Texas A&M International University

Assistant Professor

A. R. Sanchez, Jr. School of Business

University of Minnesota Duluth

Assistant Professor

Labovitz School of Business and Economics

Aix-Marseille University

Research Associate

Aix-Marseille School of Economics

Banco Central do Brasil

Assessor Sênior

Research Department (DEPEP)

Kedge Business School

Associate Professor

Department of Finance and Economics

Optimal Time Interval Selection in Long-Run Correlation Estimation

Journal of Quantitative Economics

This paper presents an asymptotically optimal time interval selection criterion for the long-run correlation block estimator (Bartlett kernel estimator) based on the Newey–West and Andrews–Monahan approaches. An alignment criterion that enhances finite-sample performance is also proposed. The procedure offers an optimal alternative to the customary practice in finance and economics of heuristically or arbitrarily choosing time intervals or lags in correlation studies. A Monte Carlo experiment using parameters derived from Dow Jones returns data confirms that the procedure can be MSE-superior to alternatives such as aggregation over arbitrary time intervals, parametric VAR, and Newey–West covariance matrix estimation with automatic lag selection.

Optimal Time Interval Selection in Long-Run Correlation Estimation

Journal of Quantitative Economics

This paper presents an asymptotically optimal time interval selection criterion for the long-run correlation block estimator (Bartlett kernel estimator) based on the Newey–West and Andrews–Monahan approaches. An alignment criterion that enhances finite-sample performance is also proposed. The procedure offers an optimal alternative to the customary practice in finance and economics of heuristically or arbitrarily choosing time intervals or lags in correlation studies. A Monte Carlo experiment using parameters derived from Dow Jones returns data confirms that the procedure can be MSE-superior to alternatives such as aggregation over arbitrary time intervals, parametric VAR, and Newey–West covariance matrix estimation with automatic lag selection.

Can Globalisation Stop the Decline in Commodities’ Terms of Trade?

Cambridge Journal of Economics

In this paper we address the following question: would a fully integrated world economy eliminate the widely reported decline in the terms of trade of primary commodities? We address the question by looking at the terms of trade within the US (a highly integrated economy). Our findings show two results. First, US internal real commodities' terms of trade over the 1947–1998 period experienced slowly declining but significant trends. Second, once we control for the effect of US prices on international terms of trade, we find a long-run relationship between the US and international relative prices. These findings support the view that the decline of commodities' terms of trade bears no relationship with the process of globalisation. This seems to indicate that, if world terms of trade behaved as the US terms of trade, neither increased integration nor protectionist measures would eliminate this trend.

Optimal Time Interval Selection in Long-Run Correlation Estimation

Journal of Quantitative Economics

This paper presents an asymptotically optimal time interval selection criterion for the long-run correlation block estimator (Bartlett kernel estimator) based on the Newey–West and Andrews–Monahan approaches. An alignment criterion that enhances finite-sample performance is also proposed. The procedure offers an optimal alternative to the customary practice in finance and economics of heuristically or arbitrarily choosing time intervals or lags in correlation studies. A Monte Carlo experiment using parameters derived from Dow Jones returns data confirms that the procedure can be MSE-superior to alternatives such as aggregation over arbitrary time intervals, parametric VAR, and Newey–West covariance matrix estimation with automatic lag selection.

Can Globalisation Stop the Decline in Commodities’ Terms of Trade?

Cambridge Journal of Economics

In this paper we address the following question: would a fully integrated world economy eliminate the widely reported decline in the terms of trade of primary commodities? We address the question by looking at the terms of trade within the US (a highly integrated economy). Our findings show two results. First, US internal real commodities' terms of trade over the 1947–1998 period experienced slowly declining but significant trends. Second, once we control for the effect of US prices on international terms of trade, we find a long-run relationship between the US and international relative prices. These findings support the view that the decline of commodities' terms of trade bears no relationship with the process of globalisation. This seems to indicate that, if world terms of trade behaved as the US terms of trade, neither increased integration nor protectionist measures would eliminate this trend.

