nep-lam New Economics Papers
on Central and South America
Issue of 2015‒01‒26
six papers chosen by
Maximo Rossi
Universidad de la República

  1. Inferring inflation expectations from fixed-event forecasts By Winkelried, Diego
  2. Tracking the Exchange Rate in Latin America By Carrera, César
  3. Latin American Agriculture in a World of Trade Agreements By Josling, Tim; Paggi, Mechel; Wainio, John; Yamazaki, Fumiko
  4. The Institutional Presidency from a Comparative Perspective: Argentina and Brazil since the 1980s By Mariana Llanos; Magna Inácio
  5. Consumer credit performance over the business cycle in Colombia: some empirical facts By Luis E. Arango; Lina Cardona-Sosa
  6. An Economic Model of Brazil’s Ethanol-Sugar Markets and Impacts of Fuel Policies By Drabik, Dusan; de Gorter, Harry; Just, David R.; Timilsina, Govinda R.

  1. By: Winkelried, Diego (Universidad del Pacífico)
    Abstract: Often, expected inflation measured by surveys are available only as fixed-event forecasts. Even though these surveys do contain information of a complete term structure of expectations, direct inferences about them are troublesome. Records of a fixed-event forecast through time are associated with time-varying forecast horizons, and there is no straightforward way to interpolate such figures. This paper proposes an adaptation of the measurement model of Kozicki and Tinsley (2012) [“Effective use of survey information in estimating the evolution of expected inflation”, Journal of Money, Credit and Banking, 44(1), 145-169] to suit the intricacies of fixed-event data. Using the Latin American Consensus Forecasts, the model is estimated to study the behavior of inflation expectations in four inflation targeters (Chile, Colombia, Mexico and Peru). For these countries, the results suggest that the announcement of credible inflation targets has been instrumental in anchoring long-run expectations.
    Keywords: Survey expectations, fixed-event forecasts, Kalman filter, inflation targeting, Latin America
    JEL: C32 E37 E52
    Date: 2014–12
  2. By: Carrera, César (Banco Central de Reserva del Perú)
    Abstract: The exchange rate is one of the most important prices in any open economy. Tracking deviations from its long-run value may provide important information for policymakers. One way to track such deviations is to compute the distribution of exchange-rate observed values and compare them with those of Benford’s law. I document such cases for 15 Latin American countries, for the two most widely traded currencies. Latin American countries are small open economies that are characterized for having different degrees of dollarization and intervention in the forex market. This is an alternative view of how these characteristics play a role with respect to an implied equilibrium exchange rate.
    Keywords: Exchange rate, Forex, Benford’s law
    JEL: C16 F31 F41
    Date: 2014–12
  3. By: Josling, Tim; Paggi, Mechel; Wainio, John; Yamazaki, Fumiko
    Keywords: Latin American and Caribbean (LAC) countries have been among the most active participants in the negotiation of regional and bilateral FTAs. The countries of the region are members of 73 of the 259 FTAs notified to the WTO as currently in force, with 29 of these agreements containing tariff concessions made to one or more Latin American partners: the remaining 44 are between an LAC member country and a third country. Among LAC countries already linked by an FTA, a large percentage of agricultural tariffs are already duty free. But the progress in this direction seems to have stalled, with continued tensions in MERCOSUR and political difficulties in the Andean Community. Negotiation of the proposed Free Trade Areas of the Americas (FTAA) has been shelved, and the MERCOSUR-EU negotiations are moving at an imperceptible speed. Meanwhile other countries are moving ahead rapidly by negotiating ambitious mega-agreements, particularly the Trans Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (T-TIP). The only LAC countries actively involved in the TPP talks are Mexico, Chile, and Peru. If either or both of these mega-agreements are concluded the impacts on the region could be significant. These impacts include trade diversion and preference erosion in major import markets, as competitors improve their market access. They could also involve the de facto acceptance of regulatory decisions made by the mega-agreement partners. The Latin American strategies toward these potentially significant agreements and the impacts of the TPP and T-TIP on Latin American agriculture have so far gone largely unstudied. Several possible avenues exist for Latin American countries to counter the impact of a TPP and TTIP on agricultural exports. One possible avenue would be to strengthen existing bilateral trade agreements within the region and to rely on multilateral trade negotiations to improve market access in other regions. Another possible strategy would be to link existing multi-country agreements, such as MERCOSUR and the Pacific Alliance, to NAFTA, in effect reviving the idea for a Free Trade Area of the Americas (FTAA) under a different structure. Another possibility would be to complete and expand the scope of the MERCOSUR-EU FTA talks, to include other LAC countries. A fourth possible action would be for those countries that are not yet part of the negotiations to “sign on” to the TPP in so far as it is an “open access” agreement., Agribusiness, International Development, International Relations/Trade,
