Publications
"Monetary Policy Volatility Shocks in Brazil" (2018)
Abstract: This paper provides empirical evidence for the impact of changes in volatility of monetary policy in Brazil using a SVAR where the time-varying volatility of shocks directly affects the level of observed variables. Contrary to the literature, an increase in monetary policy volatility results in higher in inflation, combined with reduction in output. The qualitative differences of impulse responses functions, compared to the literature for developed economies, are explained using a calibrated small-scale DSGE model with habit persistence in consumption and stochastic volatility shocks in the Taylor rule. The DSGE model is capable of explaining the increase of inflation in the medium term after a monetary policy volatility shock.
"Not Just Another Mixed Frequency Paper" (2015, with Sergio A. Lago Alves)
Abstract: This paper presents a new algorithm, based on a two-part Gibbs sampler with FFBS method, to recover the joint distribution of missing observations in a mixed-frequency dataset. The new algorithm relaxes most of the constraints usually presented in the literature, namely: (i) it does not require at least one time series to be observed every period; (ii) it provides an easy way to add linear restrictions based on the state space representation of the VAR; (iii) it does not require regularly-spaced time series at lower frequencies; and (iv) it avoids degeneration problems arising when states, or linear combination of states, are actually observed. In addition, the algorithm is well suited for embedding high-frequency real-time information for improving nowcasts and forecasts of lower frequency time series. We evaluate the properties of the algorithm using simulated data. Moreover, as empirical applications, we simulate monthly Brazilian GDP, comparing our results to the Brazilian IBC-BR, and recover what would historical PNAD-C unemployment rates look like prior to 2012.
"Effective Tax Rates on Consumption and Factor Incomes: a Quarterly Frequency Estimation for Brazil" (2015, with Cyntia F. Azevedo)
Abstract: This paper estimates time series of effective tax rates for consumption and factor incomes for Brazil, following the spirit of Mendoza et al (1994). The procedure to generate quarterly estimates of the tax base, using microdata from populational surveys, and the tax revenues seems to be appropriate, despite its simplicity, as the time series of the tax burden and the effective tax rates are in line with the historical Brazilian experience on fiscal policy. The estimated tax burden identifies a positive trend over time, despite the partial interruption after the international crisis in 2008. The paper also provides preliminary evidence on the properties of the computed effective tax rates and their relation with the business cycles.
"The Ramsey Steady State under Optimal Monetary and Fiscal Policy for Small Open Economies" (2014)
Abstract: This paper describes the steady state allocations and prices for small open economies under optimal monetary and fiscal policy in a medium-scale DSGE model. The model encompasses the most common nominal and real rigidities normally found in the literature in a single framework. The Ramsey solution for the optimal monetary and fiscal policy is computed for a large space of the parameter set and for different combinations of fiscal policy instruments. Results show that, despite the large number of frictions in the model, optimal fiscal policy follows the usual results in the literature, with high taxes over labor income and low taxes (subsidies) on capital income. On the other hand, the choice of fiscal policy instruments is critical to characterize optimal monetary policy. Frictions associated with the small open economy framework do not play a critical role in characterizing the Ramsey planner's policy choices.
"A Note on Particle Filters Applied to DSGE Models" (2012)
Abstract: This paper compares the properties of two particle filters – the Bootstrap Filter and the Auxiliary Particle Filter – applied to the computation of the likelihood of artificial data simulated from a basic DSGE model with nominal and real rigidities. Particle filters are compared in terms of speed, quality of the approximation of the probability density function of data and tracking of state variables. Results show that there is a case for the use of the Auxiliary Particle Filter only when the researcher uses a large number of observable variables and the number of particles used to characterize the likelihood is relatively low. Simulations also show that the largest gains in tracking state variables in the model are found when the number of particles is between 20,000 and 30,000, suggesting a boundary for this number.