BAD Taxation: Disintermediation and Illiquidity in a Bank Account Debits Tax Model

International Tax and Public Finance

This paper uses a dynamic general equilibrium model to study the economic effects of bank account debits (BAD) taxation. Australia and various Latin American countries have levied or levy BAD taxes. Aspects such as financial disintermediation, market illiquidity, and impacts on dividend and interest rates are considered. Part of the BAD tax revenue may be fictitious, due to increased interest payments on government debt. The Brazilian BAD tax (CPMF) experience is evaluated. The empirical analysis confirms some theoretical predictions. Incidence base over GDP appears to be sensitive to the tax rate, possibly engendering a Laffer curve. The tax may also cause real interest rates to increase. Furthermore, the deadweight losses are relatively large, even if revenues are small. The theoretical and empirical results suggest that the BAD tax is not adequate for revenue collection.

Optimal Time Interval Selection in Long-Run Correlation Estimation

Journal of Quantitative Economics

This paper presents an asymptotically optimal time interval selection criterion for the long-run correlation block estimator (Bartlett kernel estimator) based on the Newey–West and Andrews–Monahan approaches. An alignment criterion that enhances finite-sample performance is also proposed. The procedure offers an optimal alternative to the customary practice in finance and economics of heuristically or arbitrarily choosing time intervals or lags in correlation studies. A Monte Carlo experiment using parameters derived from Dow Jones returns data confirms that the procedure can be MSE-superior to alternatives such as aggregation over arbitrary time intervals, parametric VAR, and Newey–West covariance matrix estimation with automatic lag selection.

Can Globalisation Stop the Decline in Commodities’ Terms of Trade?

Cambridge Journal of Economics

In this paper we address the following question: would a fully integrated world economy eliminate the widely reported decline in the terms of trade of primary commodities? We address the question by looking at the terms of trade within the US (a highly integrated economy). Our findings show two results. First, US internal real commodities' terms of trade over the 1947–1998 period experienced slowly declining but significant trends. Second, once we control for the effect of US prices on international terms of trade, we find a long-run relationship between the US and international relative prices. These findings support the view that the decline of commodities' terms of trade bears no relationship with the process of globalisation. This seems to indicate that, if world terms of trade behaved as the US terms of trade, neither increased integration nor protectionist measures would eliminate this trend.

BAD Taxation: Disintermediation and Illiquidity in a Bank Account Debits Tax Model

International Tax and Public Finance

This paper uses a dynamic general equilibrium model to study the economic effects of bank account debits (BAD) taxation. Australia and various Latin American countries have levied or levy BAD taxes. Aspects such as financial disintermediation, market illiquidity, and impacts on dividend and interest rates are considered. Part of the BAD tax revenue may be fictitious, due to increased interest payments on government debt. The Brazilian BAD tax (CPMF) experience is evaluated. The empirical analysis confirms some theoretical predictions. Incidence base over GDP appears to be sensitive to the tax rate, possibly engendering a Laffer curve. The tax may also cause real interest rates to increase. Furthermore, the deadweight losses are relatively large, even if revenues are small. The theoretical and empirical results suggest that the BAD tax is not adequate for revenue collection.

Banking Stability, Natural Disasters, and State Fragility: Panel VAR Evidence from Developing Countries

Research in International Business and Finance

Panel VAR methodology is used in this study to empirically evaluate the effects of natural disasters and state fragility on economic and financial dimensions in developing countries such as GDP per capita, banking and financial system deposits, banks’ Z-scores, and non-performing loans. Results based on three panels of up to 66 countries and 17 years of annual data indicate that natural disasters and state fragility may cause significant economic and financial disruption in low-income and middle-income countries. Shocks from natural disasters seem to be temporary and detrimental only to non-performing loans, while shocks from state fragility appear to be permanent and to create detrimental economic and financial feedback loops.

Optimal Time Interval Selection in Long-Run Correlation Estimation

Journal of Quantitative Economics

This paper presents an asymptotically optimal time interval selection criterion for the long-run correlation block estimator (Bartlett kernel estimator) based on the Newey–West and Andrews–Monahan approaches. An alignment criterion that enhances finite-sample performance is also proposed. The procedure offers an optimal alternative to the customary practice in finance and economics of heuristically or arbitrarily choosing time intervals or lags in correlation studies. A Monte Carlo experiment using parameters derived from Dow Jones returns data confirms that the procedure can be MSE-superior to alternatives such as aggregation over arbitrary time intervals, parametric VAR, and Newey–West covariance matrix estimation with automatic lag selection.

