102 records from EconBiz based on author Name

1. We Are Not in a Gaussian World Anymore : Implications for the Composition of Official Foreign Assets

abstract

In the aftermath of the 1997-98 Asian crises, many emerging markets self-insured by accumulating international reserves (i.e., non-contingent assets) in excess of what many models predicted, while relying relatively little on state-contingent assets. This apparent over-reliance on self-insurance has been viewed as a puzzle in search of an explanation. A related, and still outstanding, puzzle is why the benefits of financial liberalization appear to be quite small and, yet, financial globalization has been unprecedented in recent decades. We show that these two puzzles can be solved by incorporating rare macroeconomic disasters in income risk. To this effect, we first fit a fat-tailed distribution to long output time series for 156 countries. We then develop a theoretical framework to quantify (i) the increase in welfare gains of financial integration and (ii) how the composition of official reserves (non-contingent and contingent) responds to bigger shocks. Our results show that fat tails lead to a sharp increase in both the gains of financial integration and self-insurance for standard values of the coefficient of risk aversion

Camarena, José Andrée; Medina, Juan Pablo; Riera-Crichton, Daniel; Végh, Carlos A.; Vuletin, Guillermo;
2025
Type: Arbeitspapier; Working Paper; Graue Literatur; Non-commercial literature;
Availability: Link Link

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2. Asymmetric effects of positive and negative commodity price shocks during civil wars

Janus, Thorsten; Riera-Crichton, Daniel;
2024
Type: Aufsatz in Zeitschrift; Article in journal;
Availability: Link Link

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3. The Promise of Integration: Opportunities in a Changing Global Economy

abstract

La región de América Latina y el Caribe (ALC) demostró ser relativamente resiliente ante el aumento del estrés de deuda, la inflación persistente y la incertidumbre en torno a la invasión rusa de Ucrania. Los niveles de ingreso y de empleo en general se recuperaron tras la pandemia, la pobreza se redujo y los mercados siguen siendo moderadamente optimistas respecto al corto plazo. No obstante, la incertidumbre aumenta a nivel mundial, incluida una ola reciente de quiebres bancarios en EE. UU. y Europa. Fortalecer la resiliencia, tanto en los frentes sanitario como macroeconómico, sigue siendo primordial. Aún se debe avanzar en la cobertura de vacunación y en el estado de preparación de los sistemas de salud, mientras la institucionalidad de la política macroeconómica está siendo cuestionada en algunos países.La evolución de la economía mundial ofrece dos nuevas oportunidades a la región: la tendencia hacia la deslocalización cercana —mover la producción más cerca de los mercados de EE. UU. y Europa — y el imperativo de luchar contra el cambio climático, que le brinda a la región una nueva ventaja comparativa en capital solar, eólico, hidroeléctrico y natural. Aprovechar esta situacióndemandará una mayor integración en la economía mundial. No obstante, y paradójicamente, de cara a estas oportunidades, ALC está reduciendo su nivel de integración. La intensidad del comercio en general se estancó, mientras que la inversión extranjera directa (IED) disminuyó en la mayoría de los países.Más allá de las reformas estructurales a largo plazo necesarias para reducir el riesgo sistémico, elevar el nivel y calidad de la educación, invertir en infraestructura y asegurar el correcto funcionamiento de los mercados financieros, este informe hace un llamado a preservar las conquistas reputacionales de los últimos veinte años en términos de estabilidad macro y simplificación de las normas que rigen el sistema aduanero y el transporte con el fin de reducir el costo de hacer negocios en la región. Las agencias de promoción de exportaciones y las agencias de promoción de inversiones también pueden ayudar, dado su sólido historial. Un enfoque integral, tanto para las reformas de corto como de largo plazo, podría impulsar a ALC hacia un compromisorenovado y más dinámico con la economía mundial

Beylis, Guillermo; Ianchovichina, Elena; Maloney, William F.; Riera-Crichton, Daniel; Vuletin, Guillermo; Vuletin, Guillermo;
2023
Availability: Link Link

