Verifying exchange rate regimes

Credibility and transparency are at the core of the current debate about exchange rate regimes. The steady growth in the magnitude and variability of international capital flows has complicated the question of whether to use floating, fixed, or intermediate exchange rate regimes. Emerging market economies are abandoning basket pegs, crawling pegs, bands, adjustable pegs, and various combinations of these. One of several reasons intermediate regimes have fallen out of favor is that they are not transparent; it is very difficult to verify them. Verifiability is a concrete example of the principle of"transparency"so often invoked in discussions of the new international financial architecture but so seldom made precise. A simple peg or a simple float may be easier for market participants to verify than a more complicated intermediate regime. The authors investigate how difficult it is for investors to verify from observable data whether the authorities are in fact following the exchange rate regime they claim to be following. Of the various intermediate regimes, they focus on basket pegs with bands. Statistically, it can take a surprisingly long span of data for an econometrician or investor to verify whether such a regime is actually in operation. The authors find that verification becomes more difficult as the regime's bands widen or more currencies enter the basket peg. At the other extreme, they also analyze regimes described as the regime's bands widen or more currencies enter the basket peg. At the other extreme, they also analyze regimes described as free floating and find that in some cases the observed exchange rate data do validate the announced regime.Payment Systems&Infrastructure,Economic Theory&Research,Environmental Economics&Policies,Fiscal&Monetary Policy,ICT Policy and Strategies,Fiscal&Monetary Policy,Economic Theory&Research,ICT Policy and Strategies,Economic Stabilization,Macroeconomic Management

Auctioning Annuities

In this paper, we empirically analyze a market for annuity contracts. To this end, we use multi-stage and multi-attribute auctions, where life insurance companies that have private information about their annuitization costs compete for retirees\u27 savings by offering pensions and bequests, and retirees choose \winners that maximize their expected present discounted utilities. We establish the identification of our model parameters and estimate them using rich administrative data from Chile. Our estimates suggest that (i) retirees with lowest savings quintiles value firms\u27 risk ratings (e.g., AAA, AA) the most, while the high savers do not; (ii) almost half the retirees who choose an annuity do not value bequest, and (iii) firms are more likely to have low annuitization cost for retirees in the top-two savings quintiles. Counterfactuals show that private information about costs harms only these high savers, and simplifying the current mechanism by using English auctions and \shutting-down risk ratings lead to higher pensions in equilibrium, but only for the high savers

An Economic Model of Amniocentesis Choice

Medical practitioners typically utilize the following protocol when advising pregnant women about testing for the possibility of genetic disorders: Pregnant women over the age of 35 should be tested for Down syndrome and other genetic disorders; for younger women, such tests are discouraged since they can cause a miscarriage. The logic appears compelling. The rate at which amniocentesis causes a miscarriage is constant while genetic disorders rise over a woman's reproductive years. Hence the potential benefit from testing – being able to terminate a fetus with a genetic disorder – rises with maternal age. We argue that this logic is incomplete. While the benefits to testing rise with age, so do the costs. While undergoing an amniocentesis always entails the risk of miscarriage of a healthy fetus, these costs are lower at early ages, because there is a higher probability of being able to replace a miscarried fetus with a healthy birth at a later age. We develop and calibrate a dynamic model of amniocentesis choice to explore this tradeoff. For parameters that characterize realistic age patterns of chromosomal abnormalities, fertility rates and miscarriages following amniocentesis, our model implies a falling, rather than rising, rate of amniocentesis as women approach menopause.

Contributions to social security in Argentina, Chile and Uruguay: densities, transitions and duration

Los programas de pensiones latinoamericanos tienen baja cobertura. Utilizando paneles de registros administrativos de Argentina, Chile y Uruguay, caracterizamos las historias de contribución de la población. Construimos tres indicadores: densidad de cotización, tasas de transición y duración de los períodos de contribución y no contribución. Los datos obtenidos son preocupantes. La densidad de cotización promedio es baja y bastante heterogénea a través de la población. Los períodos de contribución son cortos y las interrupciones frecuentes. Las tasas de transición son altas a edades tempranas y tienden a caer a lo largo de la vida, indicando gran rotación entre los jóvenes.Pension programs in Latin America have low coverage. We use large panel databases coming from administrative records of Argentina, Chile and Uruguay to characterize the histories of contribution of the population. We compute three indicators: density of contribution, transition rates and duration of the spells of contribution and no contribution. The picture that emerges is worrisome. The density of contributions is low on average and pretty heterogeneous across the population. The spells of contribution are short and interruptions are frequent. Transition rates are higher at early ages and tend to decline later in life, indicating high turnover among young individuals.Instituto de Investigaciones Económica

Reformando las reformas previsionales: en la Argentina y Chile

Incluye BibliografíaEn este trabajo se describen las recientes reformas previsionalesen la Argentina y Chile. Con ellas se pretendió en los años ochentay noventa mejorar la sostenibilidad fiscal de largo plazo y el diseñoinstitucional de los sistemas, trasladando parte de los riesgos sociales yeconómicos desde el Estado a los participantes. En años recientes, lasautoridades de ambos países coincidieron en identificar a la insuficientecobertura entre los adultos mayores y al bajo nivel de los beneficioscomo los principales problemas de los sistemas previsionales vigentes.Debido a divergencias institucionales y políticas, las respuestas fuerondispares. En Chile, un proceso prolongado y participativo redundó enuna amplia reforma concentrada en efectos a mediano plazo medianteajustes cuidadosamente calibrados. En la Argentina, en cambio, lasreformas involucraron un gran número de correcciones sucesivas, conpoco debate público sobre sus implicancias y efectos en la coberturay las necesidades fiscales

Reforming the pension reforms: Argentina and Chile

Includes bibliograph