Capital flows and monetary control under a domestic currency substitution regime: the recent Brazilian experience

The 90s have witnessed a resumption in capital flows to Latin America. due to the conjugation of low interest rates in the US and economic reforms in most LA countries. In Brazil. however. substantial capital flows have becn induced by the extremely high domestic interest rates practiced by the Central Bank as a measure of last reson given the absence of successful stabilization policies. These very high interest rates were needed to prevent capital flight in a context of a surprisingly stable inflation rate above 20% a month. and keep interest bearing govemment securities preferable to foreign assets as money substitutes. We carefully describe how this domestic currency substitution regime (interest bearing govemment securities are substituted for MIas cash holdings) requires the Central Bank to renounce aoy control over monerary aggregates. In this domestic currency substitution regime. hyperinflation is the most likely outcome of an isolated (i.e.. without fiscal adjusanents) attempt by the Brazilian Central Bank to control money.

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.

Welfare characterization of monetary-applied models and three implications

This paper demonstrates that the applied monetary mo deIs - the Sidrauski-type models and the cash-in-advance models, augmented with a banking sector that supplies money substitutes services - imply trajectories which are P8,reto-Optimum restricted to a given path of the real quantity of money. As a consequence, three results follow: First, Bailey's formula to evaluate the wclfare cost of inflation is indeed accurate, if the long-run capital stock does not depend on the inflation rate and if the compensate demand is considered. Second, the relevant money demand concept for this issue - the impact of inflation on welfare - is the monetary base, Third, if the long-run capital stock depends on the inflation rate, this dependence has a second-order impact ou wclfare, and, conceptually, it is not a distortion from tite social point of vicw. These three implications moderatc some evaluations of the wclfare cost of the perfect predicted inflation.

Optimal exchange rate policy, optimal incomplete taxation and business cycles

Implementation and collapse of exchange rate pegging schemes are recur- rent events. A currency crisis (pegging) is usually followed by an economic downturn (boom). This essay explains why a benevolent government should pursue Þscal and monetary policies that lead to those recurrent currency crises and subsequent periods of pegging. It is shown that the optimal policy induces a competitive equilibrium that displays a boom in periods of below average de- valuation and a recession in periods of above average devaluation. A currency crisis (pegging) can be understood as an optimal policy answer to a recession (boom).

On the optimality of the Friedman Rule with heterogeneous agents and non-linear income taxation

We study the optimal “inflation tax” in an environment with heterogeneous agents and non-linear income taxes. We first derive the general conditions needed for the optimality of the Friedman rule in this setup. These general conditions are distinct in nature and more easily interpretable than those obtained in the literature with a representative agent and linear taxation. We then study two standard monetary specifications and derive their implications for the optimality of the Friedman rule. For the shopping-time model the Friedman rule is optimal with essentially no restrictions on preferences or transaction technologies. For the cash-credit model the Friedman rule is optimal if preferences are separable between the consumption goods and leisure, or if leisure shifts consumption towards the credit good. We also study a generalized model which nests both models as special cases.

The impact of the 2008 economic recession on three residential property type investments: a case study of five diverse zip codes in Washington DC, USA

There has been 47 recessions in the United States of America (US) since 1790. US recessions have increasingly affected economies of other countries in the world as nations become more and more interdependent on each other. The worst economic recession so far was the “Great Depression” – an economic recession that was caused by the 1929 crash of the stock market in the US. The 2008 economic recession in the US was a result of the burst of the “housing bubble” created by predatory lending. The economic recession resulted in increased unemployment (according to NBER 8.7 million jobs were lost from Feb. 2008 to Feb. 2010); decrease in GDP by 5.1%; increase in poverty level from 12.1% (2007) to 16.0% (2008) (NBER) This dissertation is an attempt to research the impact of the 2008 economic recession on different types of residential investments: a case study of five (5) diverse neighborhoods/zip codes in Washington DC, USA The main findings were that the effect of the 2008 economic depression on the different types of residential properties was dependent on the location of the property and the demographics/socio-economic factors associated with that location.

In search of exchange rate predictability : a study about accuracy, consistency, and granger causality of forecasts generated by a Taylor Rule Model

