ABSTRACT. The role played by mass media in the rise and maintenance of non-democratic regimes is a phenomenon well documented in the political economic literature. Anecdotal evidence suggests that Rede Globo, the main television broadcaster in Brazil served the military regime that ruled Brazil between 1964 and 1865 by distorting news. Theoretical literature on media capture, however, suggest that media outlets might face a more complicated trade-off: when media outlets bias news to serve autocracies, individuals might disengage from watching TV and advertising revenues decrease. This naturally creates an incentive for media outlets to invest in more appealing entertainment shows. This paper investigates if entertainment TV can undermine the support for autocratic regimes when dissenting views permeate entertainment shows. This is done by examining whether the entry of Globo TV and its novelas induced changes in vote share of the ruling party during Brazilian dictatorship in mayoral elections held between 1972 and 1982. We employ a Difference-in-difference strategy exploiting variation in the timing of Globo’s entry across municipalities. We also exploit variation in novelas content over time interacted with differential entry of Globo to test whether novelas with political content account for changes in vote shares. Our results show that on average, entry of Globo in a municipality is associated with a decrease on ARENA's vote-share in mayoral elections. We also provide evidence that suggests that the increased use of political messages in novelas over time accounts for part of the effect.

ABSTRACT. In this paper, we investigate the presence of patronage in the public bureaucracy in municipalities of the Brazilian northeast, by asking whether affiliated members of political parties that win the mayoral election receive any benefits regarding public sector jobs. Moreover, if there is patronage, signaling support for the local mayor has economic value, and we would expect post-election party registration to be higher for the winning party than for the losing one. We investigate those issues by analyzing public employment for registered individuals of winning parties, and registration rates following the election. We estimate plausibly causal effects using a Regression in Discontinuity design, investigating election results where a party narrowly won or lost. We find no consistent evidence of returns to political connections in the Northeast of Brazil for the 2008 mayoral elections.

ABSTRACT. We develop a model where the cost of doing business associated with red tape can arise as a response to institutional failure. When the legal system is inefficient, it cannot stop opportunistic behavior from happening in the market. In this case, an increase in the cost of setting up business relationships can improve the quality of the market. The cost reduces the benefit of unproductive agents from setting up short-term relationships only to take advantage of their partners. We show that productive individuals benefit from raising the bureaucratic costs even though their costs of doing business increase. They benefit because such costs reduce the share of unproductive types in the market. We also show that the level of red tape required to improve the market is decreasing on the efficiency of the legal system.

ABSTRACT. This article studies network effects on public employment using administrative data from the Brazilian federal government from April 2015 to May 2016. Commissioned positions, such as ministers and secretaries, are usually key for shaping public policy, although they have less monetary benefits than tenured public workers. We provide empirical evidence of network effects on assignment to commissioned positions in Brazil using fixed effects estimation. Our findings indicate that one additional peer in a commissioned position increases the probability of being appointed to public office by 0.08 percentage points.

ABSTRACT. Neste estudo, nós procuramos investigar se o Banco Central do Brasil leva em consideração o mercado acionário ao determinar a taxa de juros Selic. Baseados em Nisticò (2012) e Funke, Paetz e Pytlarczyk (2011), nós propomos um Modelo Dinâmico Estocástico de Equilíbrio Geral (DSGE) para uma pequena economia aberta com mercado de ativos e usamos métodos bayesianos para estimação dos parâmetros desse modelo. Os resultados apontam que a autoridade monetária brasileira responde a inflação e hiato do produto, mas não reage aos preços das ações. Isso está de acordo com a visão teórica de que o banco central deve reagir apenas indiretamente aos preços dos ativos, na medida em que esses preços impliquem em variações nas expectativas inflacionárias e inflação corrente. Nós observamos ainda que choques nos preços dos ativos tem pouca influência sobre as variáveis macroeconômicas.

