Is the Investment-Uncertainty Link Really Elusive? The Harmful Effects of Inflation Uncertainty in Brazil

After being one the fastest growing countries in the world during the 1940-80 period, with an average growth rate of 6.8%, Brazil has experienced a severe growth slowdown since the 1980s, which coincided with the steep rise in inflation as of 1980. At the same time, real investment rates have plunged, shrinking around nine percentage points just in the 1980s. Moreover, they were unable to recover their 1989 level afterwards. This is unexpected as several pro-growth reforms took place since 1990, such as trade liberalization, privatization and economic stabilization. More strikingly, in the ten years following the stabilization of the economy, real investment rates have being at their lowest levels for, at least, fifty years. One major factor that could help explaining this dismal behavior is inflation uncertainty, which have remained high despite much lower inflation since 1994. Indeed, inflation uncertainty is at the root as many types of uncertainties faced by firms. For example, it also means uncertainty about future interest rates and demand. This work aims both at uncovering the main determinants that have driven M&E investment in Brazil since 1980 and testing the link between inflation uncertainty and investment. The evidence strongly suggests that inflation uncertainty has been an important investment deterrent in Brazil, both in the short and long runs. Moreover, its effects were found to be asymmetric. Also, despite the limited role played by price variables in empirical studies of investment, the real interest rate, itself importantly affected by inflation uncertainty and inflation risk premium, seems to be another key factor in explaining low investment rates in Brazil.

Is there too much certainty when measuring uncertainty

This paper criticises the econometric inflation uncertainty proxies found in the literature, which show an overly optimistic picture about our real ability to forecast, and highlights the sharp contrast between the evidence portrayed by that literature and the evidence conveyed by the literature on surveys of inflation expectations. While the latter shows that actual forecasts are usually biased and systematic forecast errors are pervasive the former shows a much more optimistic picture, in accordance with the rational expectations paradigm. Also, both literatures have historically shown conflicting evidence on the inflation level – inflation uncertainty link. Next, the performance of inflation forecasts from both the Central Bank of Brazil Inflation Report and the Focus Survey are analysed. The paper then pinpoints some simple measures that could be taken to improve the reliability of econometric inflation uncertainty proxies, and carries out a (pseudo) real-time forecasting simulation exercise to derive a set of such proxies for Brazil. The features of those forecasts are shown to be very similar to those found in surveys.inflation level, inflation uncertainty, in-sample forecasts, out-of-sample forecasts, temporal inconsistency, forecast failure, surveys of expectations, rationality

Are Core Inflation Directional Forecasts Informative?

Core inflation is under attack. Empirically, experts have become increasingly disappointed with its actual performance. Theoretically, while some claim that it is a key inflation predictor others argue that, by construction, that cannot be one of its main properties, at least in the short run. Even if true, core inflation could still be useful if it provides good directional inflation forecasts. The evidence presented here using U.S., Canadian and Brazilian data shows that this does not seem to be the case. Directional forecasts are often no better than a coin toss, especially from the level model. The gap model’s forecasts are wrong, on average, at least 20% of the time. More crucially, they are usually no better than a simple moving average of headline inflation.

Estimating Brazilian Potential Output: A Production Function Approach

Estimating potential output is at the same time one of the issues of greatest uncertainty in economics and greatest importance for policymakers, an unpleasant combination. This uncertainty fostered the emergence of several methods for calculating the potential output. In this work, the production function approach was chosen because it has important advantages compared to others, although it has limitations. The preliminary results found for the Brazilian economy are the following: a) total factor productivity (TFP) decreased in the last two decades, however, the negative trend was reverted after 1992 and, since then, TFP has been growing, on average, 0,9% per year; b) since 1980, most of the time the Brazilian economy has been below its potential. The years with strongest activity were 1980, 1985 and 1986; c) simulations involving different scenarios for investment and TFP growth rates, show that the average potential output growth for the 2001-05 period should be between 3,3% and 4,5%; d) although these figures are much lower than those registered before 1980, they are higher than the average GDP growth in the last two decades; e) because of the deep structural changes the Brazilian economy has been experiencing recently, we can expect TFP growth to increase in the next years. Even so, without increasing investment rates significantly, Brazil will not grow at rates near to its historical average.

The Natural Rate of Unemployment in Brazil, Chile, Colombia and Venezuela: some results and challenges

This paper summarises the research results obtained by the group of central banks (Brazil, Chile, Colombia and Venezuela) that joined the research program on the Natural Rate of Unemployment – under the coordination of the Central Bank of Brazil – within the Joint Investigation on Non Observable Variables Project, and whose final results were presented at the XII Meeting of the Network of America Central Bank Researchers (CEMLA) held at Madrid in November 2007. The evidence obtained shows that the natural rate of unemployment is estimated with great uncertainty: besides sizable parameter uncertainty, estimates are very sensitive to the particular method used. This marked imprecision reflects the difficulties and challenges involved in the natural rate’s estimation. Nonetheless, the research also shows that there seems to be much room available for improvement, especially those stemming from a more careful modelling process and better care with the data, particularly regarding supply shocks proxies, given their importance in inflation dynamics. Indeed, this “channel” seems to be the most promising one to both narrow down the uncertainty about the NAIRU and improve the reliability of inferences.