Este estudo investiga o poder preditivo fora da amostra, um mês à frente, de um modelo baseado na regra de Taylor para previsão de taxas de câmbio. Revisamos trabalhos relevantes que concluem que modelos macroeconômicos podem explicar a taxa de câmbio de curto prazo. Também apresentamos estudos que são céticos em relação à capacidade de variáveis macroeconômicas preverem as variações cambiais. Para contribuir com o tema, este trabalho apresenta sua própria evidência através da implementação do modelo que demonstrou o melhor resultado preditivo descrito por Molodtsova e Papell (2009), o “symmetric Taylor rule model with heterogeneous coefficients, smoothing, and a constant”. Para isso, utilizamos uma amostra de 14 moedas em relação ao dólar norte-americano que permitiu a geração de previsões mensais fora da amostra de janeiro de 2000 até março de 2014. Assim como o critério adotado por Galimberti e Moura (2012), focamos em países que adotaram o regime de câmbio flutuante e metas de inflação, porém escolhemos moedas de países desenvolvidos e em desenvolvimento. Os resultados da nossa pesquisa corroboram o estudo de Rogoff e Stavrakeva (2008), ao constatar que a conclusão da previsibilidade da taxa de câmbio depende do teste estatístico adotado, sendo necessária a adoção de testes robustos e rigorosos para adequada avaliação do modelo. Após constatar não ser possível afirmar que o modelo implementado provém previsões mais precisas do que as de um passeio aleatório, avaliamos se, pelo menos, o modelo é capaz de gerar previsões “racionais”, ou “consistentes”. Para isso, usamos o arcabouço teórico e instrumental definido e implementado por Cheung e Chinn (1998) e concluímos que as previsões oriundas do modelo de regra de Taylor são “inconsistentes”. Finalmente, realizamos testes de causalidade de Granger com o intuito de verificar se os valores defasados dos retornos previstos pelo modelo estrutural explicam os valores contemporâneos observados. Apuramos que o modelo fundamental é incapaz de antecipar os retornos realizados.

A crise financeira e a política monetária no Brasil

A crise financeira iniciada em 2007 gerou uma grande recessão nos Estados Unidos e abalou a economia global com consequências nefastas para o crescimento e a taxa de desemprego em vários países. Os principais Bancos Centrais do mundo passaram a dar maior importância para políticas que garantam a estabilidade financeira. É consensual a necessidade de avanços regulatórios e de medidas prudenciais capazes de reduzir os riscos financeiros, mas existem divergências quanto ao uso da taxa básica de juros, não só como um instrumento necessário para garantir a estabilidade de preços, como também para garantir a estabilidade financeira e evitar a formação de bolhas. O Brasil viveu nos últimos vinte anos um período de grande expansão do mercado de crédito, fruto das estabilidades econômica e financeira. O Banco Central do Brasil teve atuação exitosa durante a crise e demonstrou habilidade em utilizar instrumentos de política monetária e medidas macroprudenciais de forma complementar. Nos últimos quatro anos, as condições macroeconômicas se deterioraram e o Brasil atravessou um período de crescimento baixo, inflação próxima ao teto da meta e aumento do endividamento. Enquanto as políticas macroprudenciais foram capazes de evitar a formação de bolhas, as políticas fiscal e monetária foram demasiadamente expansionistas. Neste período houve um enfraquecimento na função-reação do Banco Central, que deixou de respeitar o princípio de Taylor.

The certification role of venture capitalists, top underwriters and big-n auditors in ipos

Esta tese avalia o impacto dos principais atores recorrentes durante o processo de IPO, em particular, o venture capitalist, o underwriter, e o auditor, sobre as condições de comercialização das ações da empresa, capturado pelo bid-ask spread, a fração de investidores institucionais que investem na empresa, a dispersão de capital, entre outros. Além disso, este estudo também analisa alguns benefícios que os fundos de Venture Capital (VCs) fornecem às empresas que eles investem. Ele investiga o papel dos VCs em dificultar o gerenciamento de resultados em IPOs e quantifica o papel desempenhado por eles no desempenho operacional das empresas após sua oferta inicial de ações. No primeiro capítulo, os resultados indicam que as empresas inflam seus resultados principalmente nos períodos pré-IPO e do IPO. Quando nós controlamos para os quatro períodos diferentes do IPO, observamos que IPOs de empresas investidas por VCs apresentam significativamente menos gerenciamento de resultados no IPO e em períodos seguintes à orfeta inicial das ações, exatamente quando as empresas tendem a inflar mais seus lucros. Este resultado é robusto a diferentes métodos estatísticos e diferentes metodologias usadas para avaliar o gerenciamento de resultados. Além disso, ao dividir a amostra entre IPOs de empresas investidas e não investidas por VCs, observa-se que ambos os grupos apresentam gerenciamento de resultados. Ambas as subamostras apresentam níveis de gerenciamento de resultados de forma mais intensa em diferentes fases ao redor do IPO. Finalmente, observamos também que top underwriters apresentam menores níveis de gerenciamento de resultados na subamostra das empresas investidas por VCs. No segundo capítulo, verificou-se que a escolha do auditor, dos VCs, e underwriter pode indicar escolhas de longo prazo da empresa. Nós apresentamos evidências que as características do underwriter, auditor, e VC têm um impacto sobre as características das empresas e seu desempenho no mercado. Além disso, estes efeitos são persistentes por quase uma década. As empresas que têm um top underwriter e um auditor big-N no momento do IPO têm características de mercado que permanecem ao longo dos próximos 8 anos. Essas características são representadas por um número maior de analistas seguindo a empresa, uma grande dispersão da propriedade através de investidores institucionais, e maior liquidez através um bid-ask spread menor. Elas também são menos propensas a saírem do mercado, bem como mais propensas à emissão de uma orferta secundária. Finalmente, empresas investidas por VCs são positivamente afetadas, quando consideramos todas as medidas de liquidez de mercado, desde a abertura de capital até quase uma década depois. Tais efeitos não são devido ao viés de sobrevivência. Estes resultados não dependem da bolha dot-com, ou seja, os nossos resultados são qualitativamente similares, uma vez que excluímos o período da bolha de 1999-2000. No último capítulo foi evidenciado que empresas investidas por VCs incorrem em um nível mais elevado de saldo em tesouraria do que as empresas não investidas. Este efeito é persistente por pelo menos 8 anos após o IPO. Mostramos também que empresas investidas por VCs estão associadas a um nível menor de alavancagem e cobertura de juros ao longo dos primeiros oito anos após o IPO. Finalmente, não temos evidências estatisticamente significantes entre VCs e a razão dividendo lucro. Estes resultados também são robustos a diversos métodos estatísticos e diferentes metodologias.

