Public debt sustainability and endogenous seignorage in Brazil: time-series evidence from 1947-92

Using national accounts data for the revenue-GDP and expenditure GDP ratios from 1947 to 1992, we examine two central issues in public finance. First, was the path of public debt sustainable during this period? Second, if debt is sustainable, how has the government historically balanced the budget after hocks to either revenues or expenditures? The results show that (i) public deficit is stationary (bounded asymptotic variance), with the budget in Brazil being balanced almost entirely through changes in taxes, regardless of the cause of the initial imbalance. Expenditures are weakly exogenous, but tax revenues are not;(ii) a rational Brazilian consumer can have a behavior consistent with Ricardian Equivalence (iii) seignorage revenues are critical to restore intertemporal budget equilibrium, since, when we exclude them from total revenues, debt is not sustainable in econometric tests.

Output convergence in Mercosur: multivariate time series evidence

The aim of this paper is to provide evidence on output convergence among the Mercosur countries and associates, using multivariate time-series tests. The methodology is based on a combination of tests and estimation procedures, both univariate and multivariate, applied to the differences in per capita real income. We use the definitions of time-series convergence proposed by Bernard & Durlauf and apply unit root and tests proposed by Abuaf & Jorion and Taylor & Sarno. In this same multivariate context, the Flôres, Preumont & Szafarz and Breuer, MbNown & Wallace tests, which allow for the existence of correlations across the series without imposing a common speed of mean reversion, identify the countries that convergence. Concerning the empirical results, there is evidence of long-run convergence or, at least, catching up, for the smaller countries, Bolivia, Paraguay, Peru and Uruguay, towards Brazil and, to some extent, Argentina. In contrast, the evidence on convergence for the larger countries is weaker, as they have followed different (or rather opposing) macroeconomic policy strategies. Thus the future of the whole area will critically depend on the ability of Brazil, Argentina and Chile to find some scope for more cooperative policy actions.

Growth, increasing returns, and public infrastructure : time series evidence

Initial endogenous growth models emphasized the importance of external effects and increasing retums in explaining growth. Empirically, this hypothesis can be confumed if the coefficient of physical capital per hour is unity in the aggregate production function. Previous estimates using time series data rejected this hypothesis, although cross-country estimates did nol The problem lies with the techniques employed, which are unable to capture low-frequency movements of high-frequency data. Using cointegration, new time series evidence confum the theory and conform to cross-country evidence. The implied Solow residual, which takes into account externaI effects to aggregate capital, has its behavior analyzed. The hypothesis that it is explained by government expenditures on infrasttucture is confIrmed. This suggests a supply-side role for government affecting productivity.

Do shocks permanently change output? : Local persistency in economic time series

While it is recognized that output fuctuations are highly persistent over certain range, less persistent results are also found around very long horizons (Conchrane, 1988), indicating the existence of local or temporary persistency. In this paper, we study time series with local persistency. A test for stationarity against locally persistent alternative is proposed. Asymptotic distributions of the test statistic are provided under both the null and the alternative hypothesis of local persistency. Monte Carlo experiment is conducted to study the power and size of the test. An empirical application reveals that many US real economic variables may exhibit local persistency.

A note on Chambers's "long memory and aggregation in macroeconomic time series"

Chambers (1998) explores the interaction between long memory and aggregation. For continuous-time processes, he takes the aliasing effect into account when studying temporal aggregation. For discrete-time processes, however, he seems to fail to do so. This note gives the spectral density function of temporally aggregated long memory discrete-time processes in light of the aliasing effect. The results are different from those in Chambers (1998) and are supported by a small simulation exercise. As a result, the order of aggregation may not be invariant to temporal aggregation, specifically if d is negative and the aggregation is of the stock type.

Public debt sustainability and endogenous seigniorage in Brazil: time-series evidence from 1947-92: revised version

Using national accounts data for the revenue-GDP and expenditureGDP ratios from 1947 to 1992, we examine three central issues in public finance. First, was the path of public debt sustainable during this period? Second, if debt is sustainable, how has the government historically balanced the budget after shocks to either revenues or expenditures? Third, are expenditures exogenous? The results show that (i) public deficit is stationary (bounded asymptotic variance), with the budget in Brazil being balanced almost entirely through changes in taxes, regardless of the cause of the initial imbalance. Expenditures are weakly exogenous, but tax revenues are not; (ii) the behavior of a rational Brazilian consumer may be consistent with Ricardian Equivalence; (iii) seigniorage revenues are critical to restore intertemporal budget equilibrium, since, when we exclude them from total revenues, debt is not sustainable in econometric tests.