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4. Policy Implications of Non-Linear Effects of Tax Changes on Output

abstract

In an earlier paper, titled "Non-linear effects of tax changes on output: The role of the initial level of taxation," we estimated tax multipliers using (i) a novel dataset on value-added taxes for 51 countries (21 industrial and 30 developing) for the period 1970-2014, and (ii) the so-called narrative approach developed by Romer and Romer (2010) to properly identify exogenous tax changes. The main finding is that, in line with existing theoretical distortionary and disincentive-based arguments, the effect of tax changes on output is highly non-linear. The tax multiplier is essentially zero under relatively low/moderate initial tax rate levels and more negative as the initial tax rate and the size of the change in the tax rate increase. This companion paper first shows that these findings have important policy implications, given that the initial level of taxes varies greatly across countries and thus so will the potential output effect of changing tax rates. The paper then turns to some specific policy applications. It focuses on the relevance of the arguments for revenue mobilization in countries with low levels of provision of public goods and social and infrastructure gaps, as well as in commodity-dependent countries. The paper then considers some practical implications for the standard debt sustainability analysis. Lastly, it evaluates the implications of the findings for the Laffer curve

Gunter, Samara R.; Riera-Crichton, Daniel; Végh, Carlos A.; Vuletin, Guillermo;
2021
Type: Arbeitspapier; Working Paper; Graue Literatur; Non-commercial literature;
Availability: Link Link

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5. Fooled by the Cycle : Permanent versus Cyclical Improvements in Social Indicators

abstract

This paper studies the time series behavior of a set of widely-used social indicators and uncovers two important stylized facts. First, not all social indicators are created equal in terms of the importance of cyclical fluctuations. While some social indicators such as the unemployment rate and monetary poverty show large cyclical fluctuations, other social measures such as the Human Development Index are, by construction, dominated by long-run trends. Second, interestingly, yet not surprisingly, a large part of the cyclical fluctuations in social indicators can be explained by cyclical changes in income (proxied by real GDP per capita). For this reason, countries with large cyclical income volatility exhibit, in turn, large cyclical changes in some of these social indicators (particularly in those indicators that are more prone to cyclical fluctuations). Since cyclical income volatility is much larger in the developing world, these two critical stylized facts raise fundamental issues regarding the duration of improvements in social indicators (like the ones observed in many developing countries during the last commodity super-cycle). After a detailed conceptual and methodological discussion of these issues, and relying on a global sample of industrial and developing countries, this paper digs deeper into the importance of cyclical versus permanent components by extending the seminal contribution of Datt and Ravallion (1992). In particular, it shows that more than 40 percent of the fall in monetary poverty observed in Latin America and the Caribbean during the so-called Golden Decade can be attributed to cyclical changes in income. While in principle universal, these concerns are particularly relevant in the developing world where, compared to developed countries, output volatility is larger and driven, to a large extent, by external factors (such as commodity prices)

Camarena, José Andrée; Galeano, Luciana; Morano, Luis; Puig, Jorge; Riera-Crichton, Daniel; Végh, Carlos A.; Venturi, Lucila; Vuletin, Guillermo;
2022
Availability: Link

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6. From Fiscal Cyclicality to Fiscal Stress

abstract

Macroeconomic textbooks warn that procyclical public spending can amplify economic volatility and cause fiscal stress. However, the latter risks materialize only when governments fail to reduce spending during downturns as much as they increase it during booms. This study investigates asymmetries in the cyclicality of public consumption and finds that emerging markets exhibit "downward rigidity": they boost spending during upswings but do not effectively cut back during downturns. In contrast, advanced economies maintain steady levels of public consumption regardless of economic conditions, making them effectively acyclical. Downward rigidity in public consumption not only paves the way for fiscal stress when the economy slows, but also leads to sustained growth in the size of the state

Riera-Crichton, Daniel; Ruiz Orrico, Pilar; Vuletin, Guillermo;
2024
Availability: Link

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7. Public Spending Policies in Latin America and the Caribbean

abstract

In low- and middle-income economies, public spending policies diverge significantly from those of industrialized nations due to structural differences. Low- and middle-income economies often make long-term commitments based on short-term economic conditions, leading to mismatches between spending maturity and economic cycles. These mismatches can exacerbate fiscal imbalances and hinder economic growth by forcing compositional changes in public spending. "Public Spending Policies in Latin America and the Caribbean: When Cyclicality Meets Rigidities" describes significant cyclical behavior variations in low- and middle-income markets. Contrary to Keynesian principles, public spending in these economies tends to be procyclical during economic booms, driven by increased borrowing and political pressures to address social deficits, but policy makers are unable or unwilling to retrench during economic busts. This approach not only amplifies macroeconomic volatility but also plants the seeds for fiscal distress, which is typically addressed by diminishing the quantity and quality of public investment-with serious consequences for long-term growth. Labor market informality further complicates matters, rendering automatic stabilizers like unemployment insurance impractical. Instead, governments rely on public employment and social transfer programs, which are downwardly rigid and can contribute to the expansion of government size over time. Addressing these anomalies requires policy interventions beyond traditional recommendations. Implementing fiscal rules to restrain overspending during economic upturns, enhancing the efficiency of public goods provision, and establishing mechanisms to adjust social programs during economic fluctuations are suggested approaches. In addition, measures to protect public investment and mitigate biases against pension benefits could aid in fostering long-term economic sustainability and welfare improvement. Public Spending Policies in Latin America and the Caribbean will be of interest to policy makers, researchers, and anyone with an interest in developing mechanisms for helping low- and middle-income economies weather economic storms

