Tough Policies, Incredible Policies?

We revisit the question of what determines the credibility of macroeconomic policies here, of promises to repay public debt. Almost all thinking on the issue has focused on governments' strategic decision to default (or erode the value of outstanding debt via inflation/devaluation). But sometimes governments default not because they want to, but because they cannot avoid it: adverse shocks leave them no option. We build a model in which default/devaluation can occur deliberately (for strategic reasons) or unavoidably. If such unavoidable fiscal crises a) have pecuniary costs and b) occur with possible probability, much conventional wisdom on the determinantes of credibility need no longer hold. For instance, appointing a conservative policymaker or denominating public debt in foreign currency may reduce, not increase, credibility.

Essays in macroeconomics

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2003.Includes bibliographical references.In this thesis, I cover three relevant topics in macroeconomics: the effects of trade liberalization, the effect of institutions and the determinants of credibility on macroeconomic policies. The first essay revisits the empirical work on the effects of trade liberalization and analyzes how it affects growth through two distinct channels: through better access to intermediate supplies and through tougher foreign competition. In particular, both effects are significant: while the first boosts growth the second one hinders it. Moreover, the effect of the first channel outweighs the effect of the second one. The second essay is an empirical analysis showing that weaker institutions increase transaction costs, particularly the costs incurred by a firm when dealing with suppliers of intermediate goods. In particular, It is showed that industries with a more complex intermediate structure suffer a relatively larger loss of productivity in countries with poorer institutions. The third essay revisits the theoretical determinants of governments' credibility in regard to outstanding debt. Governments default not because they want to, but because they cannot avoid it. Under this and other assumptions, some standard results need no longer hold. For instance, appointing a conservative policymaker or denominating public debt in foreign currency may reduce credibility.by Roberto Alejandro Neut.Ph.D

Intermediate Goods, Institutions and Output per Worker

Este artículo analiza un canal específico a través del cual las instituciones afectan al producto por trabajador: el impacto de dichas instituciones en la división de la producción entre empresas. Argumentamos que las instituciones débiles aumentan los costos de transacción, en especial aquellos en que las firmas deben incurrir en sus relaciones con proveedores de bienes intermedios. Las firmas responden a estos mayores costos sustituyendo bienes intermedios adquiridos a terceros por bienes producidos en la firma. Esta sustitución reduce el grado de especialización, lo que a su vez genera pérdidas de productividad. Para testear este mecanismo, aprovechamos diferencias entre sectores en su capacidad de sustituir bienes intermedios por bienes internos. Comenzamos construyendo un índice que mide la "complejidad" de los bienes intermedios de cada sector en Estados Unidos. Usando este índice, encontramos que las industrias con una estructura de bienes intermedios más compleja sufren una mayor caída de productividad en países con instituciones débiles

Intermediate Goods, Institutions and Output per Worker

Este artículo analiza un canal específico a través del cual las instituciones afectan al producto por trabajador: el impacto de dichas instituciones en la división de la producción entre empresas. Argumentamos que las instituciones débiles aumentan los costos de transacción, en especial aquellos en que las firmas deben incurrir en sus relaciones con proveedores de bienes intermedios. Las firmas responden a estos mayores costos sustituyendo bienes intermedios adquiridos a terceros por bienes producidos en la firma. Esta sustitución reduce el grado de especialización, lo que a su vez genera pérdidas de productividad. Para testear este mecanismo, aprovechamos diferencias entre sectores en su capacidad de sustituir bienes intermedios por bienes internos. Comenzamos construyendo un índice que mide la "complejidad" de los bienes intermedios de cada sector en Estados Unidos. Usando este índice, encontramos que las industrias con una estructura de bienes intermedios más compleja sufren una mayor caída de productividad en países con instituciones débiles

Fiscal policy in Latin America: better after all?

This paper analyses fiscal policy for several economies in Latin America, from the early nineties to the 2009 crisis. We present original estimates of cyclically-adjusted public revenues for Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Peru and Uruguay implementing the standardised OECD methodology and extending it to include commodity cycles, which have a direct and significant effect on the fiscal balance of several Latin American countries. Based on these estimates, we evaluate the size of automatic tax stabilisers and the cyclicality of discretionary fiscal policy. Additionally, we highlight the uncertainty stemming from the estimation of the output gap, due to large and simultaneous cyclical, temporary and permanent shocks in several Latin American economies. --fiscal policy,business cycle,public finances,structural balance

Fiscal Policy in Latin America: Countercyclical and Sustainable at Last?

This paper analyses fiscal policy for several economies in Latin America, from the early nineties to the 2009 crisis. We present original estimates of cyclically-adjusted public revenues for Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Peru and Uruguay implementing the standardised OECD methodology and extending it to include commodity cycles, which have a direct and significant effect on the fiscal balance of several Latin American countries. Based on these estimates, we evaluate the size of automatic tax stabilisers and the cyclicality of discretionary fiscal policy. Additionally, we highlight the uncertainty stemming from the estimation of the output gap, due to large and simultaneous cyclical, temporary and permanent shocks in several Latin American economies. Cette étude analyse la politique budgétaire dans huit économies d’Amérique Latine, à partir du début des années 1990 et jusqu’à 2009. Nous étudions les estimations des composantes structurelles et cyclique des recettes publiques en l’Argentine, le Brésil, le Chili, la Colombie, le Costa Rica, le Méxique, le Pérou et l’Uruguay, en utilisant la méthodologie de l’OCDE, et en ajoutant l’effet des prix des matières premières, qui ont un impact significatif sur le solde budgétaire en Amérique Latine. A partir de ces résultats, l’étude évalue l'ampleur des stabilisateurs automatiques, et l’stabilisation de la politique budgétaire discrétionnaire. Finalement, nous soulignons l’incertitude de l’estimation de l’écart de production en raison des larges chocs cycliques, temporaires et permanents dans plusieurs économies d’Amérique Latine.public finances, fiscal policy, business cycle, politique budgétaire, cycle économique, finances publiques

Fiscal policy in Latin America: Countercyclical and sustainable?

This paper analyses fiscal policy for several economies in Latin America, from the early nineties to the 2009 crisis. We present original estimates of cyclically-adjusted public revenues for Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Peru and Uruguay implementing the standardised OECD methodology and extending it to include commodity cycles, which have a direct and significant effect on the fiscal balance of several Latin American countries. Based on these estimates, we evaluate the size of automatic tax stabilisers and the cyclicality of discretionary fiscal policy. Additionally, we highlight the uncertainty stemming from the estimation of the output gap, due to large and simultaneous cyclical, temporary and permanent shocks in several Latin American economies. --fiscal policy,business cycle,public finances