ABSTRACT. This paper investigates the nonlinearity of exchange rate pass-through in the Brazilian economy during the floating exchange rate period (2000-2015) using a Markov-switching DSGE (MS-DSGE) model. We apply the methods proposed by Baele et al. (2015) and a basic new Keynesian model, with the addition of new elements to the AS curve and a new equation for the exchange rate dynamics. We find evidence of two distinct regimes for the exchange rate pass-through and for the volatility of shocks to inflation. Under the so-called “normal” regime, the long-run pass-through to consumer prices inflation is estimated at 0.00057 percentage points, given a 1% exchange rate shock. Comparatively, the expected pass-through under a “crisis” regime is of 0.1035 percentage points to inflation, for the same exchange rate shock. The MS-DSGE model outperforms the fixed parameters model according to several comparison criteria. The results allowed us to identify the occurrence of three distinct cycles for the exchange rate pass-through during the inflation targeting period in Brazil.

ABSTRACT. We apply the data cloning method developed by Lele et al. (2007) to estimate the model of Smets and Wouters (2007). The data cloning algorithm is a numerical method that employs replicas of the original sample to approximate the maximum likelihood estimator as the limit of Bayesian simulation-based estimators. We also analyze the identification properties of the model. We measure the individual identification strength of each parameter by observing the posterior volatility of data cloning estimates, and access the identification problem globally through the maximum eigenvalue of the posterior data cloning covariance matrix. Our results indicates that the model of Smets and Wouters (2007) is poorly identified. The model display bad global identification properties, and most of its parameters seem locally ill-identified.

ABSTRACT. Esse artigo investiga como uma política macroprudencial de recolhimento de depósitos compulsórios afeta a dinâmica de uma pequena economia aberta com fricções financeiras. O modelo DSGE proposto incorpora as políticas monetária e macroprudencial além de elementos do setor financeiro. Choques na política monetária doméstica, produtividade e política monetária externa são usados para ilustrar o papel da taxa de câmbio na transmissão de perturbações exógenas. A política monetária usa regras para a taxa nominal de juros sob diferentes configurações enquanto a macroprudencial define regras para os recolhimentos compulsórios. Uma análise de bem estar ilustra o desempenho de regras alternativas. Os resultados indicam que a taxa de câmbio tem um papel ativo na transmissão dos diversos choques, com intensidade dependendo do grau de abertura da economia. Considerando a volatilidade das variáveis e a convergência ao estado estacionário, a regra de juros deve responder à inflação doméstica (PPI), mas não à taxa de câmbio. Já a regra para o recolhimento compulsório deve reagir mais agressivamente a desvios no crédito. Por fim, há uma complementariedade entre as ações das políticas monetária e macroprudencial também na economia aberta.

ABSTRACT. Evidence of negative birth order effects in the literature abounds. Studies have shown that, after accounting for those effects, there is little indication that family size alone bears an inverse causal relationship with child outcomes. Using data from adult children born to senior Chinese households, I find the opposite. First, family size effects on child's years of schooling from OLS estimates are virtually unchanged after controlling for the child's birth rank. When I exploit the incidence of twins in the family to instrument for family size, I find the same pattern. In particular, a one-child increase in family size leads to a decrease in schooling of nearly 0.61 years for first and second born children. Furthermore, a larger number of siblings has a stronger negative impact on schooling for daughters than sons. Second, fixed-effect estimates indicate that birth order effects are different for sons and daughters. Holding family size constant, an increase in the number of sisters is associated with lower schooling for daughters, but an increase in the number of siblings, regardless of sibling sex, is associated with more schooling for sons. My results suggest that the reductions in fertility caused by the One-child policy are likely to have differential effects on the average educational outcomes of men and women, and depend on the initial distribution of family sizes.

ABSTRACT. This paper examines the effect of the average real value of the minimum wage in the first months of life on early child development and long-run human capital outcomes for a cohort born in Pelotas (Brazil) with a poverty rate of about 48% in a period of hyperinflation. It uses the variation coming from the day of birth within a month to identify the effects of the minimum wage on human capital. It shows that the average daily minimum wage during the first year of life has a large effect on weight, height and socioemotional skills when the children reach 11 years-old and on schooling and high school graduation when they are 18,only for the children of low educated mothers.

