João Victor Issler

Estimating common sectoral cycles

Abstract We investigate in this paper the degree of short-run and long-run comovement in U.S. sectoral output data by estimating sectoral trends and cycles. A theoretical model based on Long and Plosser (1983) is used to derive a reduced form for sectoral outputs from first principles. Cointegration and common-cycle tests are performed; sectoral output data seem to share a relatively high number of common trends and a relatively low number of common cycles. A special trend-cycle decomposition of the data set is performed, and the results indicate a very similar cyclical behavior across sectors and very different behavior for trends. In a variance decomposition analysis, prominent sectors such as Manufacturing and Wholesale/Retail Trade exhibit relatively important transitory shocks.

Common cycles and the importance of transitory shocks to macroeconomic aggregates

Abstract Although there has been substantial research using long-run co-movement (cointegration) restrictions in the empirical macroeconomics literature, little or no work has been done investigating the existence of short-run co-movement (common cycles) restrictions and discussing their implications. In this paper we first investigate the existence of common cycles in a aggregate data set comprising per-capita output, consumption, and investment. Later we discuss their usefulness in measuring the relative importance of transitory shocks. We show that, taking into account common-cycle restrictions, transitory shocks are more important than previously thought at business-cycle horizons. The central argument relies on efficiency gains from imposing these short-run restrictions on the estimation of the dynamic model. Finally, we discuss how the evidence here and elsewhere can be interpreted to support the view that nominal shocks may be important in the short run.

The importance of common cyclical features in VAR analysis: A Monte Carlo study

Despite the commonly held belief that aggregate data display short-run comovement, there has been little discussion about the econometric consequences of this feature of the data. We use exhaustive Monte-Carlo simulations to investigate the importance of restrictions implied by common-cyclical features for estimates and forecasts based on vector autoregressive models.

Public debt sustainability and endogenous seigniorage in Brazil: time-series evidence from 1947-1992

Using national accounts data for the revenue-GDP and expenditure GDP ratios from 1947 to 1992, we examine two central issues in public finance. First, was the path of public debt sustainable during this period? Second, if debt is sustainable, how has the government historically balanced the budget after hocks to either revenues or expenditures? The results show that (i) public deficit is stationary (bounded asymptotic variance), with the budget in Brazil being balanced almost entirely through changes in taxes, regardless of the cause of the initial imbalance. Expenditures are weakly exogenous, but tax revenues are not;(ii) a rational Brazilian consumer can have a behavior consistent with Ricardian Equivalence (iii) seignorage revenues are critical to restore intertemporal budget equilibrium, since, when we exclude them from total revenues, debt is not sustainable in econometric tests.

A hipótese das expectativas na estrutura a termo de juros no Brasil: uma aplicação de modelos de valor presente

Utilizando dados financeiros brasileiros da BM&F, testa-se a validade do modelo de valor presente na estrutura a termo de juros, tambem conhecido na literatura como Hipotese das Expectativas. Estes modelos relacionam a taxa de juros de longo prazo a uma media das taxas de juros de curto-prazo mais um premio de risco, invariante no tempo. Associada a estes modelos esta a questao da previsibilidade dos retornos de ativos financeiros ou, mais especificamente, a previsibilidade na evolucao das taxas de juros. Neste artigo e realizada uma analise multivariada num arcabouco de series temporais utilizando a tecnica de Auto-Regressao Vetorial. Os resultados empiricos aceitam apenas parcialmente a Hipotese das Expectativas para a estrutura a termo de juros brasileira.

Novo indicador coincidente para a atividade industrial brasileira

Neste trabalho aplicam-se e testam-se, dentro da amostra, algumas metodologias de construcao de indicadores coincidentes para atividade industrial visando a deteccao de ciclos de crescimento/recessao da atividade industrial. Especificamente, testou-se uma versao baseada no indicador coincidente do The Conference Board (TCB), uma versao modificada deste, na qual as volatilidades sao modeladas, a abordagem de Stock-Watson tradicional e, finalmente, testou-se a abordagem de Mariano-Murasawa. Concluiu-se que, em geral, o indice TCB padrao e superior a outros metodos testados, sendo apenas competitivo com o metodo modificado. Mais ainda, o indice TCB tende a englobar os periodos recessivos apresentados pelos outros indices, sendo correspondentes com os periodos recessivos conhecidos do setor industrial.

Principais características do consumo de duráveis no Brasil e testes de separabilidade entre duráveis e não-duráveis

Estre trabalho investiga amplamente a evolucao do consumo de bens duraveis no Brasil a partir da decisao de consumo individual e da possibilidade de existir restricao ao credito. A contribuicao mais relevante consiste na nao rejeicao da hipotese de separabilidade nas decisoes de consumo de bens duraveis e nao duraveis, ja que tal hipotese e implicitamente utilizada por varios artigos que tratam a questao do consumo agregado no Brasil. Os resultados, aqui encontrados, sugerem que uma grande parcela dos consumidores esta restrita ao credito, existindo restricoes de curto e longo prazo sobre a evolucao do consumo de bens duraveis, nao duraveis e renda.

Prevendo o crescimento da produção industrial usando um número limitado de combinações de previsões

The purpose of this article is to propose and evaluate forecasting models for the Brazilian industrial GDP. Most models are based on vector auto-regressions (VARs) or on restricted VARs, but models on the ARMA class are also entertained. We used many forecasting models and also combinations of these models. The use of cointegration vectors improves substantially the forecast performance of industrial GDP. Furthermore, in general, combining models out-performed individual models, even when the performance of the later was acceptable.

A NOTE ON THE FORWARD AND THE EQUITY PREMIUM PUZZLES: TWO SYMPTOMS OF THE SAME ILLNESS?

We build a stochastic discount factor—SDF— using information on US domestic financial data only, and provide evidence that it accounts for foreign markets stylized facts that escape SDF’s generated by consumption based models. By interpreting our SDF as the projection of the pricing kernel from a fully specified model in the space of returns, our results indicate that a model that accounts for the behavior of domestic assets goes a long way toward accounting for the behavior of foreign assets prices. In our tests, we address predictability, a defining feature of the Forward Premium Puzzle—FPP— by using instruments that are known to forecast excess returns in the moments restrictions associated with Euler equations both in the equity and the foreign markets.

Constructing coincident indices of economic activity for the Latin American economy

This paper has three main contributions. The first is to propose an individual coincident indicator for the following Latin American countries: Argentina, Brazil, Chile, Colombia and Mexico. In order to obtain similar series to those traditionally used in business-cycle research in constructing coincident indices (output, sales, income and employment) we were forced to back-cast several individual country series which were not available in a long time-series span. Our second contribution is to establish a chronology of recessions for these countries, covering the period from 1980 to 2010 on a monthly basis. Based on this chronology, we compare countries in several respects. Our final contribution is to propose an aggregate coincident indicator for the Latin American economy, which weights individual-country composite indices. Its behavior is then compared with the coincident indicator (The Conference Board – TCB) of the U.S. economy. We find that the U.S. indicator Granger-causes the Latin American indicator.