BIOACUMULAÇÃO DE CIANOTOXINAS E SEUS EFEITO SEM ORGANISMOS AQUÁTICOS

revista vol 13 nº 2.indd Cyanobacteria are photosynthetic procariotes with wide geographic distribution, occurring in many different ecossystems. They produce secondary metabolites named cyanotoxins, which can be classified in three main types: hepatotoxins, dermatotoxins and neurotoxins. Many studies showed the effects of cynobacteria and their toxins over aquatic organisms, including acute effects (reduction in survivorship, feeding inhibition, paralysis) and chronic effects (e.g. reduction in growth and fecundity). Some studies also reported biochemical alterations, (e.g. on the activity of phosphatases, GST, AChE, and proteases) and behavioral alterations. The main target of these toxins seems to be the herbivorous zooplancton, thus research efforts have foccused on this link as the main bioaccumulators of cyanotoxins, showing indeed its potential for bioaccumulation in the food chain. However, the large variability found in results of many studies has lead to equivocal conclusions. Although there is unequivocal evidence of deleterious effects of cyanobacteria and their toxins, the resistance of some zooplâncton species and the absence of effect of microcystins on Daphnia in some studies raised the question whether this toxin would be serving as a chemical defense mechanism against zooplancton grazing. The present manuscript presents a broad review of studies about bioaccumulation and the effects of cyanotoxins on freshwater organisms.revista vol 13 nº 2.indd Las cianobacterias son procariontes fotosintéticos que tienen una amplia distribución geográfica y habitan en diferentes ecosistemas. Como característica singular, producen metabolitos secundarios conocidos como cianotoxinas. Las cianotoxinas se dividen en tres grupos principales: hepatotoxinas, dermatotoxinas y neurotoxinas. Muchos estudios han mostrado que las cianobacterias y sus toxinas tienen efectos deletéreos en algunos organismos acuáticos, pudiendo ser efectos agudos (p. ej., reducción en la sobrevivencia, inhibición de tasa de ingestión, parálisis) y crónicos (p. ej., disminución de crecimiento y fecundidad). También se han descrito efectos bioquímicos como alteración de la actividad de las enzimas fosfatasas, GST, AChEy proteasas, además de efectos en el comportamiento. Como el principal organismo afectado por estas toxinas parece ser el zooplancton herbívoro, muchas investigaciones han enfocado esta relación como la principal ruta de las cianotoxinas, mostrando incluso su potencial de bioacumulación en la cadena alimentaria. No obstante, la gran variabilidad encontrada en los resultados de estudios de bioacumulación han llevado a conclusiones erradas. Apesar de la evidencia inequívoca de los efectos deletéreos de las cianobacterias y sus toxinas, la resistencia de algunas especies de zooplancton y la ausencia de efectos de la microcistina sobre Daphnia en algunos estudios, ha puesto en duda el papel de esta tóxina como mecanismo químico de defensa contra la herbivoría del zooplancton. Por esto son necesarios mas estudios para esclarecer el rol de las cianotoxinas sobre los organismos acuáticos. Este trabajo tiene como objetivo hacer una revisión crítica de los principales estudios sobre bioacumulación y efectos de las cianotoxinas em los organismos acuáticos, en especial los de agua dulce.  As cianobactérias são procariotos fotossintéticos que têm ampla distribuição geográfica e habitam os mais diferentes ecossistemas. Como característica peculiar, produzem alguns metabólitos secundários denominados de cianotoxinas. As cianotoxinas dividem-se em três classes principais: as hepatotoxinas, as dermatotoxinas e as neurotoxinas. Muitos estudos têm demonstrado que as cianobactérias e suas toxinas exercem efeitos deletérios para vários organismos aquáticos, como efeitos agudos (i.e. redução na sobrevivência e inibição da taxa de ingestão, paralisia) e crônicos (i.e. redução no crescimento e fecundidade). Efeitos bioquímicos, como alteração na atividade de enzimas fosfatases, GST, AChE, e proteases, além de efeitos comportamentais também têm sido descritos. Como o alvo principal destas toxinas parece ser o zooplâncton herbívoro, muitas pesquisas têm enfocado este elo como principal rota das cianotoxinas, mostrando inclusive o seu potencial de bioacumulação na cadeia alimentar. No entanto, a grande variabilidade encontrada nos resultados dos estudos de bioacumulação tem levado à conclusões equivocadas. Apesar da inequívoca evidência de efeitos deletérios das cianobactérias e suas toxinas, a resistência de algumas espécies de zooplâncton e a ausência de efeito de microcistina sobre Daphnia em alguns estudos têm levado ao questionamento do papel desta toxina como mecanismo químico de defesa contra a herbivoria do zooplâncton. Deste modo, mais estudos são necessários para esclarecer o papel das cianotoxinas sobre organismos aquáticos. Este trabalho tem como objetivo fazer uma ampla revisão sobre os estudos de bioacumulação e efeitos de cianotoxinas em organismos aquáticos, especialmente de água doce