Carlos Góes

Filling the Gap: Infrastructure Investment in Brazil

Infrastructure bottlenecks have been identified as a key obstacle to growth affecting productivity and market efficiency, and hindering domestic integration and export performance. This paper assesses the state of Brazil’s infrastructure, in light of past investment trends and various quality and quantity indicators. Brazil’s infrastructure stock and its quality rank low in relation to that of comparator countries, chosen amongst main export competitors. We provide evidence that infrastructure affects domestic integration by analyzing price convergence of tradable goods across major cities. The government’s concession program will narrow part of the infrastructure gap, however, governance reforms will be crucial to improving investment efficiency.

Testing Piketty's Hypothesis on the Drivers of Income Inequality: Evidence from Panel VARs with Heterogeneous Dynamics

Thomas Pikettys Capital in the Twenty-First Century puts forth a logically consistent explanation for changes in income and wealth inequality patterns. However, while rich in data, the book provides no formal empirical testing for its theoretical causal chain. In this paper, I build a set of Panel SVAR models to check if inequality and capital share in the national income move up as the r-g gap grows. Using a sample of 19 advanced economies spanning over 30 years, I find no empirical evidence that dynamics move in the way Piketty suggests. Results are robust to several alternative estimates of r-g.

Domestic Market Integration and the Law of One Price in Brazil

ABSTRACT This article presents the first assessment of domestic market integration in Brazil using the law of one price. The law of one price is tested using two panel unit root methodologies and a unique data set comprising price indices for 51 products across 11 metro-areas. We find that the law holds for most tradable products and, not surprisingly, nontradable products are found to be less likely to satisfy the law of one price. While these findings are consistent with evidence found for other countries, price convergence occurs very slowly in Brazil, suggesting relatively limited domestic market integration.

Spillovers from U.S. Monetary Policy Normalization on Brazil and Mexico's Sovereign Bond Yields

This paper examines the transmission of changes in the U.S. monetary policy to localcurrency sovereign bond yields of Brazil and Mexico. Using vector error-correction models, we find that the U.S. 10-year bond yield was a key driver of long-term yields in these countries, and that Brazilian yields were more sensitive to U.S. shocks than Mexican yields during 2010–13. Remarkably, the propagation of shocks from U.S. long-term yields was amplified by changes in the policy rate in Brazil, but not in Mexico. Our counterfactual analysis suggests that yields in both countries temporarily overshot the values predicted by the model in the aftermath of the Fed’s “tapering” announcement in May 2013. This study suggests that emerging markets will need to contend with potential spillovers from shifts in monetary policy expectations in the U.S., which often lead to higher government bond interest rates and bouts of volatility.

Consumption in Brazil : Where to Next?

Private consumption has been a key driver of growth in Brazil for more than a decade. Over this time, Brazilian consumers have benefited from a favorable policy environment, a rapid phase of development—dramatically increasing economic, financial and social inclusion— and a supportive external environment. Meanwhile, infrastructure gaps have widened and investment and productivity levels have fallen behind. The consumption-led growth model now appears to have run its course. The prospect of a period of macroeconomic adjustment presents an opportunity to adjust policy settings to ensure stronger, more balanced and sustainable growth over the medium term.

Inequality in Brazil: A Regional Perspective

In this study, we document the decline in income inequality and a convergence in consumption patterns in Brazilian states in a new database constructed from micro data from the national households’ survey. We adjust the state-Gini coefficients for spatial price differences using information on households’ rental prices available in the survey. In a panel regression framework, we find that labor income growth, formalization, and schooling contributed to the decline in inequality during 2004-14, but redistributive policies, such as Bolsa Familia, have also played a positive role. Going forward, it will be important to phase out untargeted subsidies, such as public spending on tertiary education, and contain growth of public sector wages, to improve budgetary efficiency and protect gains in equality.

Determinants of Infrastructure and Its Financing

Abstract Adequate infrastructure is a critical input for growth and development in all countries, and especially in emerging and developing countries. This article 1 1 The views expressed in this article are those of the authors and do not necessarily represent the views of the IMF, its Executive Board, or IMF management. examines the factors that have underpinned the stock of infrastructure across countries, including in Latin America and the Caribbean. We find that public finance and private sector participation both contribute to improving the stock of infrastructure. The impact of public finance depends on how capital investment is financed to meet the government’s budget constraint. Total domestic finance of infrastructure depends, in turn, on domestic financial depth and links to the rest of the world through trade and foreign investment.