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.

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.

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

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.

Surveying structural change: seminal contributions and a bibliometric account

The main aim of this paper is to provide a comprehensive survey of the economic literature on structural change. Along with an insightful literature review of the seminal contributions in the field, we perform a quantitative analysis that takes into account all the theoretical and empirical articles on the subject that were published from 1969 onwards. This effort to gather the relevant documentation is based on a review of 910 abstracts from articles published in all the economic journals found in the Econlit database over the past forty years. According to our quantitative analysis, structural change analysis received a major boost in the 1990s, with a considerable increase in the number of articles published on the matter. The marked rise in interest seems to be primarily related to the growing concern to find explanations for the process of technological change and its effects on the economy. In the first half of the current decade technological change comprises a predominant area of research, accounting for about one quarter of the articles published. Despite the increased formalism observed in the 1990s, our results further highlight that the bulk of the research in this field remains empirically led. Furthermore, and quite surprisingly, discussions concerning ICTs do not seem to have been translated so far into a substantial increase in research on structural change-related issues.Structural Change; Bibliometrics; Econlit

Does structure influence growth? A panel data econometric assessment of ‘relatively less developed’ countries, 1979-2003

Neo-Schumpeterian streams of research emphasize the close relationship between changes in economic structure in favour of high-skill and high-tech branches and rapid economic growth. They identify the emergence of a new technological paradigm, strongly based on the application of information and communication technologies (ICTs), in the 1970s, arguing that in such periods of transition and emergence of new techno-economic paradigms the relatively less developed countries have higher opportunities to catch-up. Although this debate is theoretically well documented, the empirics seem to lag behind the theory. In this paper, we contribute to this literature by adding illuminating evidence on the issue. More precisely, we relate the growth experiences of countries which had relatively similar economic structures in the late 1970s, with changes occurring in these countries’ structures between 1979 and 2003. The results reveal a robust relationship between structure and (labour) productivity growth, and lend support to the view that producing (though not user) ICT-related industries are strategic branches of economic activity.Structural change, Economic growth, Technical change

Irreversible processes and the accelerated-decelerated phases of the Universe

A model for the Universe is proposed where it is considered as a mixture of scalar and matter fields. The particle production is due to an irreversible transfer of energy from the gravitational field to the matter field and represented by a non-equilibrium pressure. This model can simulate three distinct periods of the Universe: (a) an accelerated epoch where the energy density of the scalar field prevails over the matter field, (b) a past decelerated period where the energy density of the matter field becomes more predominant than the scalar energy density, and (c) a present acceleration phase where the scalar energy density overcomes the energy density of the matter field.Comment: 6 pages, 2 figures, to be published in Brazilian Journal of Physic

La categoría del espacio en la construcción de la identidad

As ciências humanas são importantes para o entendimento da sociedade, mais a ciência geográfica tem sido uma das principais pontes para estudos nas relações do homem e natureza, incorporados diante das categorias, espaço, lugar, território, paisagem e região. Neste ensaio teórico buscou-se compreender a evolução conceitual do tema e entender como a categoria de espaço constrói a identidade. Pensou-se no objetivo geral; refletir sobre espaço como uma categoria da base epistemológica geográfica para a construção de identidade. Além disso, recorreu-se, de forma a alguns das principais contribuições teóricas clássicas, (Eric Dardel, Alfredo Wagner Berno de Almeida, Ana fani Alessandri Carlos, Stuart Hall, Henry Lafebvre, Karl Marx,  Milton Santos) com intuito de compreender a evolução dos conceitos de espaço para construção da identidade.  The human sciences are important for the understanding of society, but science geography has been one of the main bridges for studies on the relations of man and nature, incorporated in the face of the categories, space, place, territory, landscape and region. In this theoretical essay, we sought to understand the conceptual evolution of the theme and understand how the category of space builds identity. The general objective was thought; reflect on space as a category of the geographic epistemological basis for the construction of identity. In addition, some of the main classical theoretical contributions (Eric Dardel, Alfredo Wagner Berno de Almeida, Ana fani Alessandri Carlos, Stuart Hall, Henry Lafebvre, Karl Marx, Milton Santos) were used in order to understand evolution of the concepts of space for the construction of identity.Las ciencias humanas son importantes para la comprensión de la sociedad, pero la ciencia de la geografíca ha sido uno de los principales puentes para los estudios sobre las relaciones del hombre y la naturaleza, incorporados frente a las categorías, espacio, lugar, territorio, paisaje y región. En este ensayo teórico, buscamos comprender la evolución conceptual del tema y comprender cómo la categoría de espacio construye identidad. Se pensó en el objetivo general; reflexionar sobre el espacio como categoría de la base epistemológica geográfica para la construcción de la identidad. Además, se utilizaron algunas de las principales aportaciones teóricas clásicas (Eric Dardel, Alfredo Wagner Berno de Almeida, Ana fani Alessandri Carlos, Stuart Hall, Henry Lafebvre, Karl Marx, Milton Santos) para comprender la evolución de los conceptos de espacio. para la construcción de la identidad

A política numa política do trabalho escravo: alguns apontamentos sobre o compromisso nacional da cana de açúcar

O presente artigo visa traçar alguns apontamentos sobre os principais sujeitos políticos no agronegócio sucroalcooleiro atual e seus principais projetos políticos para o trabalho e trabalhadores na atividade. O Compromisso Nacional da Cana de Açúcar - espaço tripartite criado em 2008 – possibilitou o acompanhamento das disputas presentes na dinâmica social da atividade. Ainda que proposto para ser “democrático”, o interior deste espaço permite atentar para a existência e manutenção de diversos embates e conflitos envolvendo trabalhadores e patrões, além de assimetrias de influência política. Dialogando com os eventos recentes destas arena, discuto a reconfiguração das redes de poder, os diversos desafios decorrentes que permanecem na atividade e as vias políticas de encaminhamento de demandas e reivindicação do empresariado e trabalhadores