The emerging global financial architecture and exchange rate regimes in a volatile world

Previous work has documented inflation effects on Tobin's q in the long run. This paper examines whether the FED's different policies and chairmen tenure have an impact on Tobin's q, after a modified stylized AD-AS model shows that central banks affect q. We do find changing responses of q depending on the pre-Volcker and post-Volcker periods.     

The macroeconomic effects of fiscal policy in Portugal: a Bayesian SVAR analysis

With a new quarterly dataset we estimate a Bayesian Structural Autoregression model and a Fully Simultaneous System approach to analyze the macroeconomic effects of fiscal policy. Results show that positive government spending shocks, in general, have a negative effect on real GDP; lead to “crowding-out” effects of private consumption and investment; have a persistent and positive effect on the price level and a mixed impact on the average financing cost of government debt. Explicitly considering the government debt dynamics in the model is also important. A VAR counter-factual exercise confirms that unexpected positive spending shocks create relevant “crowding-out” effects.     

What are the effects of fiscal policy on asset markets?

We investigate the link between fiscal policy shocks and asset markets. Our results show that spending shocks have: a positive and persistent effect on GDP in the U.S. and in the U.K., while for Germany and Italy, such impact is temporary; a positive and persistent effect on housing prices; a negative effect on stock prices; and mixed effects on the price level. A VAR counter-factual exercise suggests that fiscal shocks play a minor role in the asset markets of the U.S. and Germany, and substantially increase the variability of housing and stock prices in the U.K., while government revenue shocks have increased volatility in Italy.     

Ad‐valorem tax incidence and after‐tax price adjustments: evidence from Brazilian basic basket food

Abstract Recent empirical work on tax incidence suggests that after‐tax price responses are independent of the tax change direction. This paper investigates asymmetric price responses to ad‐valorem tax changes in the Brazilian food market for 10 goods in 16 states during the period 1994–2008. Our results suggest that when tax rates increase, tax full shifting occurs for 2 of the 10 goods and tax overshifting occurs for one of the 10 goods; the price response to tax cuts is an undershifting for all goods. Moreover, this last result is similar to our estimation of (average) tax incidence (undershifting). We also investigate the short‐term and long‐term relationships between prices and VAT rate parameters and find that prices seem to respond to tax shocks within four months.     

Crises and liquidity in over-the-counter markets

We study the efficiency of liquidity provision by dealers and the desirability of policy intervention in over-the-counter (OTC) markets during crises. We emphasizes two OTC frictions: finding counterparties takes time, and trade is bilateral and involves bargaining. We model a crisis as a shock that reduces investors? asset demands, lasting until a random recovery time. In this context, dealers can provide liquidity to investors by accumulating asset inventories. When OTC frictions are severe, even well capitalized dealers may not find it privately optimal to accumulate inventories, and direct purchase by the government can improve welfare.     

Persistent high ambition and substance abuse: a rationalization of a vicious circle

While the current use of some mind-altering substances alleviates current level of depression, it facilitates future depression. Our analysis incorporates this intertemporal tradeoff and shows that the stationary status of a consistently overly ambitious sophisticated user is improved by impatience, and that this improvement is amplified by the ratio of the instantaneous depression-relief effect to the status-degradation effect of the mind-altering substance. The analysis also shows that the existence of a supportive personal community leads to permanent cyclical use of mind-altering substances.      

Growth Accelerations

Unlike most cross country growth analyses, we focus on turning points in growth performance. We look for instances of rapid acceleration in economic growth that are sustained for at least 8 years and identify more than 80 such episodes since the 1950s. Growth accelerations tend to be correlated with increases in investment and trade, and with real exchange rate depreciations. Political-regime changes are statistically significant predictors of growth accelerations. External shocks tend to produce growth accelerations that eventually fizzle out, while economic reform is a statistically significant predictor of growth accelerations that are sustained. However, growth accelerations tend to be highly unpredictable: the vast majority of growth accelerations are unrelated to standard determinants and most instances of economic reform do not produce growth accelerations.     

The Game Academics Play: Editors versus Authors

This article studies a game between authors and editors. Editors play as leaders while authors are the followers. Authors maximize the number of publications seeking to increase the impact of their work in the literature, captured by citations. Editors maximize the quality of papers they publish in order to increase the reputation of their journals. The main results are: (i) rules aimed at increasing scholars productivity, such as requirements to obtain tenure, increase author's citations and journal's quality; (ii) editors willingness to build journal's reputation hurt journal's quality and increase author's publications; (iii) journal's reputation increases citations and journal's quality.     

Exporting and performance: evidence from Chilean plants

Abstract.  Recent empirical evidence documents the superior characteristics of exporters relative to non‐exporters. Three explanations for this phenomenon have been proposed: self‐selection; learning‐by‐exporting; and conscious self‐selection. We test these three hypotheses using plant‐level data from Chile. We find that plants that enter international markets show superior initial performance compared with non‐exporters, consistent with self‐selection; we observe increases in productivity after plants begin to export, which is consistent with learning‐by‐exporting. We also find strong evidence supporting the idea that self‐selection is a conscious process by which plants increase productivity with the purpose of becoming exporters. JEL classification: F14; O54; D21     

WEALTH,ASSET PORTFOLIO,MONEY DEMAND AND POLICY RULE

I look at the linkages between monetary policy and asset wealth using quarterly data for the USA. I show that a positive interest rate shock leads to a fall in aggregate wealth and an important change in portfolio composition: housing wealth gradually decreases, but the effects are very persistent; and financial wealth quickly shrinks, but the impact is short‐lived. I also find that the money market can be characterized as follows: (i) the money demand has a large interest elasticity and a small output elasticity; and (ii) the estimated monetary policy reaction function highlights the special focus given by the central bank to developments in monetary aggregates. These features call for an approach whereby monetary authorities put more emphasis on tracking wealth developments, in particular, given the asset portfolio rebalancing between money holdings and financial and/or housing assets.