Can Globalisation Stop the Decline in Commodities’ Terms of Trade?

Cambridge Journal of Economics

In this paper we address the following question: would a fully integrated world economy eliminate the widely reported decline in the terms of trade of primary commodities? We address the question by looking at the terms of trade within the US (a highly integrated economy). Our findings show two results. First, US internal real commodities' terms of trade over the 1947–1998 period experienced slowly declining but significant trends. Second, once we control for the effect of US prices on international terms of trade, we find a long-run relationship between the US and international relative prices. These findings support the view that the decline of commodities' terms of trade bears no relationship with the process of globalisation. This seems to indicate that, if world terms of trade behaved as the US terms of trade, neither increased integration nor protectionist measures would eliminate this trend.

BAD Taxation: Disintermediation and Illiquidity in a Bank Account Debits Tax Model

International Tax and Public Finance

This paper uses a dynamic general equilibrium model to study the economic effects of bank account debits (BAD) taxation. Australia and various Latin American countries have levied or levy BAD taxes. Aspects such as financial disintermediation, market illiquidity, and impacts on dividend and interest rates are considered. Part of the BAD tax revenue may be fictitious, due to increased interest payments on government debt. The Brazilian BAD tax (CPMF) experience is evaluated. The empirical analysis confirms some theoretical predictions. Incidence base over GDP appears to be sensitive to the tax rate, possibly engendering a Laffer curve. The tax may also cause real interest rates to increase. Furthermore, the deadweight losses are relatively large, even if revenues are small. The theoretical and empirical results suggest that the BAD tax is not adequate for revenue collection.

Banking Stability, Natural Disasters, and State Fragility: Panel VAR Evidence from Developing Countries

Research in International Business and Finance

Panel VAR methodology is used in this study to empirically evaluate the effects of natural disasters and state fragility on economic and financial dimensions in developing countries such as GDP per capita, banking and financial system deposits, banks’ Z-scores, and non-performing loans. Results based on three panels of up to 66 countries and 17 years of annual data indicate that natural disasters and state fragility may cause significant economic and financial disruption in low-income and middle-income countries. Shocks from natural disasters seem to be temporary and detrimental only to non-performing loans, while shocks from state fragility appear to be permanent and to create detrimental economic and financial feedback loops.

Canaries and Vultures: A Quantitative History of Monetary Mismanagement in Brazil

Journal of International Money and Finance

During the last two decades of the twentieth century, Brazil went through a sequence of failed stabilization plans that tried to cope with an enduring hyperinflation. This paper uses a money demand model to evaluate monetary policies during those episodes. Consistency between money supply and expected conditional money demand growth rates is considered for each plan. It is shown that unsuccessful programs were marked by excessive liquidity. The results not only suggest that monetary mismanagement led to the failure of the plans, but also that the excessive liquidity could have been predicted.

Optimal Time Interval Selection in Long-Run Correlation Estimation

Journal of Quantitative Economics

This paper presents an asymptotically optimal time interval selection criterion for the long-run correlation block estimator (Bartlett kernel estimator) based on the Newey–West and Andrews–Monahan approaches. An alignment criterion that enhances finite-sample performance is also proposed. The procedure offers an optimal alternative to the customary practice in finance and economics of heuristically or arbitrarily choosing time intervals or lags in correlation studies. A Monte Carlo experiment using parameters derived from Dow Jones returns data confirms that the procedure can be MSE-superior to alternatives such as aggregation over arbitrary time intervals, parametric VAR, and Newey–West covariance matrix estimation with automatic lag selection.

Can Globalisation Stop the Decline in Commodities’ Terms of Trade?

Cambridge Journal of Economics

In this paper we address the following question: would a fully integrated world economy eliminate the widely reported decline in the terms of trade of primary commodities? We address the question by looking at the terms of trade within the US (a highly integrated economy). Our findings show two results. First, US internal real commodities' terms of trade over the 1947–1998 period experienced slowly declining but significant trends. Second, once we control for the effect of US prices on international terms of trade, we find a long-run relationship between the US and international relative prices. These findings support the view that the decline of commodities' terms of trade bears no relationship with the process of globalisation. This seems to indicate that, if world terms of trade behaved as the US terms of trade, neither increased integration nor protectionist measures would eliminate this trend.

