Brazil has been one of the most active country in intervening in FX markets though several forms: sterilized interventions and foreign reserves accumulation, controls on capital inflows and FX interventions through domestic derivatives markets. During the golden phase of the commodity super-boom generated by China, the goal of the FX interventions was to deter real exchange rate appreciation. With the Brazilian experience in mind, we extract lessons for surveillance and coordination. We argue that capital controls were not a very useful tool to deter real exchange rate appreciation. Comparing Brazil with Chile, the poster child of capital controls in the nineties that decided not to use them again during the commodity super-boom of this century, we conclude that an adequate fiscal policy stance could provide much better results than the use of capital controls. Furthermore, we claim that the use of capital controls in Brazil helped to avoid necessary changes in the fiscal policy stance. Analyzing the recent experiences of Colombia and Peru also do not bring much support to capital controls. Therefore, when analyzing the implications for surveillance and coordination, international institutions, as the IMF, should take into consideration that, no matter how many caveats are listed before its guidelines, capital controls may serve mainly to bypass needed changes in macroeconomic policy, thereby jeopardizing better economic performance.

The taper tantrum of May 2013 generated sharp fall in risky assets prices,

including the depreciation of several emerging market currencies. To fight

excess volatility and exchange rate overshooting, the Central Bank of Brazil

announced a major program of interventions in foreign exchange markets. We

use a synthetic control approach to determine whether or not the

intervention program was successful. Our results suggest that the first FX

intervention program mitigated the depreciation of the real against the

dollar. A second announcement made later in the year that the program

was going to continue on a smaller basis had a smaller effect, which was not

significant. This result is corroborated by a standard event study

methodology. We also document that both program did not have an impact on the volatility of the exchange rate

We combine questions from the Michigan Survey about future inflation, unemployment, and
interest rates to investigate whether households are aware of the basic features of U.S. monetary
policy. Our findings provide evidence that some households form their expectations in a way
that is consistent with a Taylor (1993)-type rule. We also document a large degree of variation in
the pattern of responses over the business cycle. In particular, the negative relationship between
unemployment and interest rates that is apparent in the data only shows up in households´
answers during periods of labor market weakness.

We quantify the informational content of statements issued by the interest-rate setting committee of the Central Bank of Brazil (COPOM), building on the methodology developed by Lucca and Trebbi (2011). Using Google search queries, we measure the extent to which each COPOM statement is perceived to be associated with more "hawkish" or "dovish" language. This allows us to construct a time-series of the informational content of COPOM statements, which we then use in regressions to explain changes in the term-structure of interest rates around COPOM meetings - together with a market-based measure of interest-rate surprises. We find that, during Governor Tombini's tenure, interest-rate surprises started to be "passed through" one-to-one (or more) even at long maturities, as markets seem to have bought into the idea that the interest-rate cuts that began in mid-2011 would lead to lower yields in Brazil into the foreseeable future. Most importantly, changes in the informational content of COPOM statements seem to have meaningful e¤ects on yields at short-to-medium maturities. However, this result only holds for the period prior to Tombini's tenure.

O economia brasileira avançou na década seguinte à chegada ao poder do ex-presidente Lula. Ainda mais importante foi o avanço nos temas sociais. Não obstante, o desempenho brasileiro, quando medidoem relação ao melhor grupo de comparação entre emergentes, foi, em geral, muito aquém do que poderia ter sido. Tendo recebido um choque de renda externa mais generoso, o Brasil, em relação ao melhor grupo de comparação:1) cresceu, investiu e poupou menos; 2) recebeu menos investimento estrangeiro direto e adicionou menos valor na indústria; 3) teve mais inflação; 4) perdeu competitividade e produtividade, avançou menos em Pesquisa e Desenvolvimento e piorou a qualidade regulatória; 5) foi pior ou igual em quase todos os setores importantes; 6) a distribuição de renda, a fração de pobres, e a subnutrição caíram em linha ou um pouco menos; 7) a escolaridade avançou menos, a despeito de maiores gastos; 8) a saúde andou em linha.Fomos melhor no mercado de trabalho, onde avançamos na margem mais fácil: colocar as pessoas para trabalhar. Em suma, o Brasil avançou, mas poderia ter avançado muito mais. Neste sentido a década foi perdida.