ABSTRACT. Abstract Poor youths face high risks of dropping out of high school and are vulnerable to many sorts of risky behavior. While high school attainment awards have recently become more popular, there is still little evidence on whether they can positively impact students outcomes when implemented at scale, and how implementation interacts with school characteristics. This paper presents evidence on the impacts of the Renda Melhor Jovem Program, an attainment award targeted to socio-economic disadvantaged secondary students in the state of Rio de Janeiro, Brazil. By exploiting the phased in expansion of the program, I find that program eligibility substantially decreases dropout and increases test scores and high school completion. The program is particularly effective for boys and students with high risks of dropping out. Schools with better management practices have higher take up rates and stronger program effects.

ABSTRACT. In order to derive closed-form solutions for consumption function under precautionary motive, the literature adopts restrictive assumptions about the consumer's income process, moving from a stationary process to a random walk one. For this reason, under precautionary motive and habit formation, I derive the consumption function for a representative consumer whose income process follows any ARIMA(p,1,q) process, obtaining a very general consumption function. Empirically, I evaluate the impact of precautionary motive and habit formation on consumption level using aggregate US data. Such task is accomplished by estimating both the appropriated ARIMA process for income and the consumer Euler equation, which allows the estimation of structural parameters of interest. To conclude, lagged consumption has a sizable impact on current consumption, and the precautionary motive is also relevant.

ABSTRACT. This paper introduces the notion of common noncausal feature and proposes tools for detecting the presence of co-movements in stationary economic and financial time series such as variables with asymmetric cycles or bubbles. For purely noncausal models, i.e., forward looking VARs, we estimate reduced rank regressions in reverse time in order to highlight the potential presence of such noncausal co-movements. For more than one lead or lag, we are able to determine whether the VAR is better represented by purely causal or purely noncausal reduced rank models. Using both sets of lag and lead instruments within a canonical correlation or a GMM framework, additional relationships are discovered between series, both in the Monte Carlo simulations and in empirical illustrations. For mixed causal-noncausal models though, an approximate maximum likelihood estimator assuming non Gaussian disturbances is needed.

ABSTRACT. Concerns about the qualifications of labor and training of specific skills has been routinely debated, especially by developing countries. In this context, much has been discussed about the technical and vocational education, their deployment models and which impacts expected policies and support to this skill set. This work represents an effort to systematize the effects of policies for Technical & Vocational Education and Training (TVET). Thus, this work aims to build a signaling model in the labor market to check the effects of public policies that affect access to TVET courses. More specifically, the model here developed begin from the analysis of parameters typically used by public policies, such as the granting of scholarships, extending the offer of vacancies in the public network and lowering the cost of obtaining student loans,to seek as these actions have an impact on wage gains arising from the conclusion of the TVET in comparison with those who attended higher education and secondary education. The main result of the theoretical model is the fact that some public policies that seek to expand access to vocational education and improve labor market conditions, can have the reverse effect, increasing wage inequality between vocational and college education. This is due to the weakening of vocational education as worker productivity signal.

ABSTRACT. This paper aims to analyze the effects of changes in returns to education, educational composition and educational assortative mating in household income inequality in Brazil covering the period from 1992 to 2014. Our work follows Eika et al. (2014)`s. The results suggest that changes in marital sorting parameters have little effect on household income inequality whereas returns to education have played a major role as in Eika et al. (2014)'s work. Comparing the counterfactual Gini with returns to education fixed in 2014 with the actual Gini shows that the household income inequality would be lower than what it really was during the period covered by the study. This effect can be explained by the decrease in returns to educations from 1992 to nowadays. If we keep fixed the educational composition of 1992, the counterfactual Gini is lower than the actual one. Both results are in the opposite direction from Eika et al., 2014's work. Finally, if marriages were formed randomlly across time the counterfactual Gini would be lower than the actual one from 1992 to 2014.

