Marco Bonomo

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The relationship between conditional volatility and expected stock market returns, the so-called risk-return trade-off, has been studied at high- and low-frequency. We propose an asset pricing model with generalized disappointment aversion preferences and short- and long-run volatility risks that captures several stylized facts associated with the...

Government-driven credit had an important role in countervailing private credit crunch in Brazil during the recent financial crisis. However, government credit concessions continued to expand after the economy recovered. This paper investigates some important features of this expansion using a huge repository of loan contracts between banks and fir...

Government-driven credit had an important role in countervailing private credit crunch in Brazil during the recent financial crisis. However, government credit concessions continued to expand after the economy recovered. This paper investigates some important features of this expansion using a huge repository of loan contracts between banks and fir...

We derive a measure of the degree of inefficiency of the production structure of an economy by casting its optimal sectoral composition as the outcome of a portfolio allocation problem, in the spirit of Koren and Tenreyro (2004). We use the framework to construct measures of inefficiency using sectoral data for 194 countries, document the patterns...

We develop a tractable unified framework for solving optimal time- and state-dependent price-setting problems. We use it to study models with adjustment costs and infrequent information, entertaining various alternatives for the source and nature of infrequent information. In particular, we consider both models where information is infrequent for e...

We propose an asset pricing model with generalized disappointment aversion preferences and long-run volatility risk. With Markov switching fundamentals, we derive closed-form solutions for all returns moments and predictability regressions. The model produces first and second moments of price-dividend ratios and asset returns as well as return pred...

In this paper, we build a framework where the interplay between the lobby power of special interest groups and the voting power of the majority of the population leads to political business cycles. We apply our setup to explain electoral cycles in government expenditure composition, aggregate expenditures, and real exchange rates. Copyright 2010 Bl...

We characterize optimal state-dependent pricing rules under various forms of infrequent information. In all models, infrequent price changes arise from the existence of a lump-sum "menu cost." We entertain various alternatives for the source and nature of infrequent information. In two benchmark cases with continuously available information, optima...

We propose an asset pricing model where preferences display generalized disappointment aversion (Routledge and Zin, 2009) and the endowment process involves long-run volatility risk. These preferences, which are embedded in the Epstein and Zin (1989) recursive utility framework, overweight disappointing results as compared to expected utility, and...

We assess the aggregate asset pricing implications of generalized disappointment aversion (GDA) coupled with the long-run risks model of Bansal and Yaron (2004). While persistence of expected consumption growth is fundamental for the moment matching ability of Kreps-Porteus model, GDA rely mostly on the persistence of consumption volatility. The fo...

We study how price setting responds to changes in the macroeconomic environment. We use a unique data base from the Brazilian CPI index of Fundação Getulio Vargas, ranging from April 1996 to December 2008. During this period a number of important events produced substantial macroeconomic variability: two emerging market crisis, a change of exchange...

We derive and estimate an affine no-arbitrage model with default risk and macroeconomic state variables to investigate the determinants of the term structure of emerging market external debt for Brazil, Colombia and Mexico. In particular we assess the importance of US macroeconomic factors, country's solvency ratios and latent variables in determin...

The real effects of an imperfectly credible disinflation depend critically on the extent of price rigidity. Therefore, the study of how policymakers' credibility affects the outcome of an announced disinflation should include an analysis of the determinants of the frequency of price adjustments. In this paper, we examine how credibility affects the...

This paper complements the findings of Atal, Ñopo and Winder (2009) on gender and ethnic wage gaps for 18 Latin American countries circa 2005 by analyzing gender wage gaps for the same countries between circa 1992 and circa 2007. During this span the overall gender earnings gaps dropped about 7 percentage points, while the unexplained component dro...

The real effects of an imperfectly credible disinflation depend critically on the extent of price rigidity. Therefore, the study of how the policymaker's credibility affects the outcome of an announced disinflation should not be dissociated from the analysis of the determinants of the frequency of price adjustments. In this paper we examine the out...

In this paper we try to bridge the gap between special interest politics and political business cycle literature. We build a framework where the interplay between the lobby power of special interest groups and the voting power of the majority of the population leads to political business cycles.

