Common cycles in macroeconomic aggregates

Reduced form estimation of multivariate data sets currently takes into account long-run co-movement restrictions by using Vector Error Correction Models (VECM' s). However, short-run co-movement restrictions are completely ignored. This paper proposes a way of taking into account short-and long-run co-movement restrictions in multivariate data sets, leading to efficient estimation of VECM' s. It enables a more precise trend-cycle decomposition of the data which imposes no untested restrictions to recover these two components. The proposed methodology is applied to a multivariate data set containing U.S. per-capita output, consumption and investment Based on the results of a post-sample forecasting comparison between restricted and unrestricted VECM' s, we show that a non-trivial loss of efficiency results whenever short-run co-movement restrictions are ignored. While permanent shocks to consumption still play a very important role in explaining consumption’s variation, it seems that the improved estimates of trends and cycles of output, consumption, and investment show evidence of a more important role for transitory shocks than previously suspected. Furthermore, contrary to previous evidence, it seems that permanent shocks to output play a much more important role in explaining unemployment fluctuations.

The welfare cost of macroeconomic uncertainty in the post-war period

With standard assumptions on preferences and a fully-fledged econometric model we computed the welfare costs of macroeconomic uncertainty for post-war U.S. using the BeveridgeNelson decomposition. Welfare costs are about 0.9% per-capita consumption ($175.00) and marginal welfare costs are about twice as large.

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.

Financiamento para o subdesenvolvimento, o Brasil e o segundo consenso de Washington

While in the social and in the ethical realms the Cardoso administration was successful, its economic outcomes were frustrating. In this administration’s eight years the investment rate did not increase and income per capita growth lagged, while the public debt and the foreign debt increased substantially. This poor economic performance may be explained by three chained causes: a mistake in agenda setting, the adoption of the Second Washington Consensus, and the alienation of elites. The decision of setting high inflation as the major problem to be tackled instead of achieving equilibrium in foreign accounts represented a major macroeconomic mistake, which can be explained by the Second Washington Consensus. This consensus proposed in the 1990s that highly indebted countries should grow counting on foreign savings, although this is not the experience among OECD countries. The outcome was to evaluate the real, to increase artificially wages and consumption, so that instead of growth what we have been increased indebtedness. Why this flopped strategy was adopted? Rich countries’ interests are not difficult to guess. On the part of Brazil, the only explanation is Brazilian elites’ alienation in relation to the country’s national interest. As a final outcome, the Cardoso administration ends with another balance of payments crisis, which was empowered by the coming presidential elections. Yet, the solvency situation of the Brazilian economy have been improving since the 1999 successful floatation of the real, so that I believe that, adopted a policy that deepens fiscal adjustment, while lowers the interest rate, and avoids new evaluation of the real, the country will eventually be able to avoid default.

The behavior of temporary sales in a macroeconomic context

Nós investigamos promoções temporárias usando uma base de dados detalhada de 13 anos sobre preços ao consumidor no Brasil, com cotações de preços coletadas decendialmente. Nós encontramos forte evidências da existência de relação entre a frequência e tamanho de promoções e as variáveis macroeconômicas. A crença comum na literatura de que promoções não reagem a mudanças nas variáveis macroeconômicas pode ser devido a baixa volatilidade do cenário macro- econômico nos países analisados até o presente momento.

Interesse, ideologia & incompetência: a guerra do Iraque e o segundo consenso de Washington

Este projeto continua a avançar o programa de pesquisa que relaciona desenvolvimento econômico e democracia: pretende-se neste projeto dar um passo adiante e examinar como a democracia, uma vez consolidada como fruto do desenvolvimento capitalista, se torna ela própria um fator de desenvolvimento, particularmente quando ela deixa de ser uma mera democracia de elites para se tornar uma democracia de sociedade civil, na qual o debate público passa a ser um elemento central.

Ajuste macroeconômico e empréstimos externos no Brasil, 1995-2004

O presente estudo analisa a o impacto das restrições macroeconômicas, que emergiram no bojo da crise cambial de 1999, sobre a contratação de empréstimos externos pelo governo brasileiro junto às agências multilaterais de crédito, entre 1995-2004. A idéia básica é que a estratégia de equacionamento da crise externa teve reflexos diretos sobre o comportamento dos empréstimos contratados junto aos Multilateral Development Banks. Mais especificamente, o conjunto de políticas adotadas pelo governo brasileiro acabou promovendo tanto uma mudança na natureza como uma substancial redução na contratação de empréstimos principalmente junto ao Banco Mundial e ao Banco Inter americano de Desenvolvimento. Em decorrência, a estratégia de ajuste adotada, apesar do seu mérito, acabou privando o governo brasileiro de uma fonte barata de recursos e comprometendo o investimento do setor público.

The global financial crisis and after: a new capitalism?

The 2008 global financial crisis was the consequence of the process of financialization, or the creation of massive fictitious financial wealth, that began in the 1980s, and of the hegemony of a reactionary ideology, namely, neoliberalism, based on selfregulated and efficient markets. Although capitalism is intrinsically unstable, the lessons from the stock-market crash of 1929 and the Great Depression of the 1930s were transformed into theories and institutions or regulations that led to the “30 glorious years of capitalism” (1948–77) and that could have avoided a financial crisis as profound as the present one. It did not because a coalition of rentiers and “financists” achieved hegemony and, while deregulating the existing financial operations, refused to regulate the financial innovations that made these markets even more risky. Neoclassical economics played the role of a meta-ideology as it legitimized, mathematically and “scientifically”, neoliberal ideology and deregulation. From this crisis a new capitalism will emerge, though its character is difficult to predict. It will not be financialized but the tendencies present in the 30 glorious years toward global and knowledge-based capitalism, where professionals will have more say than rentier capitalists, as well as the tendency to improve democracy by making it more social and participative, will be resumed.

Monetary policy and country risk

This article develops an econometric model in order to study country risk behavior for six emerging economies (Argentina, Mexico, Russia, Thailand, Korea and Indonesia), by expanding the Country Beta Risk Model of Harvey and Zhou (1993), Erb et. al. (1996a, 1996b) and Gangemi et. al. (2000). Toward this end, we have analyzed the impact of macroeconomic variables, especially monetary policy, upon country risk, by way of a time varying parameter approach. The results indicate an inefficient and unstable effect of monetary policy upon country risk in periods of crisis. However, this effect is stable in other periods, and the Favero-Giavazzi effect is not verified for all economies, with an opposite effect being observed in many cases.

The macroeconomic effects of infrequent information with adjustment costs

We extend the macroeconomic literature on Sstype rules by introducing infrequent information in a kinked ad justment cost model. We first show that optimal individual decision rules are both state-and -time dependent. We then develop an aggregation framework to study the macroeconomic implications of such optimal individual decision rules. In our model, a vast number of agents act together, and more so when uncertainty is large.The average effect of an aggregate shock is inversely related to its size and to aggregate uncertainty. These results are in contrast with those obtained with full information ad justment cost models.