My research expertise includes five major areas of economics: i) applied finance; ii) corporate finance and banking; iii) economic growth and international economics; iv) labor and household economics; and v) natural resource and agriculture economics. Below you can see a list of published and working papers in each of these areas. Feel free to ask me a copy of the manuscript if it is not available online.
In this area of research I am particular interested in efficiency, predictability and how risk, volatility and unexpected shocks are spread across markets. Some of my work has addressed sources of inefficiency in the stock market, as well as risk spillovers between stock and exchange markets in Brazil.
- Volatility Spillovers and the Risk-Return Relation Between Stock and Foreign Exchange Markets in Brazil Latin American Business Review 16(4) 2016 305-325. We examine the evidence of mean and volatility spillovers between stock and foreign exchange markets in Brazil with multivariate GARCH models and nonlinear Granger causality tests. We also use a multivariate GARCH-in-mean model to assess the relationship between risk and return in these markets. The results indicate that the stock market leads the foreign exchange market in price formation and that nonlinear Granger causalities from the exchange market to the stock market do occur. Part of these nonlinear causalities are explained by volatility spillovers. We show that exchange rate volatility affects not only stock market volatility but also stock returns.
- Relations Between Serial Correlation and Volatility: Is There a LeBaron Effect in Brazil? Revista Brasileira de Finanças/Brazilian Review of Finance 12(1) 2014 13-39. This paper examines the relation between serial correlation and volatility of the Ibovespa index returns and extends the empirical evidence of the LeBaron effect for higher orders of serial correlation. We employ an exponential general autoregressive conditional heteroskedastic model to estimate volatility and an automatic variance ratio statistic to calculate serial correlation. The results support some stylized facts from behavioral finance and help us to explain evidences from empirical studies. We show that (i) serial correlation in weekly returns are negative related with volatility, (ii) this negative relation is found in daily returns only if we use first order serial correlation, and (iii) the effect for weekly returns was not intensified by the 2008 crisis, but a positive relation between volatility and serial correlation for daily returns was identified during that time.
- Returns predictability and stock market efficiency in Brazil Revista Brasileira de Finanças/Brazilian Review of Finance 9(4) 2011 571-584. This paper searches for evidence of predictability in the Brazilian stock market using portfolios grouped by sector and firm size with data from 1999 to 2008. I conduct an automatic variance ratio test using wild bootstrap. This methodology eliminates the arbitrary choice of the holding period as well as improves small sample properties. The results suggest (i) stocks from the industrial sector are highly predictable, (ii) stocks from small firms tend to be more predictable than the ones from large firms, (iii) the Brazilian stock market, measured by the Ibovespa index from 1986 to 2008, shows an increase of efficiency since 1994.
- The relationship between monetary policy shocks and the Brazilian stock market (with Halmenschlager, V.; Cechin, L. A. W. and Fernandez, R. N.) Revista Brasileira de Economia de Empresas/Brazilian Journal of Business Economics Forthcoming. This article investigates the relationship between monetary policy shocks and the Brazilian stock market. We use a structural model based on Bjornland and Leitemo (2009) where we identify monetary shocks with a combination of restrictions on short and long term, which retains the properties preconized by the economic theory. The results indicate that IBrX falls 0.5% immediately after an unexpected monetary policy shock that increases the Selic rate by 100 basis points. On the other side, we found that a shock that increases IBrX by 1% leads to an increase in Selic of 75 basis points. This results show that: (i) economy agents adjust their portfolios from equities to fixed income after restrictive monetary shocks; (ii) stock market returns are one of the parameters that determines the monetary policy decisions in Brazil.
- Evidence of the Dividend Month Premium in the Brazilian Stock Market (with Pereira, C. C. and Shikida, C. D.) Working paper (submitted). We test the presence of the dividend month premium in the Brazilian stock market. This premium consists in the existence of abnormal returns when companies are predicted to issue a dividend. We build portfolios based on predicted dividends and estimate asset pricing multifactor models to check for the existence of returns not associated with risks. We present evidences of a positive monthly premium of about 1%, but results are less robust when we exclude low liquidity assets from the sample. Also, the effect is larger for small caps and assets with higher dividend yields.