A model of realized variance-covariance is proposed using a portfolio with the most liquid stock

assets of Ibovespa. The purpose is to evaluate the economic gains associated with following a

volatility timing strategy based on the model’s conditional forecasts. Comparing with traditional

volatility methods, we find that economic gains associated with realized measures perform well

when estimation risk is controlled and increase proportionally to the target return. When

expected returns are bootstrapped, however, performance fees are not significant, which is an

indication that economic gains of realized volatility are offset by estimation risk.

The estimation of the impact of macroeconomic announcements in the Brazilian futures

markets is used to uncover the relationship between macroeconomic fundamentals and

asset prices. Using intraday data from October 2008 to January 2011, we find that

external macroeconomic announcements dominate price changes in the Foreign

Exchange and Ibovespa futures markets, while the impact of the domestic ones is

mainly restricted to Interest Rate futures contracts. We additionally propose an

investment strategy based on the conditional price reaction of each market that showed

promising results in an out-of-sample study, where we are able to correctly identify

returns’ signals, conditional on the surprise’s signal, in approximately 70% of the cases.

Finally, we provide evidence that price reactions are conditional on the state of the

economy and document the impact on volume and bid-ask spreads

Brazilian Foreign Exchange (FX) markets have a unique structure: most trades are conducted in the derivatives (futures) market. We study price discovery in the FX markets in Brazil and indicate which market (spot or futures) adjusts more quickly to the arrival of new information. We find that futures market dominates price discovery since it responds for 66.2% of the variation in the fundamental price shock and for 97.4% of the fundamental price composition. In a dynamic perspective, the futures market is also more efficient since, when markets are subjected to a shock in the fundamental price, it is faster to recover to equilibrium. By computing price discovery according to calendar semesters, we find evidence of the correlation between price discovery metrics and market factors, such as spot market supply-demand disequilibrium, central bank interventions and institutional investors’ pressure

We analyze the unique intervention strategy of the BCB using DNDFs (Domestic-Non-Deliverable Forwards): currency forwards that settle in domestic currency. We show the mechanisms through which DNDFs provide efficient hedging instruments for economic agents in times of reduced capital inflows and FX volatility, and how the use of DNDFs provide incentives for commercial banks to bring dollar to Brazil and so help finance the current account deficit. We discuss the limits to this strategy, which will work insofar as economic agents believe they can go from DNDFs to spot USD, i.e., that convertibility risk is negligible. We also have described how the strategy creates increasing positions within the commercial banking system (basis and roll over risks,0), generating possible threats to financial stability. The gain of not having to sell down hard currency reserves in the present strategy should be weighed against these risks. We conclude that the BCB’s strategy does provide an alternative intervention strategy, which is made possible only due to specific features of the Brazilian financial markets and its legislation. It is not clear that other emerging markets would profit from adopting such intervention strategy in FX markets.

We build a theoretical model that incorporates unionization in the
labor market into a Heckscher-Ohlin-Samuelson (HOS) framework to in-
vestigate the impact of unionization on the Stolper-Samuelson Theorem.
To capture the American economy case, we assume that unskilled labor in
the manufactured goods sector is unionized, and that sector is intensive
in skilled labor, and that trade liberalization increases the relative price
of manufactured goods. In the HOS model, trade liberalization induces
a reallocation of production towards the sector that uses intensively the
country's most abundant factor. The resulting change in relative labor de-
mand impacts wage bargaining in the unionized sector, which, in turn, has
a dampening eect on the Stolper-Samuelson eect. Moreover, wages of
unionized workers are even less responsive to trade liberalization. Through
traditional mandated-wages regressions, we show that skilled-wage dier-
entials changes were less pronounced among more unionized sectors in the
U.S. economy for the 1979-1990 period.

This paper develops and estimates an equilibrium model where heterogeneous firms can exploit two margins of informality: (i) not register their business, the extensive margin; and (ii) hire workers "off the books", the intensive margin. The model encompasses the main competing frameworks for understanding informality and provides a natural setting to infer their empirical relevance. The counterfactual analysis shows that once the intensive margin is accounted for, aggregate firm and labor informality need not move in the same direction as a result of policy changes. Lower informality can be, but is not necessarily associated to higher GDP, TFP or welfare.