BAD Taxation: Disintermediation and Illiquidity in a Bank Account Debits Tax Model

International Tax and Public Finance

This paper uses a dynamic general equilibrium model to study the economic effects of bank account debits (BAD) taxation. Australia and various Latin American countries have levied or levy BAD taxes. Aspects such as financial disintermediation, market illiquidity, and impacts on dividend and interest rates are considered. Part of the BAD tax revenue may be fictitious, due to increased interest payments on government debt. The Brazilian BAD tax (CPMF) experience is evaluated. The empirical analysis confirms some theoretical predictions. Incidence base over GDP appears to be sensitive to the tax rate, possibly engendering a Laffer curve. The tax may also cause real interest rates to increase. Furthermore, the deadweight losses are relatively large, even if revenues are small. The theoretical and empirical results suggest that the BAD tax is not adequate for revenue collection.

Banking Stability, Natural Disasters, and State Fragility: Panel VAR Evidence from Developing Countries

Research in International Business and Finance

Panel VAR methodology is used in this study to empirically evaluate the effects of natural disasters and state fragility on economic and financial dimensions in developing countries such as GDP per capita, banking and financial system deposits, banks’ Z-scores, and non-performing loans. Results based on three panels of up to 66 countries and 17 years of annual data indicate that natural disasters and state fragility may cause significant economic and financial disruption in low-income and middle-income countries. Shocks from natural disasters seem to be temporary and detrimental only to non-performing loans, while shocks from state fragility appear to be permanent and to create detrimental economic and financial feedback loops.

Canaries and Vultures: A Quantitative History of Monetary Mismanagement in Brazil

Journal of International Money and Finance

During the last two decades of the twentieth century, Brazil went through a sequence of failed stabilization plans that tried to cope with an enduring hyperinflation. This paper uses a money demand model to evaluate monetary policies during those episodes. Consistency between money supply and expected conditional money demand growth rates is considered for each plan. It is shown that unsuccessful programs were marked by excessive liquidity. The results not only suggest that monetary mismanagement led to the failure of the plans, but also that the excessive liquidity could have been predicted.

A Practical Log-Linear Aggregation Method with Examples: Heterogeneous Income Growth in the USA

Journal of Applied Econometrics

A practical aggregation method for heterogeneous log-linear functions is presented. Inequality measures are employed in the construction of a simple but exact aggregate representation of an economy. Three macroeconomic applications are discussed: the aggregation of the Lucas supply function, the time-inconsistent behaviour of an egalitarian social planner facing heterogeneous discount rates, and the case of a simple heterogeneous growth model. In the latter application, aggregate CPS data is used to show that the slowdown that followed the first oil shock is worse than usually thought, and that the "new economy" growth resurgence is not as strong as it appears.

Optimal Time Interval Selection in Long-Run Correlation Estimation

Journal of Quantitative Economics

This paper presents an asymptotically optimal time interval selection criterion for the long-run correlation block estimator (Bartlett kernel estimator) based on the Newey–West and Andrews–Monahan approaches. An alignment criterion that enhances finite-sample performance is also proposed. The procedure offers an optimal alternative to the customary practice in finance and economics of heuristically or arbitrarily choosing time intervals or lags in correlation studies. A Monte Carlo experiment using parameters derived from Dow Jones returns data confirms that the procedure can be MSE-superior to alternatives such as aggregation over arbitrary time intervals, parametric VAR, and Newey–West covariance matrix estimation with automatic lag selection.

Can Globalisation Stop the Decline in Commodities’ Terms of Trade?

Cambridge Journal of Economics

In this paper we address the following question: would a fully integrated world economy eliminate the widely reported decline in the terms of trade of primary commodities? We address the question by looking at the terms of trade within the US (a highly integrated economy). Our findings show two results. First, US internal real commodities' terms of trade over the 1947–1998 period experienced slowly declining but significant trends. Second, once we control for the effect of US prices on international terms of trade, we find a long-run relationship between the US and international relative prices. These findings support the view that the decline of commodities' terms of trade bears no relationship with the process of globalisation. This seems to indicate that, if world terms of trade behaved as the US terms of trade, neither increased integration nor protectionist measures would eliminate this trend.