ABSTRACT. There has been a striking increase in American idiosyncratic labor income volatility since 1970, with little attention paid to the effects on families. The formation and dissolution of the typical American family has changed substantially, however, with a notable decline/delay of marriage and, since 1980, declining divorce rates. Furthermore, the elderly are divorcing more. This paper demonstrates a quantitatively important link between income volatility and the changing family. Marriage typically involves children, a large, persistent cost, which causes people to dislike risk; volatility therefore causes less marriage. This effect dominates the increased insurance value of marriage that arises because shocks to income are imperfectly correlated between spouses. Once a couples has married, however, the rising insurance value of marriage also leads to a decline in divorce. On the other hand, the elderly are either retired or near retirement and have grown children, and thus are less susceptible to the effects of volatility. Elderly divorce rises as younger people delay divorce. The model qualitatively matches observed family changes over time, and quantitatively accounts for up to a third of the data.

ABSTRACT. In this paper, we pursue more general simulations of the Shi-Trejos-Wright model with lump-sum transfers of fiat money, as well as develop a model of intermediation in tripartite meetings, to demonstrate the following implications of lack of commitment in matching models of money: savings are inefficiently low; inflation has a negative effect on self-insurance; and although lump-sum transfers should be avoided in many specifications, positive inflation can be optimal with inside money.

ABSTRACT. This paper studies information disclosure when a financial supervisor cannot commit to reveal the situation of the banking sector truthfully. I present a bank run model where a regulator observes banks' types (through a stress test, for example) and chooses whether to disclose bank-specific information or only to release a report on the health of the entire financial system. Information can be biased at a cost – the higher this cost, the more credible the regulator. The signaling role of disclosure and manipulation policies gives rise to multiple equilibria. Still, predictions may be derived. If credibility is not too low, the regulator only discloses bank-specific information in low states (i.e., when the proportion of good banks is small); in intermediate states, the policy features opacity and information manipulation; and in high states, opacity with truth-telling. The relationship between credibility and the amount of disclosure in equilibrium is non-monotonic. If credibility is low enough, the regulator loses the ability to help agents coordinate by manipulating aggregate information and must release bank-specific reports (truthful or not) in all states, in which case not all runs can be avoided. If misreporting banks' types is possible and supervisors lack credibility, some banks always have to fail the stress test to generate confidence in those who do pass the test. The results have implications for institutional design. Ex ante, a social planner would choose an interior level of credibility.

ABSTRACT. This paper proposes a macroeconomic model to study unusually deep financial crises. Disasters episodes arise as a consequence of demand-driven coordination failures on the productive sector, and weak balance sheets on the financial sector. There is an endogenous two-way feedback between intermediaries balance sheets and coordination. The calibrated model is able to capture several empirical regularities. Coordination failures alone have small effects, but once one takes into account the feedback from the financial sector, they have a large negative impact on asset prices, investment and welfare, even if the economy is in good times and they rarely happen. Macroprudential policies that increase intermediaries returns during disasters greatly improve welfare, growth and financial stability, almost mitigating the negative effects of coordination failures.

ABSTRACT. In 1980, US Census data indicate that housing prices in large cities rose with distance to the city center. By 2010, that relationship had reversed. We propose that this development can be traced to greater labor supply of high-income households via reduced tolerance for commuting. In a tract-level data set covering the 27 largest US cities, years 1980-2010, we employ a Bartik type demand shifter for skilled labor and find support for our hypothesis: full-time skilled workers favor proximity to the city center and their increased presence can account for the rising price premium commanded by centrality.