This paper presents a theoretical model based on the distributive effects of real exchange rate (RER) changes that generates RER electoral cycles of the type identified in Latin American countries: more appreciated RER before elections and more depreciated after elections. Typically, a RER depreciation favors exporters and import-competing domestic...

The objective of this paper is to investigate the potential role of credit market imperfections in transmission mechanism of monetary policy in Brazil. The paper uses the.nancial accelerator model, developed by Bernanke, Gertler and Gilchrist (1999), where the credit channel arises via balance sheet effects. The simulations indicate that the financ...

A large number of microeconomic decision variables such as investments, prices, inventories or employment are characterized by intermittent large adjustments. The behavior of those variables has been often modeled as following state-dependent rules. The optimality of such state-dependent rules depends crucially on the continuous observation of the...

In this paper, we endogenize fixed price time-dependent rules to examine the output effects of monetary disinflation. We derive the optimal rules in and out of inflationary steady states, and develop a methodology to aggregate individual pricing rules which vary through time. Because of strategic complementarities, we have to solve both problems si...

In this paper, we study the interaction between macroeconomic environment and firms’ balance sheet effects in Brazil during the 1990's. We start by assessing the influence of macroeconomic conditions on firms’ debt composition in Brazil. We found that larger firms tend to change debt currency composition more in response to a change in the exchange...

We test the hypothesis that strategies which are long on portfolios of looser stocks and short on portfolios of winner stocks generate abnormal returns in Brazil. This type of evidence for the US stock market was interpreted by The Bondt and Thaler (1985) as reflecting systematic evaluation mistakes caused by investors overreaction to news related...

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We test the hypothesis that strategies which are long on portfolios of looser stocks and short on portfolios of winner stocks generate abnormal returns in Brazil. This type of evidence for the US stock market was interpreted by The Bondt and Thaler (1985) as reflecting systematic evaluation mistakes caused by investors overreaction to news related...

This paper aims at explaining the casual evidence that monetary disinflations produce recessions, using the evolutionary game theory framework. This is an appealing framework for analyzing this issue because it combines two ingredients commonly blamed for the costs of credible disinflations: limited rationality and coordination failures. The study...

Este artigo estima e simula um modelo macroeconômico aberto de expectativas racionais para a economia brasileira, com o objetivo de identificar as características das regras monetárias ótimas e a dinâmica de curto prazo gerada por elas. Os autores trabalham com uma versão antecipativa e uma versão retroativa a fim de comparar o desempenho de três p...

We use a state-dependent model where pricing rules are optimal to examine the costs of a money-based disinflation under various assumptions about the credibility of the policy change. Our analysis allows us to relate actual credibility and future inflation inertia to the asymmetry of the price deviation distribution. An important implication of our...

Este artigo testa duas versões do modelo de passeio aleatório para os preços de carteiras de ações no mercado brasileiro. Evidências contrárias a tal modelo foram observadas nos horizontes diário e semanal, caracterizados por persistência. As evidências foram mais fracas em períodos mais recentes. Foram também encontradas sazonalidades diárias, inc...

We extend the macroeconomic literature on Ss-type rules by introducing infrequent information in a kinked adjustment-cost model. We first show that optimal individual decision rules are both state and time dependent. We then develop an aggregation framework to study the macroeconomic implications of such optimal individual decision rules. In our mo...

Resumo Este trabalho utiliza retornos mensais de 10 portfólios de ações negociadas na Bovespa entre 1987 e 1997, a fim de testar a validade empírica do modelo APT. Foram criadas variá-veis macroeconômicas como fatores de variância comum aos diversos portfólios. Além de ter sido verificado que estes fatores representam uma explicação estatisticament...

This article is motivated by the prominence of one-sided S,s rules in the literature and by the unrealistic strict conditions necessary for their optimality. IT aims to assess whether one-sided pricing rules could be an adequate individual rule for macroeconomic models, despite its suboptimality. It aims to answer two questions. First, since agents...

Analysts of regional growth differences in the US tend to assume full spatial equilibrium (Glaeser et al, 1995). Flows of people thus indicate changes in the distribution of spatial welfare more effectively than differences in incomes. Research in Europe, however, shows that people tend to be immobile. Even mobility within countries is restricted c...