BAD Taxation: Disintermediation and Illiquidity in a Bank Account Debits Tax Model

International Tax and Public Finance

This paper uses a dynamic general equilibrium model to study the economic effects of bank account debits (BAD) taxation. Australia and various Latin American countries have levied or levy BAD taxes. Aspects such as financial disintermediation, market illiquidity, and impacts on dividend and interest rates are considered. Part of the BAD tax revenue may be fictitious, due to increased interest payments on government debt. The Brazilian BAD tax (CPMF) experience is evaluated. The empirical analysis confirms some theoretical predictions. Incidence base over GDP appears to be sensitive to the tax rate, possibly engendering a Laffer curve. The tax may also cause real interest rates to increase. Furthermore, the deadweight losses are relatively large, even if revenues are small. The theoretical and empirical results suggest that the BAD tax is not adequate for revenue collection.

Banking Stability, Natural Disasters, and State Fragility: Panel VAR Evidence from Developing Countries

Research in International Business and Finance

Panel VAR methodology is used in this study to empirically evaluate the effects of natural disasters and state fragility on economic and financial dimensions in developing countries such as GDP per capita, banking and financial system deposits, banks’ Z-scores, and non-performing loans. Results based on three panels of up to 66 countries and 17 years of annual data indicate that natural disasters and state fragility may cause significant economic and financial disruption in low-income and middle-income countries. Shocks from natural disasters seem to be temporary and detrimental only to non-performing loans, while shocks from state fragility appear to be permanent and to create detrimental economic and financial feedback loops.

Canaries and Vultures: A Quantitative History of Monetary Mismanagement in Brazil

Journal of International Money and Finance

During the last two decades of the twentieth century, Brazil went through a sequence of failed stabilization plans that tried to cope with an enduring hyperinflation. This paper uses a money demand model to evaluate monetary policies during those episodes. Consistency between money supply and expected conditional money demand growth rates is considered for each plan. It is shown that unsuccessful programs were marked by excessive liquidity. The results not only suggest that monetary mismanagement led to the failure of the plans, but also that the excessive liquidity could have been predicted.

A Practical Log-Linear Aggregation Method with Examples: Heterogeneous Income Growth in the USA

Journal of Applied Econometrics

A practical aggregation method for heterogeneous log-linear functions is presented. Inequality measures are employed in the construction of a simple but exact aggregate representation of an economy. Three macroeconomic applications are discussed: the aggregation of the Lucas supply function, the time-inconsistent behaviour of an egalitarian social planner facing heterogeneous discount rates, and the case of a simple heterogeneous growth model. In the latter application, aggregate CPS data is used to show that the slowdown that followed the first oil shock is worse than usually thought, and that the "new economy" growth resurgence is not as strong as it appears.

The Effect of Oil Price on China's Exports

China Economic Review

The increase in oil prices in recent years has occurred concurrently with a rapid expansion of Chinese exports in the world markets, despite China being an oil importing country. In this paper we develop a theoretical model that explains the positive correlation between Chinese exports and the oil price. The model shows that Chinese growth can lead to an increase in oil prices that has a stronger impact on its export competitors. This is due to the large labor force surplus of China. We then examine this hypothesis by estimating a reduced form equation for Chinese exports using Rodrik [Rodrik, Dani, 2006. What's so special about China's exports? China and World Economy 14, 1–19.]'s measure of export competitiveness, together with the oil price, productivity, real exchange rate, and foreign industrial production over the monthly 1992–2005 period. The results suggest a stable relationship and yields slightly positive values for the price of oil and elastic coefficients for export competitiveness, along with the expected negative elasticity for the real exchange rate.

Optimal Time Interval Selection in Long-Run Correlation Estimation

Journal of Quantitative Economics

This paper presents an asymptotically optimal time interval selection criterion for the long-run correlation block estimator (Bartlett kernel estimator) based on the Newey–West and Andrews–Monahan approaches. An alignment criterion that enhances finite-sample performance is also proposed. The procedure offers an optimal alternative to the customary practice in finance and economics of heuristically or arbitrarily choosing time intervals or lags in correlation studies. A Monte Carlo experiment using parameters derived from Dow Jones returns data confirms that the procedure can be MSE-superior to alternatives such as aggregation over arbitrary time intervals, parametric VAR, and Newey–West covariance matrix estimation with automatic lag selection.

