An Information Theory Approach to the Aggregation of Log-Linear Models

In this paper, an unrestricted aggregation method for heterogeneous log-linear functions is presented. It employs inequality measures derived from information theory in the construction of an exact representation of the aggregate behavior of the economy. A condition for the identification of average micro parameters is proposed. It is shown that the method leads to previous results in the field when adequate restrictions are imposed. Two macroeconomic applications are discussed: the aggregation of the Lucas supply function and the time-inconsistent behavior of an egalitarian social planner facing agents with heterogeneous discount rates.

Inequality-Driven Growth: Unveiling Aggregation Effects in Growth Equations

It is well known from nonlinear aggregation theory that distributions play a central role in the determination of aggregate relations. This paper establishes a bridge between the aggregation and the inequality and growth literature by applying a log-linear aggregation method to a simple heterogeneous AK growth model. The aggregation effect is explicitly captured in the growth equation by the changes of the mean logarithmic deviation (MLD or Theil’s second measure) of the income, implying that increases in income inequality may be unambiguously associated with temporary increases in a country’s growth rate, in agreement with the empirical findings of Forbes (AER, 2000). Consequently, empirical studies of the long-run effects of income inequality may suffer from aggregation bias if the temporary effects of the MLD changes are not considered. The accelerated growth episodes observed in Brazil and China demonstrate that the increase in income inequality may have resulted in substantial temporary increases in the aggregate growth rates experienced by those countries.Inequality, Growth, Income Distribution, Aggregation, Heterogeneity, AK Model, Brazil, China

BAD Taxation: Disintermediation and Illiquidity in a Bank Account Debits Tax Model

This paper uses a dynamic general equilibrium model to study the economic effects of bank account debits (BAD) taxation. Australia and various Latin American countries have levied or levy BAD taxes. Aspects such as financial disintermediation, market illiquidity, and impacts on dividend and interest rates are considered. Part of the BAD tax revenue may be fictitious, due to increased interest payments on government debt. The Brazilian BAD tax (CPMF) experience is evaluated. The empirical analysis confirms some theoretical predictions. Incidence base over GDP appears to be sensitive to the tax rate, possibly engendering a Laffer curve. The tax may also cause real interest rates to increase. Furthermore, the deadweight losses are relatively large, even if revenues are small. The theoretical and empirical results suggest that the BAD tax is not adequate for revenue collection.Bank Account Debits Tax, BAD Tax, Financial Transactions Tax, FTT, Currency Transaction Tax, CTT, Automated Payment Transaction Tax, APT Tax, CPMF, Disintermediation, Illiquidity

Optimal Time Interval Selection in Long-Run Correlation Estimation

This paper presents an asymptotically optimal time interval selection criterion for the long-run correlation block estimator (Bartlett kernel estimator) based on the Newey-West and Andrews-Monahan approaches. An alignment criterion that enhances finite-sample performance is also proposed. The procedure offers an optimal yet unobtrusive alternative to the common practice in finance and economics of arbitrarily choosing time intervals or lags in correlation studies. A Monte Carlo experiment using parameters derived from Dow Jones returns data confirms that the procedures are MSE-superior to typical alternatives such as aggregation over arbitrary time intervals, parametric VAR estimation, and Newey-West covariance matrix estimation with automatic lag selection.Long-Run Correlation, Bartlett, Lag Selection, Time Interval, Alignment, Newey-West

Inequality-Driven Growth: Unveiling Aggregation Effects in Growth Equations

This paper presents a simple Cass-Koopmans-Ramsey AK growth model with heterogeneity that explains how policies that increase income inequality may temporarily boost a country’s income growth rate. Briefly put, a change in policy that reduces redistributive transfers will free up resources to the households with the highest productivities, resulting in an aggregate growth rate increase that will endure until new limits to differentiated accumulation are found. The unambiguous effect takes place in poor and rich countries alike, arising from productivity heterogeneity and redistribution (although it could also arise from other sources of heterogeneity). The effect is explicitly captured in the aggregate growth equation by the changes of the mean logarithmic deviation (MLD or Theil’s second measure) of the income. The model supports the empirical results found in Forbes (AER, 2000). The accelerated growth episodes observed in Brazil from 1968 to 1973 and in China recently are shown to be empirically consistent with the model. If the model predictions are correct, Chinese growth rates may eventually fall, following a pattern that, even if not presenting the same magnitude, could resemble the one observed during the Brazilian slowdownInequality, Growth, Income Distribution, Redistribution, Heterogeneity, AK Model, Brazil, China