ABSTRACT. Tropical deforestation is one of the major drivers of climate change. Much of this loss is due to illegal logging. Unlike forests in the Congo basin and South-East Asia, the world's largest tropical forest - the Amazon - has experienced a dramatic slowing in rates of deforestation over the last decade. The bulk of the Amazon is located in Brazil which has introduced a raft of policies to reduce illegal logging in recent years. We use Brazil's border with its neighbors to identify the impact of Brazilian policies on deforestation. Because forests are a fixed resource and geography and infrastructure vary continuously over the border we can compare annual forest loss on either side of the border to tease out the impact of national forest policies from other drivers of deforestation. To do this we employ a satellite-derived data set that measures forest cover at a 30 x 30 meter resolution for the entire Amazon area across the 2000-2014 period. Our data reveals a sharp discontinuity at the border -- in 2000 Amazonian pixels on the Brazilian side of the border are more likely to have been deforested and between 2001 and 2005 annual forest loss in Brazil was around four times the rate on the other side of the border. However, in 2006, just after the Brazilian government introduced a raft of policies to curtail illegal logging, these differences disappear and Brazilian rates of forest loss fall to those observed across the border. These results demonstrate the power of the state to affect whether or not natural resources are conserved or exploited even in the furthest reaches of the Amazonian jungle.

ABSTRACT. This paper proposes an alternative way to measure high frequency Tail Risk extracted from market returns: A risk-neutral mean-adjusted expected shortfall. We rely on a non-parametric estimator for the state price density based on Hellinger's distance to risk-neutralize returns. The measure is easy to interpret and not option-dependent, being straightforward to apply to different markets, and asset classes. Even without making use of option data, our tail risk factor has up to 90\% correlation with the VIX index, reassuring the ``fear nature'' of the volatility index. Empirically, we document a persistent negative relation between tail risk and one-day ahead returns, for different assets. Consistent with the crash insurance property of put options, tail risk predicts positive one-day ahead returns for portfolios long out-of-the-money short in-the-money put options. The same analysis for stock portfolios formed on the level of exposure to tail risk indicates a premium for bearing such risk, even when controlling for other known and established factors related to cross-section variability. Our analysis is robust to the inclusion of volatility measures, macroeconomic condition measures, and uncertainty indexes.

ABSTRACT. Recently, Martin (2013) showed the inability of the GMM in the estimation of a simple disaster asset pricing model in which aggregate consumption growth may suffer large drops with small probabilities (Barro, 2006). In this paper, building on Martin (2013), we analyze the ability of some members in the family of Generalized Empirical Likelihood (GEL) Estimators in estimating parameters in Barro's-type disaster models. Simulating from an economy in which large consumption drops might happen with a small probability, we show that the ability of all GEL estimators will strongly depend on the conditional occurrence or not of a disaster. When disasters do not occur, the estimators perform poorly, delivering biased parameters, in special, the coefficient of risk-aversion in the CCAPM SDF. This allows for the conclusion that in relatively young economies in which there is interest in testing for the existence of disasters via estimation of Barro's-type models, if only small samples of data on aggregate returns and consumption are available in the estimation process, all GEL estimators will estimate risk-aversion coefficients with large positive biases, therefore inducing Equity Premium like puzzles.

ABSTRACT. We evaluate the use of Generalized Empirical Likelihood (GEL) estimators in portfolio efficiency tests for asset pricing models in the presence of conditional information. Estimators from GEL family present some optimal statistical properties, such as robustness to misspecification and better properties in finite samples. Unlike GMM, the bias for GEL estimators do not increase with the number of moment conditions included, which is expected in conditional efficiency analysis. By means of Monte Carlo experiments, we show that GEL estimators has better performance in the presence of data contaminations, especially under heavy tails and outliers. We also see that efficiency tests using GEL generate lower estimates compared to tests using the standard approach with GMM.

ABSTRACT. Implicit in interest rate derivatives are Arrow-Debreu prices (or state price densities, SPDs) that contain fundamental information for risk and portfolio management in interest rate markets. To extract such information from interest rate derivatives, we propose a nonparametric method to estimate state prices based on the minimization of the Cressie-Read family function between potential SPDs and the empirical probability measure. Our estimator guarantees positivity of the state prices, can be applied to both interest rates and interest rates derivatives data, does not depend on a large quantity of data, and can be extended to deal with conditioning information.

