The British effort in the Second World War required massive external financing which depended on Lend-Lease and the accumulation of sterling balances. Indebtedness in sterling balances corresponded to almost 38 per cent of this total at the end of the war. Portuguese sterling balances, although a small share of the total, were important because of pre-emptive purchases, especially of wolfram, and because of the ‘gold clause’ which was to be applied to outstanding balances. Portugal's willingness to finance British purchases contrasts with the requirement of German payments in goods or cash for their purchases in Portugal. The settlement of Portuguese sterling balances in August 1945 was singular as it preceded the Anglo-American settlement of December 1945 which had important consequences for sterling balance holders, as the US insisted that the US$3.75 billion loan should not be used to settle British war debts. Postwar settlement of British debt through a long-term loan from Portugal to Britain contrasts with settlements that involved the sale of British assets. Salazar's concerns about the postwar international position of Portugal, the Portuguese Empire, and the survival of the Portuguese regime are relevant in explaining his pro-British stance during and after the war.

We combine questions from the Michigan Survey about future inflation, unemployment, and interest rates to investigate whether households are aware of the basic features of U.S. monetary policy. Our findings provide evidence that some households form their expectations in a way that is consistent with a Taylor (1993)-type rule. We also document a large degree of variation in the pattern of responses over the business cycle. In particular, the negative relationship between unemployment and interest rates that is apparent in the data only shows up in households׳ answers during periods of labor market weakness.

Propomos e implementamos uma medida da credibilidade do

Banco Central do Brasil, fazendo uso de uma base de dados com

expectativas desagregadas. A hipótese é de que a heterogeneidade

das expectativas de longo prazo advenha de crenças distintas com

relação à aversão do Banco Central à inflação. Desse modo, a existência

de agentes persistentemente otimistas ou pessimistas indicaria falta

de credibilidade. Com base neste argumento, construímos um

índice utilizando Cadeias de Markov. Nosso índice inova em

relação aos disponíveis na literatura por considerar a dispersão das

expectativas. Nossos resultados são comparados com os de outros

artigos, corroborando o aprimoramento advindo da nova medida da

credibilidade

Diversification through a financial intermediary has the benefit of transforming loans that need costly monitoring into bank deposits that do not. We show that financial intermediation in a costly state verification model has a cost not yet analyzed: it allows for the existence of multiple equilibria, some of which are characterized by borrowers defaulting on their loans because they expect other borrowers to do the same (i.e. bad equilibria arise due to strategic complementarities in entrepreneurs’ actions). We propose two mechanisms that fully implement the desired equilibrium allocation.

This paper performs a thorough statistical examination of the time-series properties of the daily market

volatility index (VIX) from the Chicago Board Options Exchange (CBOE). The motivation lies not only on

the widespread consensus that the VIX is a barometer of the overall market sentiment as to what concerns

investors’ risk appetite, but also on the fact that there are many trading strategies that rely on

the VIX index for hedging and speculative purposes. Preliminary analysis suggests that the VIX index

displays long-range dependence. This is well in line with the strong empirical evidence in the literature

supporting long memory in both options-implied and realized variances. We thus resort to both parametric

and semiparametric heterogeneous autoregressive (HAR) processes for modeling and forecasting

purposes. Our main findings are as follows. First, we confirm the evidence in the literature that there

is a negative relationship between the VIX index and the S&P 500 index return as well as a positive contemporaneous

link with the volume of the S&P 500 index. Second, the term spread has a slightly negative

long-run impact in the VIX index, when possible multicollinearity and endogeneity are controlled for.

Finally, we cannot reject the linearity of the above relationships, neither in sample nor out of sample.

As for the latter, we actually show that it is pretty hard to beat the pure HAR process because of the very

persistent nature of the VIX index.

We derive the asymptotic distribution of the ordinary least squares estimator in a regression with cointegrated variables under misspecification and/or nonlinearity in the regressors. We show that, under some circumstances, the order of convergence of the estimator changes and the asymptotic distribution is non-standard. The t-statistic might also diverge. A simple case arises when the intercept is erroneously omitted from the estimated model or in nonlinear-in-variables models with endogenous regressors. In the latter case, a solution is to use an instrumental variable estimator. The core results in this paper also generalise to more complicated nonlinear models involving integrated time series.

