André M. Marques

Economic development and inflation: a theoretical and empirical analysis

Abstract This paper studies the relation between inflation and economic development. The literature is largely silent regarding both the theoretical and empirical perspectives that undeveloped countries endure higher average inflation than developed economies. We present a simple theoretical model linking the inflation phenomenon to the tradition of development economics. Empirical evidence is garnered to test the hypothesis that economic development engenders a downward bias to inflation rates. Through the feasible-GLS estimator in a panel of 65 countries from 2001 to 2011, we aim at listing a number of variables most commonly used to explain differences in the stage of economic development across countries and identifying the most statistically relevant ones to account for differences in inflationary patterns. While our results show that inflation is inversely correlated with the level of the technological content of the economy (measured by share of high-tech exports), human capital and cyclical unemployment, it is directly related to the degree of inflation persistence and terms of trade growth. However, our findings still present an inverse and low correlation between inflation persistence and economic development, implying that development-sensitive variables allowed into the model can only partially account for the differences in inflation at different levels of economic development.

Advertising expenditures in Brazil and its connection with the international economy

The strong performance of the Brazilian economy during the 2000s allows the expansion of various sectors, including the advertising market, associated with the growth of the domestic market and the intensification of trade relations with other countries. The main objective of this study is to test the Relative Constancy Principle (RCP) in the context of greater integration with international economy, controlling for several factors that may exhibit some influence on the performance of the advertising market. We adopt a panel data of two periods for 49 countries and estimate a linear fixed effects model with dummies, controlling for the heterogeneity and unobserved factors of the countries. The results suggest that the advertising market of China, the United States and India have significant patterns above the average. The study does not support the RCP, yet they identify important regularities in those countries in relation to the advertising market. The level of activity and international reserves have a significant effect on the advertising market in countries; the higher the share of industry and services (urbanization), the higher the expenses on advertising; the inflation rate is nonlinearly related to the advertising market performance; the economic freedom index and the presence of Generations X and Y are associated with a reduction in advertising expenditure.

O MERCADO PUBLICITÁRIO NO BRASIL E SEUS DETERMINANTES MACROECONÔMICOS: UM ESTUDO A PARTIR DO PRINCÍPIO DA CONSTÂNCIA RELATIVA

In recent years, the growth of the Brazilian advertising market is remarkable. However there are few studies that seek a broader understanding of this dynamic. Traditionally, the Principle of Relative Constancy (PCR) is used, which establishes a relationship between the performance of GDP and advertising expenditures. For the period analyzed (1997-2010), the PCR did not find empirical support. For further analysis, we used the Principal Components Analysis in order to measure the influence of other macroeconomic factors on the performance of the Brazilian advertising market. The results suggest that the dynamics of domestic/external (associated with industrial expansion and falling unemployment) explains 41% of the total variability of the data, that being the main explanation for the expenditure on advertising in the period.

Persistência da taxa de câmbio real: um estudo a partir do estimador local de Whittle

Since 1973, the widespread adoption of floating exchange rates amongst regimes, coupled with the opening of trade and greater financial integration between countries on a global level, has increased the volatility of the exchange rate. Therefore, it is difficulty to support the hypothesis of purchasing power parity. In this context, this study investigates the possibility of a decrease in the persistence of real exchange rates before and after the intensification of trade and financial integration among economies. Based on monthly data for twenty countries, the hypothesis of change in persistence is tested using the estimation of the fractional coefficient d for two periods: 1975-1994 and 1995-2011. Employing a robust estimator relative to conditional heteroskedasticity, the study can provide more reliable evidence on the stationarity of the real exchange rate. The results suggest no significant change in the persistence of the real exchange rate which is still nonstationary.

Não linearidades, mudanças de regime e assimetrias na taxa de inflação brasileira: análise a partir de um modelo SETAR, 1944-2009

The objective of this research is to investigate asymmetries, nonlinearities and regime changes in the Brazilian inflation rate in a long time span. The process is modeled employing a threshold time series model in order to take into account these parameters. The study was divided in two distinct stages. On the first stage, the Brazilian dataset was tested for several types of nonlinearities applying general and specific tests, e.g., quadratic and threshold behavior. On the second one, the Self-Exciting Threshold Autoregressive (SETAR) model was applied to indicate the threshold to which a signal of turning point could be provided in the states of the inflationary process. All the tests suggest that the Brazilian inflation rate is highly nonlinear and cannot be modeled as a linear and time reversible process. The results support the hypothesis that there are two distinct regimes with different generating processes and different volatilities and persistence. For instance, a lower inflation rate regime is more persistent with lower volatility.