Estimating and forecasting the volatility of Brazilian finance series using arch models (Preliminary Version)

The goal of this paper is to present a comprehensive emprical analysis of the return and conditional variance of four Brazilian …nancial series using models of the ARCH class. Selected models are then compared regarding forecasting accuracy and goodness-of-…t statistics. To help understanding the empirical results, a self-contained theoretical discussion of ARCH models is also presented in such a way that it is useful for the applied researcher. Empirical results show that although all series share ARCH and are leptokurtic relative to the Normal, the return on the US$ has clearly regime switching and no asymmetry for the variance, the return on COCOA has no asymmetry, while the returns on the CBOND and TELEBRAS have clear signs of asymmetry favoring the leverage e¤ect. Regarding forecasting, the best model overall was the EGARCH(1; 1) in its Gaussian version. Regarding goodness-of-…t statistics, the SWARCH model did well, followed closely by the Student-t GARCH(1; 1)

A Framework supporting collaboration on the distributed design of integrated systems

The work described in this thesis aims to support the distributed design of integrated systems and considers specifically the need for collaborative interaction among designers. Particular emphasis was given to issues which were only marginally considered in previous approaches, such as the abstraction of the distribution of design automation resources over the network, the possibility of both synchronous and asynchronous interaction among designers and the support for extensible design data models. Such issues demand a rather complex software infrastructure, as possible solutions must encompass a wide range of software modules: from user interfaces to middleware to databases. To build such structure, several engineering techniques were employed and some original solutions were devised. The core of the proposed solution is based in the joint application of two homonymic technologies: CAD Frameworks and object-oriented frameworks. The former concept was coined in the late 80's within the electronic design automation community and comprehends a layered software environment which aims to support CAD tool developers, CAD administrators/integrators and designers. The latter, developed during the last decade by the software engineering community, is a software architecture model to build extensible and reusable object-oriented software subsystems. In this work, we proposed to create an object-oriented framework which includes extensible sets of design data primitives and design tool building blocks. Such object-oriented framework is included within a CAD Framework, where it plays important roles on typical CAD Framework services such as design data representation and management, versioning, user interfaces, design management and tool integration. The implemented CAD Framework - named Cave2 - followed the classical layered architecture presented by Barnes, Harrison, Newton and Spickelmier, but the possibilities granted by the use of the object-oriented framework foundations allowed a series of improvements which were not available in previous approaches: - object-oriented frameworks are extensible by design, thus this should be also true regarding the implemented sets of design data primitives and design tool building blocks. This means that both the design representation model and the software modules dealing with it can be upgraded or adapted to a particular design methodology, and that such extensions and adaptations will still inherit the architectural and functional aspects implemented in the object-oriented framework foundation; - the design semantics and the design visualization are both part of the object-oriented framework, but in clearly separated models. This allows for different visualization strategies for a given design data set, which gives collaborating parties the flexibility to choose individual visualization settings; - the control of the consistency between semantics and visualization - a particularly important issue in a design environment with multiple views of a single design - is also included in the foundations of the object-oriented framework. Such mechanism is generic enough to be also used by further extensions of the design data model, as it is based on the inversion of control between view and semantics. The view receives the user input and propagates such event to the semantic model, which evaluates if a state change is possible. If positive, it triggers the change of state of both semantics and view. Our approach took advantage of such inversion of control and included an layer between semantics and view to take into account the possibility of multi-view consistency; - to optimize the consistency control mechanism between views and semantics, we propose an event-based approach that captures each discrete interaction of a designer with his/her respective design views. The information about each interaction is encapsulated inside an event object, which may be propagated to the design semantics - and thus to other possible views - according to the consistency policy which is being used. Furthermore, the use of event pools allows for a late synchronization between view and semantics in case of unavailability of a network connection between them; - the use of proxy objects raised significantly the abstraction of the integration of design automation resources, as either remote or local tools and services are accessed through method calls in a local object. The connection to remote tools and services using a look-up protocol also abstracted completely the network location of such resources, allowing for resource addition and removal during runtime; - the implemented CAD Framework is completely based on Java technology, so it relies on the Java Virtual Machine as the layer which grants the independence between the CAD Framework and the operating system. All such improvements contributed to a higher abstraction on the distribution of design automation resources and also introduced a new paradigm for the remote interaction between designers. The resulting CAD Framework is able to support fine-grained collaboration based on events, so every single design update performed by a designer can be propagated to the rest of the design team regardless of their location in the distributed environment. This can increase the group awareness and allow a richer transfer of experiences among them, improving significantly the collaboration potential when compared to previously proposed file-based or record-based approaches. Three different case studies were conducted to validate the proposed approach, each one focusing one a subset of the contributions of this thesis. The first one uses the proxy-based resource distribution architecture to implement a prototyping platform using reconfigurable hardware modules. The second one extends the foundations of the implemented object-oriented framework to support interface-based design. Such extensions - design representation primitives and tool blocks - are used to implement a design entry tool named IBlaDe, which allows the collaborative creation of functional and structural models of integrated systems. The third case study regards the possibility of integration of multimedia metadata to the design data model. Such possibility is explored in the frame of an online educational and training platform.