Can Globalisation Stop the Decline in Commodities’ Terms of Trade?

Cambridge Journal of Economics

In this paper we address the following question: would a fully integrated world economy eliminate the widely reported decline in the terms of trade of primary commodities? We address the question by looking at the terms of trade within the US (a highly integrated economy). Our findings show two results. First, US internal real commodities' terms of trade over the 1947–1998 period experienced slowly declining but significant trends. Second, once we control for the effect of US prices on international terms of trade, we find a long-run relationship between the US and international relative prices. These findings support the view that the decline of commodities' terms of trade bears no relationship with the process of globalisation. This seems to indicate that, if world terms of trade behaved as the US terms of trade, neither increased integration nor protectionist measures would eliminate this trend.

BAD Taxation: Disintermediation and Illiquidity in a Bank Account Debits Tax Model

International Tax and Public Finance

This paper uses a dynamic general equilibrium model to study the economic effects of bank account debits (BAD) taxation. Australia and various Latin American countries have levied or levy BAD taxes. Aspects such as financial disintermediation, market illiquidity, and impacts on dividend and interest rates are considered. Part of the BAD tax revenue may be fictitious, due to increased interest payments on government debt. The Brazilian BAD tax (CPMF) experience is evaluated. The empirical analysis confirms some theoretical predictions. Incidence base over GDP appears to be sensitive to the tax rate, possibly engendering a Laffer curve. The tax may also cause real interest rates to increase. Furthermore, the deadweight losses are relatively large, even if revenues are small. The theoretical and empirical results suggest that the BAD tax is not adequate for revenue collection.

Banking Stability, Natural Disasters, and State Fragility: Panel VAR Evidence from Developing Countries

Research in International Business and Finance

Panel VAR methodology is used in this study to empirically evaluate the effects of natural disasters and state fragility on economic and financial dimensions in developing countries such as GDP per capita, banking and financial system deposits, banks’ Z-scores, and non-performing loans. Results based on three panels of up to 66 countries and 17 years of annual data indicate that natural disasters and state fragility may cause significant economic and financial disruption in low-income and middle-income countries. Shocks from natural disasters seem to be temporary and detrimental only to non-performing loans, while shocks from state fragility appear to be permanent and to create detrimental economic and financial feedback loops.

Canaries and Vultures: A Quantitative History of Monetary Mismanagement in Brazil

Journal of International Money and Finance

During the last two decades of the twentieth century, Brazil went through a sequence of failed stabilization plans that tried to cope with an enduring hyperinflation. This paper uses a money demand model to evaluate monetary policies during those episodes. Consistency between money supply and expected conditional money demand growth rates is considered for each plan. It is shown that unsuccessful programs were marked by excessive liquidity. The results not only suggest that monetary mismanagement led to the failure of the plans, but also that the excessive liquidity could have been predicted.

A Practical Log-Linear Aggregation Method with Examples: Heterogeneous Income Growth in the USA

Journal of Applied Econometrics

A practical aggregation method for heterogeneous log-linear functions is presented. Inequality measures are employed in the construction of a simple but exact aggregate representation of an economy. Three macroeconomic applications are discussed: the aggregation of the Lucas supply function, the time-inconsistent behaviour of an egalitarian social planner facing heterogeneous discount rates, and the case of a simple heterogeneous growth model. In the latter application, aggregate CPS data is used to show that the slowdown that followed the first oil shock is worse than usually thought, and that the "new economy" growth resurgence is not as strong as it appears.

The Effect of Oil Price on China's Exports

China Economic Review

The increase in oil prices in recent years has occurred concurrently with a rapid expansion of Chinese exports in the world markets, despite China being an oil importing country. In this paper we develop a theoretical model that explains the positive correlation between Chinese exports and the oil price. The model shows that Chinese growth can lead to an increase in oil prices that has a stronger impact on its export competitors. This is due to the large labor force surplus of China. We then examine this hypothesis by estimating a reduced form equation for Chinese exports using Rodrik [Rodrik, Dani, 2006. What's so special about China's exports? China and World Economy 14, 1–19.]'s measure of export competitiveness, together with the oil price, productivity, real exchange rate, and foreign industrial production over the monthly 1992–2005 period. The results suggest a stable relationship and yields slightly positive values for the price of oil and elastic coefficients for export competitiveness, along with the expected negative elasticity for the real exchange rate.

