDS, due only to the direct (human capital reduction) and indirect (decline in savings and investment) effects of life-expectancy reductions. Schooling will decline on average by half. These findings are well above previous results in the literature and indicate that, as pessimistic as they may be, at least in economic terms the worst could be yet to come.

On the long run effects of barriers to trade

We study the macroeconomic effects of international trade policy by integrating a Hecksher-Ohlin trade model into an optimal-growth framework. The model predicts that a more open economy will have higher factor productivity. Furthermore, there is a "selective development trap," an additional steady state with low income, to which countries may or may not converge, depending on policy. Income at the development trap falls as trade barriers increase. Hence, cross-country differences in barriers to trade may help explain the dispersion of per-capita income observed across countries. The effects are quantified and we show that protectionism can explain a relevant fraction of TFP and long-run income differentials across countries.

Model selection, estimation and forecasting in VAR models with short-run and long-run restrictions

We study the joint determination of the lag length, the dimension of the cointegrating space and the rank of the matrix of short-run parameters of a vector autoregressive (VAR) model using model selection criteria. We consider model selection criteria which have data-dependent penalties as well as the traditional ones. We suggest a new two-step model selection procedure which is a hybrid of traditional criteria and criteria with data-dependant penalties and we prove its consistency. Our Monte Carlo simulations measure the improvements in forecasting accuracy that can arise from the joint determination of lag-length and rank using our proposed procedure, relative to an unrestricted VAR or a cointegrated VAR estimated by the commonly used procedure of selecting the lag-length only and then testing for cointegration. Two empirical applications forecasting Brazilian in ation and U.S. macroeconomic aggregates growth rates respectively show the usefulness of the model-selection strategy proposed here. The gains in di¤erent measures of forecasting accuracy are substantial, especially for short horizons.

Model selection, estimation and forecasting in VAR models with short-run and long-run restrictions

We study the joint determination of the lag length, the dimension of the cointegrating space and the rank of the matrix of short-run parameters of a vector autoregressive (VAR) model using model selection criteria. We suggest a new two-step model selection procedure which is a hybrid of traditional criteria and criteria with data-dependant penalties and we prove its consistency. A Monte Carlo study explores the finite sample performance of this procedure and evaluates the forecasting accuracy of models selected by this procedure. Two empirical applications confirm the usefulness of the model selection procedure proposed here for forecasting.

Forecasting multivariate time series under present-value-model short- and long-run co-movement restrictions

It is well known that cointegration between the level of two variables (e.g. prices and dividends) is a necessary condition to assess the empirical validity of a present-value model (PVM) linking them. The work on cointegration,namelyon long-run co-movements, has been so prevalent that it is often over-looked that another necessary condition for the PVM to hold is that the forecast error entailed by the model is orthogonal to the past. This amounts to investigate whether short-run co-movememts steming from common cyclical feature restrictions are also present in such a system. In this paper we test for the presence of such co-movement on long- and short-term interest rates and on price and dividend for the U.S. economy. We focuss on the potential improvement in forecasting accuracies when imposing those two types of restrictions coming from economic theory.

The long-run properties of a dynamic Mirrlees' model with aggregate shocks

Nós abordamos a existência de distribuições estacionárias de promessas de utilidade em um modelo Mirrlees dinâmico quando o governo tem record keeping imperfeito e a economia é sujeita a choques agregados. Quando esses choques são iid, provamos a existência de um estado estacionário não degenerado e caracterizamos parcialmente as alocações estacionárias. Mostramos que a proporção do consumo agregado é invariante ao estado agregado. Quando os choques agregados apresentam persistência, porém, alocações eficientes apresentam dependência da história de choques e, em geral, uma distribuição invariante não existe.

Convergence in Brazil: recent trends and long run prospects

This paper applies to the analysis of the interstate income distribution in BraziI a set of techniques that have been widely used in the current empirical literature on growth and convergence. Usual measures of dispersion in the interstate income distribution (the coefficient of variation and Theil' s index) suggest that cr-convergence was an unequivoca1 feature of the regional growth experience in BraziI, between 1970 and 1986. After 1986, the process of convergence seems, however, to have sIowed down almost to a halt. A standard growth modeI is shown to fit the regional data well and to expIain a substantial amount of the variation in growth rates, providing estimates of the speed of (conditional) J3-convergence of approximateIy 3% p.a .. Different estimates of the long run distribution implied by the recent growth trends point towards further reductions in the interstate income inequality, but also suggest that the relative per capita incomes of a significant number of states and the number of ''very poor" and "poor" states were, in 1995, already quite c10se to their steady-state values.

International integration and long- run persistence of the GNP distribution

We use the Ramsey model of g,Towth elaborated by Bliss [1995] and Ventlira [1997] to show how international integration results in long-nm persistellce Df GNPs distribution, while allowing, under certain conditions on parameters, for convergellce during the transition. First, we pi·ovide relationships which explicitly relate, in the neighborhood of the steady-state, the magnitude of conditional convergence or divergence to the fundamentaIs of the economies. Second, we present ali analysis of the Cobb Douglas case with a broad dass of utility functions and show that there is always transitional convergenee with this technology. Third, directions for testing the Illodel against the traditional dosed-ecollomy setting are proposed. These lead to adding specific and world-wide regTessors to traditional growth regressions.