Real-time forecasts of economic activity for Latin American economies

Macroeconomic policy decisions in real-time are based on the assessment of current and future economic conditions. Crucially, these assessments are made difficult by the presence of incomplete and noisy data. The problem is more acute for emerging market economies, where most economic data are released infrequently with a (sometimes substantial) lag. This paper evaluates nowcasts and forecasts of real GDP growth using five models for ten Latin American countries. The results indicate the flow of monthly data helps to improve forecast accuracy, and the dynamic factor model consistently produces more accurate nowcasts and forecasts relative to other model specifications, across most of the countries we consider.     

Accounting and slavery: the accounts of the English South Sea Company, 1713-22

The Asiento was an agreement between the Crowns of England and Spain of tremendous economic and political consequences. In spite of its importance, very little is known about the accounting practices of the Asiento. This paper demonstrates that the developments of the Asiento were very much linked to the lack of accountability of the South Sea Company (SSC) before the Spanish Crown and describes the characteristics of the accounting system used by the SSC to provide information on its developed economic activity. It also discusses the role of accounting in the resolution of conflicts between the tenants of the Asiento, the SSC and its Spanish counterparts.     

Relevance and advantages of using the item response theory

The item response theory (IRT) also known as latent trait theory, is used for the development, evaluation and administration of standardized measurements; it is widely used in the areas of psychology and education. This theory was developed and expanded for over 50 years and has contributed to the development of measurement scales of latent traits. This paper presents the basic and fundamental concepts of this IRT and a practical example of the construction of scales is proposed to illustrate the feasibility, advantages and validity of IRT through a known measurement, the height. The results obtained with the practical application of IRT confirm its effectiveness in the evaluation of latent traits.     

The Effect of EMU on Tourism*

This paper estimates the effect of the euro on intra‐EMU tourist flows by using a panel dataset of 20 OECD countries over the period 1995–2002. The results reveal that the euro has increased tourism, with an effect of around 6.5%. This is a noticeable impact given the early stage of the EMU analyzed. The robustness checks show that the evidence of a positive impact is quite widespread across EMU destination countries.     

The importance of firms in wage determination

Firms are central to many theories of the labor market. However, the actual degree to which firms shape the structure of wages is still not well understood. This paper investigates (i) the importance of firms in explaining wage differences across individuals and industries, and (ii) how the nature of interfirm mobility – job-to-job vs. job-unemployment-job – affects the relative importance of firms and workers in wage determination. Results indicate that (i) firms are much more important in explaining the variance of average wages across industries rather than across individuals, and (ii) using job-to-job transitions to identify the firm's contribution to the wage rate reduces the importance of firm wage policies in explaining wage differences by as much as 50%.     

Entrepreneurial Structure Qualitative Analysis: The Case of Seville (Spain)

In the field of territorial economic growth, it is possible to identify important characteristics in the entrepreneurial structure, such as the structure of the size of firms, main activity sectors, or the degree of innovation. However, other lesser known characteristics are important also, such as functional dependency, which considers the relationship between small and medium enterprises (SMEs), and suppliers and clients belonging to any territorial field or productive dependency, which considers the level of concentration in terms of buying and selling in connection with the main suppliers and clients, respectively. In order to empirically contrast the importance of these entrepreneurial characteristics and try to relate them with territorial economic growth, a sample of 400 enterprises in the province of Seville (Spain) is used.      

Investor sentiment in the US-dollar: Longer-term,non-linear orientation on PPP

How is it possible that exchange rates move in the long run towards fundamentals, while professionals form consistently irrational exchange rate expectations? We look at this puzzle from a different perspective by analyzing investor sentiment in the US-dollar market. First, long-horizon regressions show that investor sentiment is connected with exchange rate returns at longer horizons, i.e. more than two years. Second, sentiment is cointegrated with fundamentals, whereas third, this relation becomes stronger, the larger exchange rate's misalignment from long-run PPP. In sum, investor sentiment's behavior in the US-dollar market closely matches with established facts of empirical exchange rate research.     

On the Sources of Inflation in Kenya: A Model‐Based Approach

We develop a semi‐structural new‐Keynesian open‐economy model – with separate food and non‐food inflation dynamics to study the sources of inflation in Kenya in recent years. To do so, we filter international and Kenyan data (on output, inflation and its components, exchange rates and interest rates) through the model to recover a model‐based decomposition of most variables into trends (or potential values) and temporary movements (or gaps) – including for the international and domestic relative price of food. We use the filtration exercise to recover the sequence of domestic and foreign macroeconomic shocks that account for business cycle dynamics in Kenya over the last few years, with a special emphasis on the various factors (international food prices, monetary policy) driving inflation. We find that while imported food price shocks have been an important source of inflation, both in 2008 and more recently, accommodating monetary policy has also played a role, most notably through its effect on the nominal exchange rate. We also discuss the implications of this exercise for the use of model‐based monetary policy analysis in sub‐Saharan African countries.