Joaquim Pinto de Andrade

Public investment in basic education and economic growth

Purpose - The main purpose of this paper is to visualize the relation between government spending on basic education and the human capital accumulation process, observing the impacts of this spending on individual investments in higher education, and on economic growth. Design/methodology/approach - The paper uses an overlapping-generations model where the government tax the adult generation and spent it in basic education of the next generations. Findings - It was demonstrated that the magnitude of the marginal effect of government spending in basic education on growth crucially depends on public budget constrains. Originality/value - The paper explains why some countries with a lot of public investment in basic education growth at low rates. In that sense if a country has only a lot of public investment in basic education without investment in higher education it may growth at low rates because the taxation can cause distortions in the agents incentives to invest in higher education.

Investment, credit, and endogenous cycles

This paper presents a general-equilibrium dynamic Ramsey-type model that can generate endogenous cycle. We assume two different representative agents, borrowers and lenders, and financial intermediaries with inside and outside money. We investigate under which conditions this model presents a cyclical relationship between capital and loans. The sources of endogenous fluctuations in this model come from a credit restriction in the representative-borrower problem.

Monetary policy and country risk

This article develops an econometric model in order to study country risk behaviour for six emerging economies (Argentina, Mexico, Russia, Thailand, Korea and Indonesia), by expanding the country beta risk model of Harvey and Zhou (1993), Erb et al . (1996a, b) and Gangemi et al . (2000). Towards this end, we have analysed the impact of macroeconomic variables, especially monetary policy, upon country risk, by way of a time-varying parameter approach. The results indicate an unstable effect of monetary policy upon country risk in periods of crisis. However, this effect is stable in other periods, and the Favero–Giavazzi effect is not verified for all economies, with an opposite effect being observed in many cases.

Currency crises in Brazil: the role of the fundamentals and the rumours

The paper aims at identification of the main explanatory factors of the currency crises in Brazil. Following Choueiri and Kaminsky (1997) a VAR monetary model is used and the historical decomposition procedure developed by Sims (1980) to evaluate the importance of the ‘fundamentals’ represented by fiscal/monetary and exchange-rate policies, and the ‘external factors’ represented by foreign interest rates and contagious effects. The main results show the importance of the exchange-rate management on the overall period and the contagious effects more recently to explain the Brazilian currency crises.

Fundamentals versus external shocks: Brazil's growing exposure to currency crises

While financial globalization does not lack theoretical economic merit, the more far-reaching practical consequences of this phenomenon are often not fully appreciated from the vantage point of North America or the European Union. In particular, globalization can make it more difficult for emerging economies to achieve macroeconomic stabilization. This is especially true if the countries in question have chosen the vehicle of pegged exchange rates as an important element of domestic anti-inflation policy. The chief macroeconomic difficulties for emerging economies in a world of volatile capital flows can include a loss of monetary control, a real appreciation of the domestic currency, and a worsening of economic fundamentals leading to damaging currency crises. This paper concentrates on the recent experience of Brazil as illustrative of the abject plight faced by many developing countries attempting to secure economic stabilization against the background of the present globalized international economy.

Monetary and exchange rate arrangements: a puzzle to be solved among major MERCOSUR

This book discusses the future of MERCOSUR, focusing on monetary union and macroeconomic policy co-ordination, and addresses a number of important questions including: is it possible, or even desirable, to achieve monetary integration?; what would the pre-conditions be for establishing such a union?; what would the convergence criteria be for joining the monetary union?; and what are the expected economic consequences for the member countries? These questions are all addressed with particular reference to the experience of EMU and the lessons which can be learnt by MERCOSUR countries, in terms of the difficult transitions they may have to face.

Reflections on the perspectives of the global economy from the point of view of emerging economies

Abstract. Recently a number of emerging economies, with high inflation and various kinds of imbalances have experienced what has come to be referred to as dollarization– the phenomenon of currency substitution where the dollar gradually replaces the national currency in the performance of its fundamental functions. The phenomenon is most commonly encountered as a component of the exchange-rate-based stabilization programs implemented in a number of emerging economies in Latin America, Asia and the Middle East. The fundamental issue we want to explore is whether this process forces the monetary authorities of emerging economies to act with their hands tied, as if caught in a trap. It is argued that when the expansion of liquidity and domestic credit is determined by the quantity of foreign-exchange reserves, an independent monetary policy vanishes and national sovereignty itself is shackled. Since this scenario typically occurs in a world of increasing globalization of finance, this paper also discusses (with reference to emerging economies) the risks and implications of capital inflows for macroeconomic policy autonomy, economic instability, and vulnerability to external shocks.

Nonlinearities in the Brazilian Yield Curve

The article indicates the yield curve can be modeled using a continuous estimator as smooth transition regression, instead of traditional switch models, because bonds are traded continuously in the financial market. The results indicate that nonlinearity in the yield curve explains the pitfalls of monetary policy. The positive correlation between inflation and spread is consistent with a rise on uncertainty due to inflation risk or seems to indicate Brazilian Central Bank’s monetary policy credibility in the sample period. Therefore, if dependence on international capital exists, the Brazilian economic policy makers must monitor the movements in yield and analyze its feedback frequently in order to guide their plans and decisions. (This abstract was borrowed from another version of this item.)ABSTRACT The article indicates the yield curve can be modeled using a continuous estimator as smooth transition regression, instead of traditional switch models, because bonds are traded continuously in the financial market. The results indicate that nonlinearity in the yield curve explains the pitfalls of monetary policy. The positive correlation between inflation and spread is consistent with a rise on uncertainty due to inflation risk or seems to indicate Brazilian Central Bank’s monetary policy credibility in the sample period. Therefore, if dependence on international capital exists, the Brazilian economic policy makers must monitor the movements in yield and analyze its feedback frequently in order to guide their plans and decisions.

Implications of Public Debt Indexation for Monetary Policy Transmission

The goal of this paper is to provide a better understanding of monetary policy effectiveness in the case of indexed bonds. When public debt management deals with bonds indexed to the interest rate set by the monetary policy, there is no wealth effect and, as a consequence, monetary policy has a weak transmission channel reducing its effectiveness. This can help to explain why monetary policy in Brazil has been so tight and interest rates so high during the Real Plan.The goal of this paper is to provide a better understanding of monetary policy effectiveness in the case of indexed bonds. When public debt management deals with bonds indexed to the interest rate set by the monetary policy, there is no wealth effect and, as a consequence, monetary policy has a weak transmission channel reducing its effectiveness. This can help to explain why monetary policy in Brazil has been so tight and interest rates so high during the Real Plan.

The Brazilian Tourism Sector as a Source of Employment and Income Generation

The main objective of this paper is to assess the tourism activity in Brazil, and examine, particularly, its capacity to generate employment. To this aim an input output matrix, that considers the tourism as a set of sectors of the economy, was computed for the year 2006. This matrix made it possible to examine the main relationships between tourism and the rest of the economy. Forward linkages and backward linkages of the tourism sector were computed. In addition, the effects of the development of the tourism sector on income and employment were analyzed and compared in this respect with the average of the Brazilian economy.