Sebastiao Oliveira

Third-Year Ph.D Student 

Department of Economics

University of Illinois at Urbana-Champaign

so28@illinois.edu

Illinois Webpage | LinkedIn


Publications

Abstract: This paper provides an up-to-date comparison of Brazil’s political system with that of 33 other democracies. We show that Brazil is an outlier with respect to the effective number of parties, the total government budget allocated to the legislative power, and the public funds allocated to parties (to fund campaigns and regular party operations). Brazil is also unique in its electoral management body: it is the only country in our sample in which the judiciary both organizes and oversees the electoral process. Moreover, only Brazil and four other countries in our sample enforce the obligation to vote. We also find a positive correlation between total public funding and the total number of effective parties.







Working papers


Abstract: This paper uses the Brazilian central bank's loss of credibility episode under President Dilma Rousseff's administration (2011-2014) and high-frequency data on inflation expectations to provide novel evidence that professional forecasters react differently to monetary policy surprises depending on the central bank's credibility. With high credibility, forecasters understand a monetary policy surprise as a monetary policy shock and react immediately by decreasing their inflation expectations 12 months ahead by -0.30%. With low credibility, forecasters interpret it as an information effect and immediately increase their inflation expectations by 0.50%. Monetary surprises do not affect the disagreement among professional forecasters' inflation expectations.



Abstract: I provide a novel channel through which real exchange rate (RER) shocks affect sales and short-term investment of U.S. firms with international activities. Using an identification strategy that compares how a similar firm responds to firm-specific shocks differently when they are initiated in their most profitable quarter ("main quarter''), I show that RER shocks are amplified by funding constraints that limit working capital financing. Specifically, a positive RER shock (RER depreciation) initiated in the main quarter increases production costs and decreases internal funds allocated to short-term investments of constrained importing firms, reducing firms' sales and production capacity. While the working capital channel is relevant for importing firms, it is not present for exporting firms since those firms are not exposed to changes in production cost after an RER shock.


Abstract: We provide novel evidence that corporate debt maturity plays an important role in the transmission of U.S. monetary policy to foreign firms. Using an identification strategy that explores the ex-ante maturity structure of long-term debt to predict firms’ financial position in a given year, we show that the effect of U.S. monetary policy shocks on foreign firms is amplified by financing constraints. After a contractionary shock, financial conditions in foreign countries become tighter, and firms with a high proportion of long-term debt maturing right after the shock significantly decrease investment and sales. We find that firms in emerging economies are much more affected by these shocks compared to those in advanced economies, and the amplification effect of U.S. monetary policy shocks by financing constraints is present only in emerging economies.


Abstract:  We show that equity financing constraints play a unique role in the amplification of monetary policy shocks. Employing a text-based metric of financial constraint that discerns between a company’s emphasis on equity versus debt financing, we show that equity-constrained firms endure more substantial declines in stock prices and implement deeper cuts in capital expenditures and R&D when faced with a contractionary monetary policy shock. Equity-focused constrained firms significantly reduce equity issuance in response to tighter monetary policy. These findings hold robustly even after accounting for debt-focused constraints and other debt-related firm attributes (such as leverage and refinancing constraints). Conversely, debt-focused constraints do not seem to play an economically significant role in magnifying the impact of monetary policy shocks.







Work in Progress