Riera-Crichton, Daniel; Vuletin, Guillermo;
2024
Availability: Link

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8. Fooled by the Cycle : Permanent versus Cyclical Improvements in Social Indicators

abstract

This paper studies the time-series behavior of a set of widely-used social indicators and uncovers two important stylized facts. First, not all social indicators are created equal in terms of the importance of cyclical fluctuations. While some social indicators such as the unemployment rate and monetary poverty show large cyclical fluctuations, other social measures such as the Human Development Index are, by construction, dominated by long-run trends. Second, a large fraction of the cyclical fluctuations in social indicators can be explained by the cyclical changes in income (proxied by real GDP per capita). Since cyclical income volatility is much larger in the developing world, these two critical facts raise fundamental issues regarding how permanent are improvements in social indicators (like the ones observed in many developing countries during the last commodity super-cycle). Finally, and relying on a global sample of industrial and developing countries, we dig deeper into the importance of cyclical versus permanent components by extending the seminal contribution of Datt and Ravallion (1992). In particular, we show that more than 40 percent of the fall in monetary poverty observed in Latin America and the Caribbean during the so-called Golden Decade can be attributed to cyclical changes in income

Camarena, José Andrée; Galeano, Luciana; Morano, Luis; Puig, Jorge; Riera-Crichton, Daniel; Végh, Carlos A.; Venturi, Lucila; Vuletin, Guillermo;
2019
Availability: Link Link

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9. Is the Public Investment Multiplier Higher in Developing Countries? An Empirical Investigation

abstract

Over the last decade, empirical studies analyzing macroeconomic conditions that may affect the size of government spending multipliers have flourished. Yet, in spite of their obvious public policy importance, little is known about public investment multipliers. In particular, the clear theoretical implication that public investment multipliers should be higher (lower) the lower (higher) is the initial stock of public capital has not, to the best of our knowledge, been tested. This paper tackles this empirical challenge and finds robust evidence in favor of the above hypothesis: countries with a low initial stock of public capital (as a proportion of GDP) have significantly higher public investment multipliers than countries with a high initial stock of public capital. This key finding seems robust to the sample (European countries, U.S. states, and Argentine provinces) and identification method (Blanchard-Perotti, forecast errors, and instrumental variables). Our results thus suggest that public investment in developing countries would carry high returns

Izquierdo, Alejandro; Lama, Ruy E.; Medina, Juan Pablo; Puig, Jorge; Riera-Crichton, Daniel; Végh, Carlos A.; Vuletin, Guillermo;
2019
Availability: Link Link
Citations: 7 (based on OpenCitations) Cited By

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10. Non-Linear Effects of Tax Changes on Output : The Role of the Initial Level of Taxation

abstract

We estimate the effect of worldwide tax changes on output following the narrative approach developed for the United States by Romer and Romer (2010). We use a novel dataset on value-added taxes for 51 countries (21 industrial and 30 developing) for the period 1970-2014 to identify 96 tax changes. We then use contemporaneous economic records to classify such changes as endogenous or exogenous to current (or prospective) economic conditions. In line with theoretical distortionary and disincentive-based arguments -- and using exogenous tax changes -- we find that the effect of tax changes on output is highly non-linear. The tax multiplier is essentially zero under relatively low initial tax rate levels and more negative as the initial tax rate increases. Based on a global sample, these novel non-linear findings suggest that the recent consensus pointing to large negative tax multipliers in industrial countries, particularly in industrial Europe (e.g., Alesina, Favero, and Giavazzi, 2015), (i) is not a robust empirical regularity, and (ii) is based on results mainly driven by high initial tax rates in these countries. We also show that the bias introduced by misidentification of tax shocks critically depends on the procyclical or countercyclical nature of endogenous tax changes

Gunter, Samara Potter; Riera-Crichton, Daniel; Végh, Carlos A.; Vuletin, Guillermo;
2019
Availability: Link Link
Citations: 3 (based on OpenCitations) Cited By

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