- Technical analysis systems of negotiation: evidences for the Brazilian stock market (with Cordeiro, L. M.; Meyer, M. and Caetano, F. M.) Working paper. This work evaluates if technical trading systems are capable of generating returns higher than the Buy and Hold strategy for an equally weighted stock portfolio after transaction costs. For this purpose, four strategies based on technical indicators widely known in the market were evaluated for a set of daily data of 154 companies listed on the São Paulo Stock Exchange, in the period from 2000 to 2016. Strategies of Bollinger band breakout, Donchian channel breakout, and moving average crossovers showed returns above Buy and Hold even after transaction costs were computed and with a slightly lower risk level. However, it is worth emphasizing that transaction costs have a strong impact on the profitability of these strategies.
Corporate Finance and Banking
In this area of research I am interested in banking regulation, risk taking decisions and profitability, as well as the impact of capital structure on firms performance and probability of default. My works include topics such as the impact of Brazilian bankrupcty law in the credit market, the cross-country effects of capital buffers on banks profitability, the relationship between competition, concentration and the risk taking behavior of banks, and the influence of capital structure and financing decision on probability of default and asset volatility.
- The impact of the new bankrupcty law in the Brazilian credit market (with Barbosa, K.; Carraro, A. and Garcia, F. R.) Economia Aplicada/Brazilian Journal of Applied Economics 21(3) 2017 469-501. The aim of this paper is to evaluate the changes in Brazilian credit market due to the new bankruptcy law, pointing out their impact on default rates, bank spreads, credit volume, and number of bankruptcies. For that purpose, we used credit market time series available by the Brazilian Central Bank during the period of 2000 to 2012, and we evaluate the impact using linear regressions and a method of endogenous breaks. The results indicate that besides the reduction in bankruptcy, the new law had a significant impact on credit concessions to corporations, although the total volume of credit has not been affected. The results also show that the law was not effective in reducing default and interest rates.
- The effects of capital buffers on profitability: An empirical study (with Tabak, B. M.; Fazio, D. M.; Amaral, J. M. T. and Cajueiro, D. O.) Economics Bulletin 37(3) 2017 1468-1473. This paper measures the effect of capital buffers and other determinants on banks’ profitability in 51 countries during the period of 2000 to 2012. We have found a nonlinear relationship between return on assets and capital buffers. While capital buffers have a positive impact on profitability, its excess can diminish banks’ profits. Countries with noncompetitive markets do not seem to change this relationship, although higher market power enhances profits. We also examine other determinants of profitability. Since minimal requirements of equity capital are one of the main regulatory instruments for preventing financial risks, we hope that the results of this letter can help financial authorities to also understand the effects of capital buffers on profits.
- Competition, concentration and the risk taking behavior of banks: a cross-country analysis (with Tabak, B. M.; Cajueiro, D. O. and Fazio, D. M.) Working paper. We study the relationship between competition and concentration on the risk taking behavior of banks through a database of over 4000 commercial banks in 25 countries. We estimate a fixed- effect panel data model to correlate different measures of competition and concentration with a proxy for the risk taking behavior of banks known as Z-score. We also estimate how the effect of market structure variables on risk taking changes according to bank size, liquidity of assets and global financial turmoils. We find significant heterogeneous effects on this relationship. Concentration increases the probability of default, but competition between large banks may induce them to switch to riskier borrowers. Our evidences synthesize two opposing theoretical frameworks regarding the impact of market structure on risk taking.
Economic Growth and International Economics
In this area of research I am interested in exchange rate dynamics and elements that may explain cross-country differences in economic growth. I have studied the effect of institutional factors on economic growth, such as the Chile’s transition to democracy, the cross-country relationship between uncertainty and economic growth, as well as the dynamics of Brazilian exchange rate.