This paper analyzes political economy determinants of exchange rate policy in Brazil over the past thirty years. Two complementary methodologies are used. The first consists of investigating the exchange rate policy historical context over this period. Thus, part of the paper is dedicated to an historical account of the political economy of the exc...

This paper investigates whether political economy factors contribute to explain the exchange rate policy in Brazil from 1964 to 1997. An analytical framework presents the tradeoff between the positive effect of a depreciated exchange rate on the balance of payments and its negative effect on inflation as driving force affecting exchange rate policy...

This paper analyses monthly returns of 10 share portfolios negotiated at Bovespa between 1987 and 1997 in order to test the APT model. Macroeconomic factors were created as sources of common variance of these assets. The factors were statistically significant in explaining the relationship between the asset returns in general; besides, evidence was...

In this paper, we test a version of the conditional CAPM with respect to a local market portfolio, proxied by the Brazilian stock index during the period 1976–1992. We also test a conditional APT model by using the difference between the 30-day rate (Cdb) and the overnight rate as a second factor in addition to the market portfolio in order to capt...

This paper examines the costs of disinflation and the role of credibility in a model where pricing rules are optimal and individual prices are rigid. Individual nominal rigidity is modeled as resulting from menu costs. The interaction between optimal pricing rules and credibility is essential in the determination of the costs of disinflation. A con...

In the various attempts to solve the equity premium puzzle, the characterization of the utility function has received a lot of attention, along with the postulated nature of the economy. In this paper, we specify and estimate by maximum likelihood over the period 1871–1985 a heteroskedastic joint consumption and dividend Markov endowment process in...

How to improve healthcare access for Chinese migrants? We show that the social network is a major key. It uses a 2006 dataset from a survey of rural migrant workers conducted in five cities amongst the most economically advanced. We use a fixed effect logit model and we control for the non-exogeneity of the health insurance. The empirical findings...

The authors extend a standard New Keynesian model to incorporate heterogeneity in spending opportunities and two sources of (potentially time-varying) credit spreads and to allow a role for the central bank's balance sheet in equilibrium determination. They use the model to investigate the implications of imperfect financial intermediation for fami...

In recent papers, Cecchetti et al (1990) and Kandel and Stambaugh (1990) showed that negative serial correlation in long horizon returns was consistent with an equilibrium model of asset pricing. In this paper we show that their results rely on misspecified Markov switching models for the endowment process. Once the proper Markov specification is c...

In order to understand the macroeconomic effects of inflation, it is necessary to investigate the underlying microeconomic aspects. Inflation affects microeconomic interaction between firms and consumers in a substantial ways. Firms choose pricing rules that affect consumers’ search. The search is realized across firms and through time. The Theory...

The US economy is arguably following an unsustainable trajectory. The main indicators of this are a large current account deficit, a large federal budget deficit and trend-wise increasing costs of Social Security and Medicare. In this chapter, we will discuss these observations and to what extent the financial and economic crisis may have changed t...

RESUMO Para entender os aspectos macroeconômicos da inflação, é necessário investigar o que acontece no nível microeconômico. A inflação afeta substancialmente a interação microeconômica entre empresas e consumidores. As empresas escolhem regras de preços que afetam a pesquisa dos consumidores. A pesquisa é realizada nas empresas e no tempo. A teor...

Since high inflation makes very frequent price adjustments desirable, costs of taking optimal price decisions may become high, and indexation may emerge as an economical rule of thumb to update prices between optimal adjustments. We introduce indexation in a model of staggered price setting, where individual prices, when not adjusted by inflation,...

In this paper, we test the CCAPM using Brazilian data and four types of preferences: expected utility; generalized expected utility; disappointment aversion; and generalized disappointment aversion. We built an IBOVESPA dividend series and modeled the consumption and dividend endowment process as a 2-states bivariate Markov switching heteroskedasti...

João Manoel Pinho de Mello (PUC-Rio) 1 Resumo Este artigo utiliza a posição financeira dos bancos brasileiros em títulos do Tesouro indexados à taxa de juros para testar o canal dos empréstimos bancários para a política de juros no Brasil. Os resultados encontrados apontam para a potencial relevância deste canal de transmissão da política monetária...

Thesis (Ph. D.)--Princeton University, 1992. Includes bibliographical references.