Non-exact present value relations

One of the most cornmonly used and, at the same time. rejected models in finance and macroeconomics is the exact present value model (PVM), where a variable Yt is expressed as the expected value at time t of the sum of discounted future values of another variable Xt. This paper generalizes the PVM by making it non-exact (NEPVM) in a simple way, allowing us to study situations with time varying discount factors, transitory deviations from the exact PVM, as well as situations with correlated market returns. The proposed NEPVM satisfies all the equilibrium conditions the exact PVM does, but at the same time it is more robust in the sense that rejections produced by the standard volatility and cross-equation restriction tests are not enough to reject the NEPVM. The paper presents the new variance bounds and cross-equation restrictions implied by the NEPVM and it shows how to test them. This paper also shows how to discriminate between the exact PVM and the NEPVM by testing for a deeper level of cointegration: multicointegration. The paper finished by analyzing empirically the cases of stock prices and dividens. short-and long-term interest rates and farmland prices. Although the exact PVM is rejected in the first two examples, as the literature has largely reported, we are unable to reject the NEPVM. This fact, together with the theoretical results contained in the paper, suggests that the pro po sed NEPVM could be compatible with sorne of the empírical findings in the literature

Load Frequency Control: A Deep Multi-Agent Reinforcement Learning Approach

The paradigm shift in energy generation towards microgrid-based architectures is changing the landscape of the energy control structure heavily in distribution systems. More specifically, distributed generation is deployed in the network demanding decentralised control mechanisms to ensure reliable power system operations. In this work, a Multi-Agent Reinforcement Learning approach is proposed to deliver an agentbased solution to implement load frequency control without the need of a centralised authority. Multi-Agent Deep Deterministic Policy Gradient is used to approximate the frequency control at the primary and the secondary levels. Each generation unit is represented as an agent that is modelled by a Recurrent Neural Network. Agents learn the optimal way of acting and interacting with the environment to maximise their long term performance and to balance generation and load, thus restoring frequency. In this paper we prove using three test systems, with two, four and eight generators, that our Multi-Agent Reinforcement Learning approach can efficiently be used to perform frequency control in a decentralised way

Why have poverty and income inequality increased so much? Argentina 1991-2002

This paper analyzes the sources of changes in poverty and income inequality among Argentine households during the 1991-2001 period. We assess the eect of changes in labor market participation, unemployment, education levels, and returns to human capital on income inequality and poverty by using a micro-simulation approach. This procedure allows us to evaluate the impact of each one of those changes on several measures of income inequality and poverty during the nineties. We found that unemployment accounts for a large part of the increase in income inequality and poverty that this country experienced in the last decade. In January 2002, Argentina declared the default on its external debt and devaluated the peso 40% ending the convertibility period. Since then, a growing inflation is aecting the purchasing power of Argentine households for the first time in more than ten years. Using our methodology we estimate the eect of the emerging inflation on poverty among households. Our findings indicate that inflation increases poverty significantly at least in the short run.

Inference and estimation in small sample dynamic panel data models

We study the finite sample properties of the most important methods of estimation of dynamic panel data models in a special class of small samples: a two-sided small sample (i.e., a sample in which the time dimension is not that short but the cross-section dimension is not that large). This case is encountered increasingly in applied work. Our main results are the following: the estimator proposed by Kiviet (1995) outperforms all other estimators considered in the literature. However, standard statistical inference is not valid for any of them. Thus, to assess the true sample variability of the parameter estimates, bootstrap standard errors have to be computed. We find that standard bootstrapping techniques work well except when the autoregressive parameter is close to one. In this last case, the best available solution is to estimate standard errors by means of the Grid-t bootstrap estimator due to Hansen (1999).

Business Cycle and Macroeconomic Policy Coordination in MERCOSUR

The paper analyzes cyclical comovements in the Mercosur area differentiating idiosyncratic from common shocks. In the Mercosur (or any region for that matter) shocks can be country-specific, affecting only one country or a specific set of countries (for example, a weather-related shock, a domestic policy shock); or they can be common to the entire region (for example, a change in the conditions in international capital markets or a world recession). Propagation mechanisms, in turn, are important because a shock that was initially country-specific, originating in one country, might eventually spillover to others. We build on the unobserved component approach to decompose the Mercosur countries real GDP (seasonally adjusted) fluctuations into these three components and compare them with previous results. The main findings in the paper are: first, common factors originating in impulses stemming from changes in investor’s sentiment are relevant to explaining regional output comovements and the spillover effects between neighbors are significant. Second, volatility matters, and matters especially in the case of recent regional agreements. Supply shocks in Mercosur countries tend to be larger than in the US and European countries. Third, finance matters for both volatility and output/price dynamics. Accelerator effects may be important in explaining some features of the output/price dynamics that the standard models based on vector autoregression techniques are unable to account for..

Global Factors and Emerging Market Spreads

This paper shows that a large fraction of the variability of emerging market bond spreads is explained by the evolution of global factors such as risk appetite (as reflected in the spread of high yield corporate bonds in developed markets), global liquidity (measured by the international interest rates) and contagion (from systemic events like the Russian default). This link has remained relatively stable over the history of the emerging market class, is robust to the inclusion of country-specific factors, and helps provide accurate long-run predictions. Overall, the results highlight the critical role played by exogenous factors in the evolution of the borrowing cost faced by emerging economies.

Business Cycles and Macroeconomic Policy Coordination in Mercosur

Abstract: The paper analyzes cyclical comovements in the Mercosur area differentiating idiosyncratic from common shocks. In the Mercosur (or any region for that matter) shocks can be country-specific, affecting only one country or a specific set of countries (for example, a weather-related shock, a domestic policy shock); or they can be common to the entire region (for example, a change in the conditions in international capital markets or a world recession). Propagation mechanisms, in turn, are important because a shock that was initially country-specific, originating in one country, might eventually spillover to others. We build on the unobserved component approach to decompose the Mercosur countries’ real GDP (seasonally adjusted) uctuations into these three components and compare them with previous results. The main findings in the paper are: first, common factors originating in impulses stemming from changes in investor’s sentiment are relevant to explaining regional output comovements and the spillover effects between neighbors are significant. Second, volatility matters, and matters especially in the case of recent regional agreements. Supply shocks in Mercosur countries tend to be larger than in the US and European countries. Third, finance matters for both volatility and output/price dynamics. Accelerator effects may be important in explaining some features of the output/price dynamics that the standard models based on vector autoregression techniques are unable to account forBusiness cycle, Comovement, Mercosur, OCA, Policy coordination

Water Expansions in Shantytowns: Health and Savings

This paper examines the effects of the expansion of the water network in urban shantytowns in Argentina. We find large reductions in the presence, frequency, and severity of diarrhea episodes among children in the households reached by network expansions relative to the control group. Moreover, expanded water connections induce savings, as these families are able to substitute piped water for more expensive and distant sources of water. These health and savings effects are also important for households that previously had clandestine self-connections to the water network, which were free but of low quality.