    Date: 2015
  4. By: Mariana Llanos (GIGA German Institute of Global and Area Studies); Magna Inácio (Universidade Federal de Minas Gerais)
    Abstract: This paper focuses on the evolution of the institutional presidency – meaning the cluster of agencies that directly support the chief of the executive – in Argentina and Brazil since their redemocratization in the 1980s. It investigates what explains the changes that have come about regarding the size of the institutional presidency and the types of agency that form it. Following the specialized literature, we argue that the growth of the institutional presidency is connected to developments occurring in the larger political system – that is, to the political challenges that the various presidents of the two countries have faced. Presidents adjust the format and mandate of the different agencies under their authority so as to better manage their relations with the political environment. In particular, we argue that the type of government (coalition or single-party) has had consequences for the structure of the presidency or, in other words, that different cabinet structures pose different challenges to presidents. This factor has not played a significant role in presidency-related studies until now, which have hitherto mostly been based on the case of the United States. Our empirical references, the presidencies of Argentina and Brazil, and typical cases of coalitional as well as single-party presidentialism respectively all allow us to show the impact of the type of government on the number and type of presidential agencies.
    Keywords: Argentina, Brazil, institutional presidency, presidential office, coalition presi-dentialism, comparative political institutions
    Date: 2014–10
  5. By: Luis E. Arango; Lina Cardona-Sosa
    Abstract: This paper studies the behavior of the survival function of accruing loans during the slowdown experienced by the Colombian economy between January-2008 and March-2009 as documented by Alfonso et al. (2013). We use a dataset with information of different vintage loans between July-2007 and March-2014 from a private credit union that operates in Medellín, the second largest city in Colombia, and its metropolitan area. The analysis suggests that the survival function of accruing loans reduces before and during the slowdown event: if the probability of survival at month ten of a consumer credit vintage is below the 97.5% and below 95% at month fifteen, the probability of a future slowdown is not negligible. Classification JEL: C41, E32, E44, G21.
    Date: 2015–01
  6. By: Drabik, Dusan; de Gorter, Harry; Just, David R.; Timilsina, Govinda R.
    Abstract: We develop an economic model of flex plants, export demands and two domestic fuel demand curves: E25, a 25 percent blend of ethanol with gasoline consumed by conventional cars, and E100, ethanol consumed only by flex cars. This allows us to analyze the market impacts of specific policies, namely the E25 blend mandate, fixing gasoline prices below world prices, the high gasoline tax, and a higher tax exemption for ethanol used in E25. Because Brazilian and U.S. ethanol prices have become linked, a change in Brazilian ethanol policy or a shock in world sugar markets can now impact U.S. ethanol and corn prices. Because of two demand curves, with flex car owners switching between fuels depending on relative prices, and because the mandate is for E25 only, the impact of each Brazilian policy in theory has an ambiguous impact on ethanol and sugar prices. Conventional wisdom is that a higher level of the mandate, gasoline tax exemptions for ethanol and gasoline price, and a lower gasoline tax, all help the ethanol industry. But for two policies, a low gasoline tax and a high tax exemption for ethanol used in E25, our empirical results show ethanol and sugar prices decline. Overall, we find that the package of policy reforms implemented in 2010 offset the ethanol price increase due outward shifts in fuel transportation and sugar export demand curves, and reduced sugarcane supply due to bad weather, by about 27 percent. Our model illustrates the importance of Brazil’s ethanol policies on world commodity markets and provides insights on how the Brazilian government can adjust policies to better control domestic inflation while minimizing impacts on investment.
    Keywords: Brazil, ethanol, flex plants, sugarcane, mandate, tax exemption, Resource /Energy Economics and Policy,
    Date: 2014–08

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