Shared Legacies, Disparate Outcomes: Why American South Border Cities Turned the Tables on Crime and Their Mexican Sisters Did Not

The article evaluates crime trends in south border American and Mexican sister cities using panel data analysis. The region offers a unique assessment opportunity since cities are characterized by shared cultural and historical legacies, institutional heterogeneity, and disparate crime outcomes. Higher homicide rates on the Mexican side seem to result from deficient law enforcement. Higher population densities in Mexican cities appear to also be a factor. Cultural differences, on the other hand, have been decreasing, and apparently do not play a substantial role. The homicide rate dynamics show opportunistic clustering of criminal activity in Mexican cities, while no clustering is found on the American side. Crime also appears to spill from Mexican cities into American cities. Homicide rates on both sides of the border have been falling faster than countrywide rates, leading, in the case of American cities, and against stereotypes, to rates below the countrywide rate in 2001.Crime, Border, Law Enforcement, Justice, Immigration, Mexico

Inequality-Driven Growth: Unveiling Aggregation Effects in Growth Equations

This paper presents a simple Cass-Koopmans-Ramsey AK growth model with heterogeneity that explains how policies that increase income inequality may temporarily boost a country's income growth rate. Briefly put, a change in policy that reduces redistributive transfers will free up resources to the households with the highest productivities, resulting in an aggregate growth rate increase that will endure until new limits to differentiated accumulation are found. The unambiguous effect takes place in poor and rich countries alike, arising from productivity heterogeneity and redistribution (although it could also arise from other sources of heterogeneity). The effect is explicitly captured in the aggregate growth equation by the changes of the mean logarithmic deviation (MLD or Theil's second measure) of the income. The model supports the empirical results found in Forbes (AER, 2000). The accelerated growth episodes observed in Brazil from 1968 to 1973 and in China recently are shown to be empirically consistent with the model. If the model predictions are correct, Chinese growth rates may eventually fall, following a pattern that, even if not presenting the same magnitude, could resemble the one observed during the Brazilian slowdownInequality, Growth, Income Distribution, Redistribution, Heterogeneity, AK Model, Brazil, China

Using a Money Demand Model to Evaluate Monetary Policies in Brazil

This paper uses a money demand model to evaluate monetary policies under different regimes in Brazil. The consistency between monetary liquidity and the inflation rate path is considered. The concept is applied to the Brazilian case by modeling M 1 and its components. Based on unit root and cointegration tests, a growth-rate model is chosen, which considers all the interventions that happened during the sample period (1980-1999). It is shown that a variable seasonal pattern, which is a linear function of the nominal interest rate, increases the model ability to explain seasonal changes in the money demand. Despite the economic instability that marked Brazilian economic history during the last two decades, the model shows good fit and predictive power. Finally, it is shown that unsuccessful macroeconomic stabilization programs were marked by excessive liquidity, with money supply exceeding expected conditional money demand during intervention periods. The results suggest that to track monetary aggregates can be useful to policy makers even under a regime where interest rates are the main policy instrument.

Canaries and Vultures: A Quantitative History of Monetary Mismanagement in Brazil

During the last two decades of the twentieth century, Brazil went through a sequence of failed stabilization plans that tried to cope with an enduring hyperinflation. This paper uses a money demand model to evaluate monetary policies during those episodes. The consistency between the money supply and the expected conditional money demand growth rates is considered for each plan. It is shown that the unsuccessful programs were marked by excessive liquidity. The results not only suggest that the mismanagement of the monetary aggregates led to the failure of the plans, but also that the excessive liquidity could have been predicted.Money Demand, Money Supply, Monetary Policy, Inflation, Stabilization, Brazil

Sebastián Celestino Pérez y Carolina López-Ruiz. Tartessos and the Phoenicians in Iberia [Reseña]

Recensão da monografia: Sebastián Celestino Pérez y Carolina López-Ruiz, Tartessos and the Phoenicians in Iberia. Oxford, Oxford University Press, 2015.info:eu-repo/semantics/publishedVersio