Macroeconomic constraints to growth of Brazilian economy diagnosis and some policy proposals

The recent process of accelerated expansion of the Brazilian economy was driven by exports and fixed capital formation. Although the pace of growth was more robust than in the 1990´s, we can still witness the existence of certain macroeconomic constraints to its continuation in the long run such as, for instance, the exchange rate overvaluation in particular since 2005, and in general the modus operandi of monetary policy. Such constraints may jeopardize the sustainability of the current pace of growth. Therefore, we argue that Brazil still lies in a trap made up of high interest and low exchange rates. The elimination of the exchange rate misalignment would bring about a great increase in the rate of interest, which on its turn would impact negatively upon investment and hence upon the sustainability of long run economic growth. We outline a set of policy measures to eliminate such a trap, in particular, the adoption of an implicit target for the exchange rate, capital controls and the abandonment of the present regime of inflation targeting. Recent events seem to go in this direction.

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.

Effects of subcutaneous methadone, morphine, buprenorphine or saline on thermal and pressure thresholds in cats

This study compared pressure and thermal thresholds after administration of three opioids in eight cats. Pressure stimulation was performed via a bracelet taped around the forearm. Three ball-bearings were advanced against the forearm by inflation of a modified blood pressure bladder. Pressure in the cuff was recorded at the end point (leg shake and head turn). Thermal threshold was tested as previously reported using a heated probe held against the thorax [Dixon et al. (2002) Research in Veterinary Science, 72, 205]. After baseline recordings, each cat received subcutaneous methadone 0.2 mg/kg, morphine 0.2 mg/kg, buprenorphine 0.02 mg/kg or saline 0.3 mL in a four period cross-over study. Measurements were made at 15, 30, 45 min and 1, 2, 3, 4, 8, 12 and 24 h after the injection. Data were analysed by ANOVA (P < 0.05). There were no significant changes in thresholds after saline. Thermal threshold increased at 45 min after buprenorphine (maximum 2.8 +/- 3 degrees C), 1-3 h after methadone (maximum 3.4 +/- 1.9 degrees C) and 45 min to 1 h (maximum 3.4 +/- 2 degrees C) after morphine. Pressure threshold increased 30-45 min (maximum 238 +/- 206 mmHg) after buprenorphine, 45-60 min after methadone (maximum 255 +/- 232 mmHg) and 45-60 min and 3-6 h (maximum 255 +/- 232 mmHg) after morphine. Morphine provided the best analgesia, and methadone appears a promising alternative. Buprenorphines limited effect was probably related to the subcutaneous route of administration. Previously, buprenorphine has produced much greater effects when given by other routes.

Effects of buprenorphine, carprofen and saline on thermal and mechanical nociceptive thresholds in cats