Are European Stock Markets Influencing Latin American Stock Markets?

Análisis Económico

In this study, we examine the response of Latin American stock markets to movements in European stock markets. Our results vary depending on the openness of the country in terms of international trade. We find evidence that Latin American stock markets are affected by Spanish stock market. Additionally, during the second and third-periods (1995 to 1998 and 1999 to 2004) Spain appears to have much stronger ties (such as more trade) with Brazil and Chile, and this might explain why Brazil and Chile are affected from Spain and not from the other European markets. This study uncovers two important findings. First, Spain has an effect on Latin American markets but these responses are not homogeneous across markets. Second, the magnitude of Spain’s influence is different in each of the three sub-periods under study.

Optimal Time Interval Selection in Long-Run Correlation Estimation

Journal of Quantitative Economics

This paper presents an asymptotically optimal time interval selection criterion for the long-run correlation block estimator (Bartlett kernel estimator) based on the Newey–West and Andrews–Monahan approaches. An alignment criterion that enhances finite-sample performance is also proposed. The procedure offers an optimal alternative to the customary practice in finance and economics of heuristically or arbitrarily choosing time intervals or lags in correlation studies. A Monte Carlo experiment using parameters derived from Dow Jones returns data confirms that the procedure can be MSE-superior to alternatives such as aggregation over arbitrary time intervals, parametric VAR, and Newey–West covariance matrix estimation with automatic lag selection.

Can Globalisation Stop the Decline in Commodities’ Terms of Trade?

Cambridge Journal of Economics

In this paper we address the following question: would a fully integrated world economy eliminate the widely reported decline in the terms of trade of primary commodities? We address the question by looking at the terms of trade within the US (a highly integrated economy). Our findings show two results. First, US internal real commodities' terms of trade over the 1947–1998 period experienced slowly declining but significant trends. Second, once we control for the effect of US prices on international terms of trade, we find a long-run relationship between the US and international relative prices. These findings support the view that the decline of commodities' terms of trade bears no relationship with the process of globalisation. This seems to indicate that, if world terms of trade behaved as the US terms of trade, neither increased integration nor protectionist measures would eliminate this trend.

BAD Taxation: Disintermediation and Illiquidity in a Bank Account Debits Tax Model

International Tax and Public Finance

This paper uses a dynamic general equilibrium model to study the economic effects of bank account debits (BAD) taxation. Australia and various Latin American countries have levied or levy BAD taxes. Aspects such as financial disintermediation, market illiquidity, and impacts on dividend and interest rates are considered. Part of the BAD tax revenue may be fictitious, due to increased interest payments on government debt. The Brazilian BAD tax (CPMF) experience is evaluated. The empirical analysis confirms some theoretical predictions. Incidence base over GDP appears to be sensitive to the tax rate, possibly engendering a Laffer curve. The tax may also cause real interest rates to increase. Furthermore, the deadweight losses are relatively large, even if revenues are small. The theoretical and empirical results suggest that the BAD tax is not adequate for revenue collection.

Banking Stability, Natural Disasters, and State Fragility: Panel VAR Evidence from Developing Countries

Research in International Business and Finance

Panel VAR methodology is used in this study to empirically evaluate the effects of natural disasters and state fragility on economic and financial dimensions in developing countries such as GDP per capita, banking and financial system deposits, banks’ Z-scores, and non-performing loans. Results based on three panels of up to 66 countries and 17 years of annual data indicate that natural disasters and state fragility may cause significant economic and financial disruption in low-income and middle-income countries. Shocks from natural disasters seem to be temporary and detrimental only to non-performing loans, while shocks from state fragility appear to be permanent and to create detrimental economic and financial feedback loops.

Canaries and Vultures: A Quantitative History of Monetary Mismanagement in Brazil

Journal of International Money and Finance

During the last two decades of the twentieth century, Brazil went through a sequence of failed stabilization plans that tried to cope with an enduring hyperinflation. This paper uses a money demand model to evaluate monetary policies during those episodes. Consistency between money supply and expected conditional money demand growth rates is considered for each plan. It is shown that unsuccessful programs were marked by excessive liquidity. The results not only suggest that monetary mismanagement led to the failure of the plans, but also that the excessive liquidity could have been predicted.