We analyze the impact of the controls and restrictions on capital inflows that Brazil has adopted since late 2009. We document that these measures had some success in segmenting the Brazilian and global financial markets, as measured by wedges between onshore and offshore prices of similar fixed and variable income assets. However, that failed to translate into significant changes in the exchange rate, at least in the immediate aftermath of these measures, suggesting limited success in mitigating real appreciation. But capital controls/restrictions may have contributed to the sizable depreciation of the real in 2012, possibly amplifying the effect on the exchange rate of cuts in the interest policy rate during that period.  (revisto em 8/2014)

Neste artigo documentamos haver entre alunos do ensino básico no Brasil uma relação negativa e significativa entre dispersão etária dentro das turmas e a proficiência individual. A relação entre a defasagem idade-série da criança e a sua proficiência escolar é usualmente explicada por diversos fatores que influenciam o processo de formação educacional, já que tanto a defasagem idade-série de um aluno quanto a sua proficiência refletem dificuldades implícitas da vida da criança. Contudo, mostramos que essa relação negativa entre dispersão etária das turmas/classes escolares e proficiência individual pode ser mitigada pela presença de professores com altos níveis de certos atributos, tais como experiência de magistério e escolaridade. Tal relação corrobora a hipótese de que quanto maior a dispersão de idade dentro da turma, as dificuldades de se implantar projetos comuns de aprendizado são mais expressivas, tendo em vista que há uma maior diversidade de interesses. Nestas condições, o papel do professor parece ser fundamental para minimizar o efeito negativo das diversidades sobre desempenho individual. 

Popular press and some practitioners have warned against threats that buying risky

assets pose on agents saving for retirement, children education and other uses. This pa-

per shows that in a standard two-period general equilibrium model where some savers

have no risk-sharing motives, there exists a non-negligible set of economies (endow-

ments) and equilibria at which every economic agent is better off if some risky assets

are added to riskless securities. Numerical examples actually show that the measure of

the set of economies (endowments) with equilibrium allocations associated with trading

risky assets that are Pareto superior to when there are only riskless assets can be larger

than half the measure of the full set of economies.

We use data on immigrants who live in the United States to study the effects of exposure to hyperinflation on occupational choice. To do so, we calculate the number of years an individual had lived under hyperinflation before arriving to the US. We find that its marginal effect on the probability of being self-employed instead of wage-earner is 0.87 percentage point. This effect depends on the age individuals had when exposed to hyperinflation. In particular, it is stronger for individuals who experienced hyperinflation at an early age, but it vanishes for those over the age of 40. These results suggest that the macroeconomic environment an individual grows up in permanently affects his economic behavior.

Neste artigo, introduz-se ao modelo de crescimento neoclássico a defasagem necessária para que o investimento público se consolide em capital público (processo time-to-build,0), assim como alíquotas tributárias distorcivas que se ajustam de acordo com a dívida acumulada pelo setor público. O objetivo é isolar quantitativamente o efeito do aumento do investimento público observado no Programa de Aceleração do Crescimento (PAC). Dependendo da defasagem associada ao processo time-to-build e da política de ajuste fiscal consideradas, o PAC pode ter induzido uma queda do produto entre 0,2% e 0,4% em um horizonte de até quatro anos.

A public job can be seen as a source of insurance against income risk. Indeed, many public employees have job stability, which is compounded with less volatile and more compressed wages. Hence, by increasing its number of public employees, the government enhances the overall degree of insurance in the economy. In this paper, we introduce public employment in a standard incomplete markets model with overlapping generations. The aim is to explore the welfare gains or losses due to a larger government, accounting for this extra source of insurance. In a model economy calibrated to Brazil, where public employment is around 13.5 percent of the workforce, we find that if the government relies on consumption taxes to balance its budget, the optimal size of public employment is nearly flat, ranging from 8 to 12 percent of the workforce. However, if the public employment is reduced from 12 to 8 percent, welfare losses due to a reduction in the degree of insurance are 2 percent, which are compensated by welfare gains due to level and inequality effects. This insurance effect is robust to a missepecification of the production technology associated with the public sector