ABSTRACT. In this paper we examine the role of compulsory savings and unfunded social security on the macroeconomic equilibrium in an economy populated by overlapping generations individual with time-inconsistent preferences. Our model economy is informed by the Brazilian experience, where a generous social security structure with high and progressive replacement rate combined with forced savings system coexists with high historical real interest rates and low saving rates. We examine the links between those facts by simulating such model and performing counter-factual exercises. Reducing pensions replacement rates to levels comparable to US leads to substantial increase in the saving rates and reduction in interest rates. Similar results are obtained when forced savings interest rates are increased from the current below market levels.

ABSTRACT. This paper tests the hypothesis raised by Reinhart and Rogoff that the growth rate income is negatively affected by the increase in public debt. We estimate a dynamic panel based on the theoretical neoclassical growth model, complemented with the debt / GDP ratio and other relevant variables. The sample covers a period long enough to capture the phenomenon of interest (1983 to 2013) and includes all the countries for which the required data are available (83 countries). The diversity of countries allows us to make more general inferences than those from other studies with fewer and less diverse countries, or with time frame which are shorter or do not include recent data. We use several estimation methods to handle issues raised in the literature and also perform the tests for sub-samples. We find evidence to support the main hypothesis, but were unable to confirm the existence of a critical debt level (threshold) beyond which the magnitude of the effect of public debt on growth is significantly larger than below it.

ABSTRACT. We use new data on cyclically adjusted primary balances for Latin America and the Caribbean to estimate effects of fiscal consolidations on GDP and some of its components. Identification is conducted through a doubly-robust estimation procedure that controls for non-randomness in the "treatment assignment" by inverse probability weighting and impulse responses are generated by local projections. Results suggest output contraction by more than one percent on impact, with economy starting to recover from the second year on. Composition effects indicate that revenue-based adjustments are way more contractionary than expenditure-based ones. Disentangling effects between demand components, we find consumption being in general less responsive to consolidations than investment, although nonlinearities associated to initial levels of debt and taxation might play an important role.

ABSTRACT. We assess how countries choose their exchange rate regime, specifically whether to fix or to float. When choosing the arrangement, the policymaker should care about growth and inflation; however, he lacks full knowledge of how the regimes impact these variables. Instead, the policymaker learns it from his own experience as well as from the other's. This limited understanding arises from the theoretical complexity involving the theme, with consequences to empirical analysis and policy guidance; which, in turn, might have induced a herd of arrangement decisions from the end of the Bretton Woods system. So, since changing beliefs could be a main driver of the herd choices, we adapt from Buera et al. (2011) and assume an economy in which the policymaker has a perceived belief of how those variables are related. We find no evidence of the policymaker considering the inflation in his judgment. In addition, the model is able to generate intuitive connections between the choices and some associated economic variables as well as to fit well the observed data.

ABSTRACT. We study how the end of the quota system for textiles and clothing products in the EU and the US on January 1, 2005, affected exports from China to countries other than those liberalizing trade (ROW). That is, we assess how trade policy changes in a group of countries affected the trade flows among other countries, where policy did not change. Our identification relies on the fact that the end of the quota system affected some but not other, similar products in the same industries. We find large extensive margin effects: the number of Chinese firms exporting previously restricted products to ROW increased significantly due to the removal of quotas in the EU and the US. This indicates that the policy shock turned China into a better export base for previously restricted products, encouraging entry in the industry. In contrast, there is little evidence of meaningful intensive margin effects. We also show that within-firm product reallocation is incapable of explaining the extensive margin effects. Overall, we find evidence of a sizeable positive third-market effects from trade liberalization stemming from new firms selling (or existing firms selling new products) in foreign markets products that were previously restricted in other foreign markets.

ABSTRACT. This paper studies the role of sunk entry cost to export in international competitiveness at firm level. We estimate the average export sunk entry cost using the World Bank Enterprise Survey database of the World Bank that has informations about more than 70 thousand firms spreaded over several activity’s sectors and more than 120 developing countries. We followed the model and methodology developed by Das, Roberts and Tybout in a paper published in Econometrica in 2007 and we found that a firm, in average, pays 3.2 million dollars in order to start exporting. Besides that, we found that the export entry cost varies between countries and this fact helps to explain why similar firms in different countries have different probabilities to become exporters. In that way, the sunk entry cost to export becomes a source of competitiveness between countries. Finally, supported by the literature of trade and institutions, we made correlations between the quality of many institutions and the fixed entry cost to export.