The impact of OFDI on economic growth countries. An econometric approach using panel data and time-series evidence

The thesis at hand adds to the existing literature by investigating the relationship between economic growth and outward foreign direct investments (OFDI) on a set of 16 emerging countries. Two different econometric techniques are employed: a panel data regression analysis and a time-series causality analysis. Results from the regression analysis indicate a positive and significant correlation between OFDI and economic growth. Additionally, the coefficient for the OFDI variable is robust in the sense specified by the Extreme Bound Analysis (EBA). On the other hand, the findings of the causality analysis are particularly heterogeneous. The vector autoregression (VAR) and the vector error correction model (VECM) approaches identify unidirectional Granger causality running either from OFDI to GDP or from GDP to OFDI in six countries. In four economies causality among the two variables is bidirectional, whereas in five countries no causality relationship between OFDI and GDP seems to be present.

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.

Forecasting Multivariate Time Series under Present-Value-Model Short- and Long-run Co-movement Restrictions

This paper has two original contributions. First, we show that the present value model (PVM hereafter), which has a wide application in macroeconomics and fi nance, entails common cyclical feature restrictions in the dynamics of the vector error-correction representation (Vahid and Engle, 1993); something that has been already investigated in that VECM context by Johansen and Swensen (1999, 2011) but has not been discussed before with this new emphasis. We also provide the present value reduced rank constraints to be tested within the log-linear model. Our second contribution relates to forecasting time series that are subject to those long and short-run reduced rank restrictions. The reason why appropriate common cyclical feature restrictions might improve forecasting is because it finds natural exclusion restrictions preventing the estimation of useless parameters, which would otherwise contribute to the increase of forecast variance with no expected reduction in bias. We applied the techniques discussed in this paper to data known to be subject to present value restrictions, i.e. the online series maintained and up-dated by Shiller. We focus on three different data sets. The fi rst includes the levels of interest rates with long and short maturities, the second includes the level of real price and dividend for the S&P composite index, and the third includes the logarithmic transformation of prices and dividends. Our exhaustive investigation of several different multivariate models reveals that better forecasts can be achieved when restrictions are applied to them. Moreover, imposing short-run restrictions produce forecast winners 70% of the time for target variables of PVMs and 63.33% of the time when all variables in the system are considered.

An overview of some historical Brazilian macroeconomic series and some open questions

This paper presents an overview of the Brazilian macroeconomy by analyzing the evolution of some specific time series. The presentation is made through a sequence of graphs. Several remarkable historical points and open questions come up in the data. These include, among others, the drop in output growth as of 1980, the clear shift from investments to government current expenditures which started in the beginning of the 80s, the notable way how money, prices and exchange rate correlate in an environment of permanently high inHation, the historical coexistence of high rates of growth and high rates of inHation, as well as the drastic increase of the velocity of circulation of money between the 70s and the mid-90s. It is also shown that, although net external liabilities have increased substantially in current dollars after the Real Plan, its ratio with respect to exports in 2004 is practically the same as the one existing in 1986; and that residents in Brazil, in average, owed two more months of their final income (GNP) to abroad between 1995-2004 than they did between 1990 and 1994. Variance decompositions show that money has been important to explain prices, but not output (GDP).