"The Accuracy of Perturbation Methods to Solve Small-Open Economy Models" (2011)
Abstract: This paper presents the evaluation of the canonical RBC models for small-open economies described in Schmitt-Grohé and Uribe (2003) when the solution is obtained by perturbation methods up to a third-order approximation. The models are evaluated in terms of accuracy of solution, ergodic moments, and local responses in extreme regions of the state vector. Results show that the gains from non-linear solutions are signifi cant in terms of accuracy and with respect to the outcome of simulations: when compared to the linear approximation of the equilibrium conditions, non-linear solution generates very different dynamics of the stationary-inducing devices and smaller responses of consumption and output if the economy is in a state of low capital. However, changes in the main allocations of the economy when using different solution methods appear only locally and under signifi cant increases in the volatility of the economy.
"Optimal Monetary and Fiscal Policy for Small Open and Emerging Economies" (2010)
Dissertation presented as a requirement for the PhD degree in Economics at Duke University.
Abstract: This dissertation computes the optimal monetary and fiscal policy for small open and emerging economies in an estimated medium-scale model. The model departs from the conventional approach as it encompasses all the major nominal and real rigidities normally found in the literature in a single framework. After estimating the model using Bayesian techniques for one small open economy and one emerging economy, the Ramsey solution for the optimal monetary and fiscal policy is computed. Results show that foreign shocks have a strong influence in the dynamics of emerging economies, when compared to the designed optimal policy for a developed small open economy. For both economies, inflation is low, but very volatile, while taxes follow the traditional results in the literature with high taxes over labor income and low taxes for capital income.
Link: Duke Dissertations
"Interdependence and Contagion: an Analysis of Information Transmission in Latin America's Stock Markets" (2006)
Abstract: This paper brings evidences about the hypotheses of financial crisis contagion over Latin American stock markets in the 90's using a multivariate GARCH model. Beside the traditional volatility structure, we added a leverage term like GJR framework in order to avoid problems due to the use of conditional correlation as a measure of relationship between stock markets. The results show the existence of contagion only during the Asian (1997) and the Russian (1998) crises. The consequences of the Brazilian crisis (1999) can be identified as a result of interdependence among Latin American markets, while the crises of Mexico (1994) and Argentina (2001) show a specific mechanism of propagation. This result raises questions about the "contagion" and "interdependence" concepts' adequacy for the analysis of information transmission among stock markets.
"Structural Breaks and Trade Elasticities in Brazil: A Time-Varying Coefficient Approach" (2005)
Abstract: In this paper, new estimates for trade elasticities in Brazil are presented, using time-varying parameters techniques based in the Kalman Filter in order to control for structural breaks in those parameters. Despite major changes in long-run elasticities, there is no evidence of significant changes in Brazilian exports in the short run. However, some slight signs of change can be verified in the exports of specific goods where Brazil does have comparative advantages, such as basic goods. Concerning imports, their most important structural determinants are the trade liberalization in the early 90’s and the stabilization of the economy after the Real plan (1994). Tests do not offer conclusive results about the influence of exchange rate’s volatility and regime in trade, as presented in the recent literature. There is not support, also, to the “residual exports” hypothesis, in which exports have an inverse relationship with economic activity.
Link: CEMLA - X Reunión de la Red de Investigadores de Bancos Centrales del Continente Americano e X Annual Meeting of the Latin American and Caribbean Economic Association (LACEA)
"Imperfect rationality and inflationary inertia: a new estimation of the Phillips Curve for Brazil" (2004, with Marcelo Savino Portugal)
Abstract: This paper presents some new estimates for the relationship between inflation and unemployment in Brazil based on a new Keynesian hypothesis about the behavior of the economy. Four main hypotheses are tested and sustained throughout the study: i) agents do not have perfect rationality; ii) the imperfection in the agents expectations generating process may be an important factor in explaining the high persistence (inertia) of Brazilian inflation; iii) inflation does have an autonomous inertial component, without linkage to shocks in individual markets; iv) a non-linear relationship between inflation and unemployment is able to provide better explanations for the inflation-unemployment relationship in the Brazilian economy in the last 12 years. While the first two hypotheses are tested using a Markov Switching based model of regime changes, the remaining two are tested in a context of a convex Phillips Curve estimated using the Kalman filter. Despite the methodological and estimation improvements provided in the paper, the impulse-response functions for the monetary policy presented the same properties shown in the literature that uses Brazilian data.