- A synthetic control approach on Chile’s transition to democracy (with Uhr, D. A. P. and Uhr, J. G. Z.) Economics Bulletin 37(3) 2017 2219-2233. We use a synthetic control approach for performing a case study of the impact of Economic Reforms and Democracy Openness on Chile’s GDP per capita. We use data available at the World Bank Open Data from 1976 to 2014 for different countries in order to build a synthetic “authoritarian Chile” and compare it with the “real Chile”. We find a significant positive effect of the process of re-democratization on Chile’s long-term GDP per capita. The results are robust to placebo tests and time series methods such as endogenous structural break tests and an analysis of causal impact based on the forecasts of a Bayesian Structural Time Series model.
- Uncertainty and growth: evidence of emerging and developed countries (with Salton, A.) Economics Bulletin 37(2) 2017 1274-1280. This letter aims to investigate the relationship between uncertainty and economic growth in economies with different stages of development. We use monthly data on industrial production during the period of 1961 to 2014 from OECD’s Main Economic Indicators database. We estimate the relationship between industrial production growth and its volatility from 14 countries using EGARCH in mean and panel GARCH in mean models. Our results suggest that the correlation between economic growth and its own volatility is positive in developed countries but ambiguous in emerging economies. This facts support both theories of precautionary savings, in the case of developed countries, and irreversible investments, in the case of some emerging economies.
- Conditional jump dynamics of the Brazilian exchange rate Revista Brasileira de Economia de Empresas/Brazilian Journal of Business Economics 13(1) 2013 59-75. This paper studies the conditional jump dynamics of the exchange rate between Real and U.S Dollar since the introduction of the floating regime in Brazil. We use a constant conditional jump model and three different specifications of the ARJI-GARCH model of Chan and Maheu (2002) to model jump dynamics. The results suggest that (i) exchange rate variations can be successfully modeled by conditional jumps, which are time-varying and sensitive to past shocks, (ii) currency depreciation presents little evidence of asymmetry in relation to jumps, and (iii) the jump intensity is highly persistent and behaves like an autorregressive moving average model. Events such as the 2002 and 2008 crisis and the recent intervention policy of the Central Bank in 2012 are discussed on the basis of the model. We also show that the forecast errors of the jump models are significant lower than traditional models.
- Exchange rate pass-through asymmetry: evidence for Brazil (with Flach, R.; Fernandez, R. N. and Nogueira, R.) Ensaios FEE 38(4) 2018 659-682. This paper investigates the existence of a nonlinear exchange rate pass-through in Brazil from January 2000 to June 2015. For this purpose, we estimate different specifications of a TVAR (Threshold Autoregressive Vector) model in which we use the exchange rate as the threshold variable. The results confirm the important role of exchange rate pass-through in determining Brazilian inflation, as well as the existence of asymmetry related to the direction of the exchange rate changes – i.e. higher rates of pass-through are associated with exchange depreciations. The results also show that the evidence of asymmetry is stronger for the period prior the 2008 financial crisis, which may be associated with lower markups in the aftermath of the crisis.
Labor and Household Economics
In this area of research I am particular interested in how public financing policies affects the decisions of households on their time allocation in the labor market. I have also studied other desirable and undesirable effects of public policies and other events on the Brazilian labor market.
- Impact of technical assistance from Sistema S in the Brazilian labor market (with Niquito, T. W. and Ribeiro, F. G.) Revista Brasileira de Economia 72(2) 2018 196-216. This paper analyses the effect of technical assistance services provided by “Sistema S” over labor market indicators of microentrepreneurs, using data from National Household Survey (Pesquisa Nacional por Amostra de Domicílios, PNAD) of 2014. The empirical strategy employed was an estimation of propensity score models applied to complex samples. The results shows that receiving assistance increases the probability of business formalization and of credit demand, was well it has a positive impact over working hour and the wage of individuals. This evidences can ground the recent discussions about the contribution of the “Sistema S” for the country’s labor market.