ABSTRACT. No período 2001-2011 tivemos um forte aumento do crédito privado no Brasil, que passou de 27,2% para 51,6% do PIB. Além disso, o crédito privado com recursos livres (com taxas de juros livremente negociadas no mercado, sem subsídios e sem direcionamento) passou de 15% do PIB para 30% do PIB. Em nosso trabalho buscamos analisar os efeitos macroeconômicos do aumento do crédito com recursos livres no Brasil no período 2001-2011. Nossa meta principal é avaliar os impactos do aumento do crédito sobre o PIB per capita. Para tanto utilizamos uma versão do modelo de crescimento neoclássico com agentes heterogêneos, restrições de crédito e escolha ocupacional, calibrado para a economia brasileira em 2001 e simulamos, no modelo, o aumento do crédito com recursos livres ocorrido no período. Nossos resultados mostram impactos significativos do aumento do crédito para as firmas sobre o PIB per capita. No exercício realizado, o aumento no crédito com recursos livres para as firmas de 9,5%, em 2001, para 15% do PIB em 2011, gerou um aumento de 1,5% no PIB per capita no período. Além disso, o aumento do crédito também gerou impactos significativos sobre o consumo, a produtividade total dos fatores e sobre o estoque de capital.

ABSTRACT. Almost 50 % of the credit in Brazil is subject to earmarking rules, in the sense that it has to follow legally pre-determined interest rates or legal restrictions regarding types of loans and borrowers. This feature of the Brazilian credit market is likely to generate substantial impacts on key economic variables. In this paper, we develop a dynamic entrepreneurship model with heterogeneous agents that replicates the main features of the Brazilian credit earmarking rules. In this model, earmarking rules can possibly interact with credit constraints. The model, can be easily solved numerically using recent techniques of continuous-time dynamic programming for models with heterogenous agents. We calibrate the model with Brazilian data and standard parameters from the literature and perform counterfactual exercises to investigate the effects of removing (or intensifying) earmarking rules. Our results indicate that earmarking rules are likely to have substantial negative effects on average income and wages and to increase both wealth and income inequality. Impacts on bank spreads are also found to be substantial. Our results also indicate that earmarking rules have a mild negative effect (of about 2.5 %) on total factor productivity.

ABSTRACT. Abstract We analyze the effects of a first-time home buyer assistance program on the pricing and financing arrangements of heterogeneous units in the São Paulo real estate market. If a homebuyer meets specific requirements, she has access to a lower mortgage rate as well the right to withdraw from an otherwise illiquid mandatory savings account. We use a change in the price cap imposed on eligible housing units to identify and quantify the impact of credit and liquidity across heterogeneous market segments. We analyze both the direct impact of the change in payment terms in house prices, as well as the indirect impact on prices through the liquidity channel. By isolating the effect from subsidized interest rates, we were able to compute the elasticity of prices with respect to these rates

ABSTRACT. Estimation of interest-rate elasticity of aggregate credit demand and supply is an important issue per se, as well as being crucial for calibrating macro models, especially the frictions-augmented modern models. Such estimation has to deal with endogeneity issues. We propose a method based on Rigobon's (2003) identification through heteroskedasticity approach. We implement the method using a dataset that contains credit flows (prices and quantities for different credit products) in Brazil at daily frequency. Identification hinges on assumptions about the difference in the speed of the response of demand and supply of credit, which we justify theoretically. Results show that in Brazil consumer credit demand is quite interest-rate inelastic, firm credit demand is elastic, and credit supply is elastic. These results are in line with previous anedoctal evidence about Brazilian credit markets and suggest that the method is successful in recovering reasonable credit demand and supply parameters.