New Economics Papers
on Central and South America
Issue of 2013‒08‒05
six papers chosen by

  1. Deconstructing the decline in inequality in Latin America By Lustig, Nora; Lopez-Calva, Luis F.; Ortiz-Juarez, Eduardo
  2. Bad Investments and Missed Opportunities? Capital Flows to Asia and Latin America, 1950-2004 By Paulina Restrepo-Echavarria; Mark Wright; Lee Ohanian
  3. Vínculos interregionales en la economía colombiana del siglo XIX: Empresariado del Caribe en el interior del país By Mejía-Cubillos, Javier
  4. Política Monetária e Assimetria de Informação: um estudo a partir do mercado futuro de taxas de juros no Brasil By Gustavo Araújo; Bruno Vieira Carvalho; Claudio Henrique Barbedo; Margarida Maria Gutierrez
  5. Quantitative Easing and Related Capital Flows into Brazil: measuring its effects and transmission channels through a rigorous counterfactual evaluation By João Barata R. B. Barroso; Luiz A. Pereira da Silva; Adriana Soares Sales
  6. Assessing Systemic Risk in the Brazilian Interbank Market By Benjamin M. Tabak; Sergio R. S. Souza; Solange M. Guerra

  1. By: Lustig, Nora; Lopez-Calva, Luis F.; Ortiz-Juarez, Eduardo
    Abstract: Inequality in Latin America unambiguously declined in the 2000s. The Gini coefficient fell in 16 of the 17 countries where there are comparable data, and the change was statistically significant for all of them. Existing studies point to two main explanations for the decline in inequality: a reduction in hourly labor income inequality, and more robust and progressive government transfers. Available evidence suggests that it is the skill premium -- or, more precisely, the returns to primary, secondary, and tertiary education vs. no schooling or incomplete primary schooling -- that drives the decline in hourly labor income inequality. The causes behind the decline in returns to schooling, however, have not been unambiguously established. Some studies find that returns fell because of an increase in the supply of workers with more educational attainment; others, because of a shift in demand away from skilled labor.
    Keywords: Inequality,Poverty Impact Evaluation,Labor Markets,Population Policies,Labor Policies
    Date: 2013–07–01
  2. By: Paulina Restrepo-Echavarria (The Ohio State University); Mark Wright (UCLA); Lee Ohanian (University of California Los Angeles)
    Abstract: From the end of the SecondWorldWar to the beginning of the Twenty-First Century, per-capita GDP in the economies of East Asia grew almost three times as fast as in the economies of Latin America. Specifically, in 1950, the economies of the Asian Tigers (Japan, South Korea, Singapore and Taiwan) had just 17 percent of US per capita GDP, but grew to have 67 percent by 2001. In contrast, Latin America had 28 percent of US per capita GDP in 1950, and only had 23 percent in 2001. Despite this large growth differential, with Latin America falling behind the US, and with Asia catching up, capital predominantly flowed out of Asia and into Latin America. This paper studies this apparent gross misallocation of capital, and how the global development process after World War II would have differed had capital flowed to the region with the highest returns. We present an analytical framework for analyzing the incentives facing investors who allocate capital internationally. Applying the framework to data on the major Asian and Latin American economies, we account for the pattern of observed capital flows by quantifying distortions in the markets for labor, domestic capital, and international capital. We find that inefficiencies in the allocation of resources within countries play a significant role in determining how capital is allocated across them. Specifically we observe that the reallocation of capital from Asia to Latin America is motivated by a quantitatively important labor market distortion that is isomorphic to a very high labor income tax in Asia. We then use the framework to explore the effect of different policy interventions in labor, domestic capital, and international capital markets at different stages in history, and on the sequencing of these interventions, on capital flows and development.
    Date: 2012
  3. By: Mejía-Cubillos, Javier
    Abstract: This paper analyzes, through case study, the activity of the Colombian Caribbean entrepreneurs in the inland country during the 19th century. It discusses the business of Amador family, Juan Bautista Mainero and Fergusson Noguera family. The aim is to highlight the importance of studying the interregional phenomena, evidencing the existence of national spheres for large business in the 19th century. Thus, it provides elements for a better understanding of the historical process of Colombian economic integration.
    Keywords: Market integration; Caribbean; Colombia; Entrepreneurship; 19th century
    JEL: N86 N96 O54
    Date: 2013–07
  4. By: Gustavo Araújo; Bruno Vieira Carvalho; Claudio Henrique Barbedo; Margarida Maria Gutierrez
    Abstract: This work relates the adverse selection cost component (ASC) embedded in the spreads of the Brazilian interest rate future market and the probability of Informed Trading (PIN) or superior analysis to monetary policy. We used the Huang and Stoll model (1997) adapted to an order driven market to estimate the ASC. For estimating the PIN we used the Easley et al model (1996). Besides the size of both measures, we study: a) if they change with the approach of the meetings of the Monetary Policy Committee; b) if they are different in each of the six days prior to Committee's decision; and c) its relationship with market expectations about the Committee's decision. The results show that both measures reach its maximum two days before the decision. Although ASC show a downward trend over time, his latest reversal behavior suggests that the trend may not be permanent. The PIN suffers an abrupt reduction over time and starts to behave in a lower level. We found no evidence that the information asymmetry is different for the pre-decision and control periods. However, we found a strong correlation of both ASC and PIN with the dispersion of market expectations about the Committee's decision.
    Date: 2013–07
  5. By: João Barata R. B. Barroso; Luiz A. Pereira da Silva; Adriana Soares Sales
    Abstract: This paper investigates whether quantitative easing policies produces spillover effects from advanced economies into emerging markets affecting prices and asset markets, and, if so, how much of these effects is attributed to “excessive” capital inflows. We focus on the Brazilian economy and on quantitative easing (QE) policies adopted by the Federal Reserve. Our evaluation methodology is an extension of Pesaran and Smith (2012) and estimates ex-ante and ex-post policy effects over a grid of counterfactuals. We also provide a decomposition of the transmission channels of the policy effects, and test for their statistical significance. The decomposition method is novel and stems from a vector autoregressive model of the endogenous variables where the different channels are represented. Our results are consistent with the view that QE policies had a positive effect on growth but also had other significant spillover effects on the Brazilian economy. These effects were mostly transmitted through “excessive” capital inflows that led to exchange rate appreciation, stock market price increases and a credit boom. The effect on inflation was less robust, mitigated by currency appreciation and dependent on whether global activity reacts more strongly to quantitative easing.
    Date: 2013–07
  6. By: Benjamin M. Tabak; Sergio R. S. Souza; Solange M. Guerra
    Abstract: In this paper, we propose a methodology to measure systemic risk that stems from financial institutions (FIs) interconnected in interbank markets. We show that this framework is useful to identify systemically important FIs. This methodology can be used to perform stress tests using additional information from FIs default probabilities and their correlation structure. We present how to implement this methodology and apply it to the Brazilian case. We also evaluate the effects of the recent global crisis on the interbank market.
    Date: 2013–07

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