To evaluate a prototype pressure stimulus device for use in the cat and to compare with a known thermal threshold device.Eight healthy adult cats weighing between 3.0 and 4.9 kg.Pressure stimulation was given via a plastic bracelet taped around the forearm. Three 2.4 mm diameter ball bearings, in a 10-mm triangle, were advanced against the craniolateral surface of the antebrachium by manual inflation of a modified blood pressure bladder. Pressure in the cuff was recorded at the end point (leg shake and head turn). Thermal threshold was also tested. Stimuli were stopped if they reached 55 degrees C or 450 mmHg without response. After four pressure and thermal threshold baselines, each cat received SC buprenorphine 0.01 mg kg(-1), carprofen 4 mg kg(-1) or saline 0.3 mL in a three period cross-over study with a 1-week interval. The investigator was blinded to the treatment. Measurements were made at 0.25. 0.5, 0.75, 1, 2, 3, 4, 6, 8, and 24 hours after injection. Data were analyzed by using ANOVA.There were no significant changes in thermal or pressure threshold after administration of saline or carprofen, but thermal threshold increased from 60 minutes until 8 hours after administration of buprenorphine (p < 0.05). The maximum increase in threshold from baseline (Delta T-max) was 3.5 +/- 3.1 degrees C at 2 hours. Pressure threshold increased 2 hours after administration of buprenorphine (p < 0.05) when the increase in threshold above baseline (Delta P-max) was 162 +/- 189 mmHg.This pressure device resulted in thresholds that were affected by analgesic treatment in a similar manner but to a lesser degree than the thermal method. Pressure stimulation may be a useful additional method for analgesic studies in cats.

Effects of meperidine or saline on thermal, mechanical and electrical nociceptive thresholds in cats

Objective To measure cutaneous electrical nociceptive thresholds in relation to known thermal and mechanical stimulation for nociceptive threshold detection in cats.Study design Prospective, blinded, randomized cross-over study with 1-week washout interval.Animals Eight adult cats [bodyweight 5.1 +/- 1.8 kg (mean + SD)].Methods Mechanical nociceptive thresholds were tested using a step-wise manual inflation of a modified blood pressure bladder attached to the cat's thoracic limb. Thermal nociceptive thresholds were measured by increasing the temperature of a probe placed on the thorax. The electrical nociceptive threshold was tested using an escalating current from a constant current generator passed between electrodes placed on the thoracic region. A positive response (threshold) was recorded when cats displayed any or all of the following behaviors: leg shake, head turn, avoidance, or vocalization. Four baseline readings were performed before intramuscular injection of meperidine (5 mg kg(-1)) or an equal volume of saline. Threshold recordings with each modality were made at 15, 30, 45, 60, 90, and 120 minutes post-injection. Data were analyzed using ANOVA and paired t-tests (significance at p < 0.05).Results There were no significant changes in thermal, mechanical, or electrical thresholds after saline. Thermal thresholds increased at 15-60 minutes (p < 0.01) and mechanical threshold increased at 30 and 45 minutes after meperidine (p < 0.05). Maximum thermal threshold was +4.1 +/- 0.3 degrees C above baseline at 15 minutes while maximum mechanical threshold was 296 +/- 265 mmHg above baseline at 30 minutes after meperidine. Electrical thresholds following meperidine were not significantly different than baseline (p > 0.05). Thermal and electrical thresholds after meperidine were significantly higher than saline at 30 and 45 minutes (p < 0.05), and at 120 minutes (p < 0.05), respectively. Mechanical thresholds were significantly higher than saline treatment at 30 minutes (p <= 0.05).Conclusion and clinical relevance Electrical stimulation did not detect meperidine analgesia whereas both thermal and mechanical thresholds changed after meperidine administration in cats.

Clinical and histological evaluation of subepithelial connective tissue after collagen sponge implantation in the human palate

Rocha AL, Shirasu BK, Hayacibara RM, Magro-Filho O, Zanoni JN, Araujo MG. Clinical and histological evaluation of subepithelial connective tissue after collagen sponge implantation in the human palate. J Periodont Res 2012; 47: 758765. (c) 2012 John Wiley & Sons A/S Background and Objective: Successful root-coverage treatment depends on the thickness of the donor tissue. This study aimed to evaluate the thickness of donor tissue after augmentation of the connective tissue in the palatal area by implantation of lyophilized collagen sponge (Hemospon (R)). Material and Methods: Ten patients with an indication for root coverage, whose palate was deficient in adequate connective tissue, were recruited. The procedure was carried out in two stages. In the first stage, the palatal thickness in the donor site was measured at three standardized points (points 1, 2 and 3), from the distal of the canine to the distal of the first molar, and the lyophilized collagen sponge was inserted. In the second stage, the palatal thickness over the implant was measured (at points 1, 2 and 3), two biopsies of the palatal mucosa were collected one over the implant (experimental sample) and the other on the contralateral side (control sample) and then root-coverage treatment was performed. Analyses consisted of clinical assessment of the palatal measurements before and after sponge implantation, and histological assessment of the experimental and control biopsy samples. Data were analyzed using the Wilcoxon test. Results: Both analyses showed a significant increase in mean thickness, of 1.08 mm of neoformed tissue in the clinical analysis (the tissue at point 2 was the thickest of the three points) and of 0.53 mm in the histological analysis. Conclusion: The insertion of lyophilized collagen sponge induced a significant increase in the thickness of palatal connective tissue.