A Practical Log-Linear Aggregation Method with Examples: Heterogeneous Income Growth in the USA

Journal of Applied Econometrics

A practical aggregation method for heterogeneous log-linear functions is presented. Inequality measures are employed in the construction of a simple but exact aggregate representation of an economy. Three macroeconomic applications are discussed: the aggregation of the Lucas supply function, the time-inconsistent behaviour of an egalitarian social planner facing heterogeneous discount rates, and the case of a simple heterogeneous growth model. In the latter application, aggregate CPS data is used to show that the slowdown that followed the first oil shock is worse than usually thought, and that the "new economy" growth resurgence is not as strong as it appears.

The Effect of Oil Price on China's Exports

China Economic Review

The increase in oil prices in recent years has occurred concurrently with a rapid expansion of Chinese exports in the world markets, despite China being an oil importing country. In this paper we develop a theoretical model that explains the positive correlation between Chinese exports and the oil price. The model shows that Chinese growth can lead to an increase in oil prices that has a stronger impact on its export competitors. This is due to the large labor force surplus of China. We then examine this hypothesis by estimating a reduced form equation for Chinese exports using Rodrik [Rodrik, Dani, 2006. What's so special about China's exports? China and World Economy 14, 1–19.]'s measure of export competitiveness, together with the oil price, productivity, real exchange rate, and foreign industrial production over the monthly 1992–2005 period. The results suggest a stable relationship and yields slightly positive values for the price of oil and elastic coefficients for export competitiveness, along with the expected negative elasticity for the real exchange rate.

Are European Stock Markets Influencing Latin American Stock Markets?

Análisis Económico

In this study, we examine the response of Latin American stock markets to movements in European stock markets. Our results vary depending on the openness of the country in terms of international trade. We find evidence that Latin American stock markets are affected by Spanish stock market. Additionally, during the second and third-periods (1995 to 1998 and 1999 to 2004) Spain appears to have much stronger ties (such as more trade) with Brazil and Chile, and this might explain why Brazil and Chile are affected from Spain and not from the other European markets. This study uncovers two important findings. First, Spain has an effect on Latin American markets but these responses are not homogeneous across markets. Second, the magnitude of Spain’s influence is different in each of the three sub-periods under study.

Shared Legacies, Disparate Outcomes: Why American South Border Cities Turned the Tables on Crime and Their Mexican Sisters Did Not

Crime, Law and Social Change

The article evaluates crime trends in south border American and Mexican sister cities using panel data analysis. The region offers a unique assessment opportunity since cities are characterized by shared cultural and historical legacies, institutional heterogeneity, and disparate crime outcomes. Higher homicide rates on the Mexican side seem to result from deficient law enforcement. Higher population densities in Mexican cities appear to also be a factor. Cultural differences, on the other hand, have been decreasing, and apparently do not play a substantial role. The homicide rate dynamics show opportunistic clustering of criminal activity in Mexican cities, while no clustering is found on the American side. Crime also appears to spill from Mexican cities into American cities. Homicide rates on both sides of the border have been falling faster than countrywide rates, leading, in the case of American cities, and against stereotypes, to rates below the countrywide rate in 2001.

Schmidt-MacArthur Fellowship

Mentor

Schmidt-MacArthur Fellowship

Mentor

Schmidt-MacArthur Fellowship

Mentor

Schmidt-MacArthur Fellowship

Mentor

Schmidt-MacArthur Fellowship

Mentor

Schmidt-MacArthur Fellowship

Mentor

Schmidt-MacArthur Fellowship

Mentor

Schmidt-MacArthur Fellowship

Mentor

Schmidt-MacArthur Fellowship

Mentor

Schmidt-MacArthur Fellowship

Mentor

Schmidt-MacArthur Fellowship

Mentor

Schmidt-MacArthur Fellowship

Mentor

Schmidt-MacArthur Fellowship

Mentor

Schmidt-MacArthur Fellowship

Mentor

Schmidt-MacArthur Fellowship

Mentor