- Natural disasters and the labor market: the case of 2008 rains in Santa Catarina (with Silva, C. and Ribeira, F. G.) Espacio Abierto 26(3) 2017 189-209 . This paper estimates the impacts caused by the 2008 rains in Santa Catarina, Brazil, on the labor market, wages and employability. In order to assess the impact on the average wage level per employee and on employability, we used an ordinary least square regression (OLS) and a Probit model, respectively. The results show that wages increased 4,7% on average for each standard deviation increase of rainfall in the municipalities. This result is supported by the literature of economics of natural disasters. We also found no significant effect of the rains on employability, which means that the level of employment has not decreased in the cities most affected by the rains.
- Rural credit and the time allocation of agricultural households: the case of Pronaf in Brazil (with Parfitt, R.; Carraro, A. and Ribeiro, F. G.) Working paper - 45º Encontro Nacional de Economia (ANPEC) (submitted). This paper evaluates the impact of Brazil’s National Program to Strengthen Family Farming (Pronaf) on the time allocation of household members. We use data from the 2014 Pesquisa Nacional por Amostra de Domicílios (PNAD), and we apply propensity score methods to complex surveys recently recommended in the literature. We find that Pronaf helps to increase focus on agricultural activities, but it also stimulates female partners to engage in unpaid work. The results show significant effects of Pronaf on child labor and on the gender-specific division of labor within households, although it does not have the usual adverse effects of microcredit programs on school enrollment.
- Effects of marriage over time allocation decisions in Brazilian Households (with Cardoso, R.; Uhr, D. A. P. and Uhr, J. G. Z.) Working paper - 45º Encontro Nacional de Economia (ANPEC) (submitted). We test the effect of marriage on variables related to the labor market and domestic activities from the viewpoint of the economic theory of marriage. For that purpose, we use data from the National Household Sample Survey (PNAD) for the year 2015 and we employ three different estimation methods for complex surveys: ordinary least squares, Propensity Score Weighting, and Propensity Score Matching. The results indicate that married men consistently present higher salaries than single men, but the same results were not found for women. In addition, the most productive agent of the family unit, regardless of gender, tends to allocate more time in the labor market while the other partner reduces its supply of labor and allocates more time in domestic activities. The main conclusion is that the time allocation of the couples is based on comparative advantages and not on a gendered division of labor.
Natural Resource and Agriculture Economics
In this area of research I am interested in price and volatility commodity spillovers, energy markets and the impact of natural resources and environmental policies on economic growth.
- Price spillovers through productive chains in Brazil (with Bini, D. A.; Souza, M. O. and Canever, M. D.) Revista de Economia 42(1) 2016 1-20. This research evaluated a transmission of prices between different links of productive chains in Brazil. Specifically, we evaluated a transmission of the price of oil to the prices of three basic fertilizers (potassium chloride, ammonium sulphate, and simple superphosphate) and commodities (corn, soybean and chicken), as well as transmissions between these products. The results reveal that fertilizer and commodity prices are a low dependence on the price of oil. Variations in the price of corn and soybeans are partially passed on to the price of fertilizers and vice versa. Variations in the price of soybean are transmitted to the price of corn. Prices of corn and chicken can be mutually dependent. The price of soybean is highly exogenous and is not altered by other products.
- Economic cycles and carbon emission in Brazil: a dynamic analysis of optimal environmental policies (with Leal, R. A.; Uhr, J. G. Z. and Uhr, D. A. P.) Revista Brasileira de Economia 69(1) 2015 125-143. This paper studies how environmental policies should respond optimally to economic cycles in Brazil. We use a real business cycle (RBC) model with pollution externalities to address this question. The results indicate that the cost of mitigation of carbon emissions is lower than the cost of pollution in Brazil, what supports the adoption of restrictive policies. Also, facing productivity shocks, mitigation should be pro-cyclical, where emission taxes and quotas rise in moments of expansion and fall in periods of crisis. We also define a decision rule to the optimal path of mitigation.