We exploit a 2004 credit reform in Brazil that simplified the sale of repossessed cars used as collateral for auto loans. We show that the change has led to larger loans with lower spreads and longer maturities. The reform expanded credit to riskier, low-income borrowers for newer, more expensive cars. Although the credit reform improved riskier borrowers’ access to credit, it also led to increased incidences of delinquency and default. Our results shed light on the consequences of a credit reform, highlighting the crucial role that collateral and repossession play in the liberalization and democratization of credit.

Neste artigo, introduz-se ao modelo de crescimento neoclássico a defasagem necessária para que o investimento público se consolide em capital público (processo time-to-build,0), assim como alíquotas tributárias distorcivas que se ajustam de acordo com a dívida acumulada pelo setor público. O objetivo é isolar quantitativamente o efeito do aumento do investimento público observado no Programa de Aceleração do Crescimento (PAC). Dependendo da defasagem associada ao processo time-to-build e da política de ajuste fiscal consideradas, o PAC pode ter induzido uma queda do produto entre 0,2% e 0,4% em um horizonte de até quatro anos.

We measure the competitive effect of public banks in concentrated local

markets in Brazil using branch location patterns. We employ variation in

market size, number, and identity of competitors to determine how the

conduct of private banks is affected by the entry of a public bank. We find

that the market size needed to sustain a private bank branch is 35% larger if a

private competitor is present and is not significantly affected by the presence

of a public bank. These results suggest that the presence of a public bank

does not affect conduct of private banks

This paper shows that the contractual arrangement of ‘banking correspondents’ has eliminated entry barriers for the provision of banking services in Brazil. With the bank correspondents, banks are allowed to reach the almost 2200 municipalities without bank branches in 2000, connecting 45 million people to the financial sector. The evidence is based on the estimation of an entry model of financial providers in Brazilian municipalities. I estimate a zero population entry threshold for banking correspondents for the period from 2002 to 2007. The estimated population entry thresholds for bank branches in the same period are relatively stable at approximately 8000–9000 people. The population entry thresholds for the second to fifth players for banking correspondents are also consistently lower than those for bank branches.

We derive asymptotic properties of the quasi-maximum likelihood estimator of smooth transition regressions when time is the transition variable. The consistency of the estimator and its asymptotic distribution are examined. It is shown that the estimator converges at the usual -rate and has an asymptotically normal distribution. Finite sample properties of the estimator are explored in simulations. We illustrate with an application to US inflation and output data.

In December 2003, the Brazilian Congress passed a law that led to a natural personal lending experiment. The law allows banks to offer loans with repayment through automatic payroll deduction, which, in effect, turns future income into collateral. We estimate the impact of the new law using auto loans as a control group. The law has caused a reduction in interest rates and an increase in the volume of personal credit

We use various secondary historical sources to compile a database containing information on the number of African slaves received by each destination country between the 16th and 19th centuries. We then construct a measure of intensity of African slavery use based on the flow of slaves received divided by historical populations. We also construct a proxy for the use of native slavery. The slavery variables are highly correlated with current levels of inequality. The correlation between our slavery use variables and inequality is stronger than that observed between inequality and development, geographic characteristics, institutional quality, and provision of public goods. The evidence suggests that use of slavery in the historical past may be an important determinant of the levels of inequality observed today across the globe.

This paper evaluates the impact of a program of bureaucracy simplification and tax reduction on formality among Brazilian microenterprises — the SIMPLES program. We document an increase of 13 percentage points in formal licensing among retail firms created after the program when compared to firms in ineligible sectors. The impact on retailers is robust to a series of tests. We find no impact on construction, transportation, services and manufacturing sectors.

In this paper, we propose a long memory asymmetric volatility model, which captures more flexible asymmetric patterns as compared with several existing models. We extend the new specification to realized volatility (RV) by taking account of measurement errors and use the Efficient Importance Sampling technique to estimate the model. We apply the model to the RV of S&P500. Overall, the results of the out-of-sample forecasts show the adequacy of the new asymmetric and long memory volatility model for the period including the global financial crisis.

This paper examines if money matters in education by looking at whether missing resources due to corruption affect student outcomes. We use data from the auditing of Brazil's local governments to construct objective measures of corruption involving educational block grants transferred from the central government to municipalities. Using variation in the incidence of corruption across municipalities and controlling for student, school, and municipal characteristics, we find a significant negative association between corruption and the school performance of primary school students. Students residing in municipalities where corruption in education was detected score 0.35 standard deviations less on standardized tests, and have significantly higher dropout and failure rates. Using a rich dataset of school infrastructure and teacher and principal questionnaires, we also find that school inputs such as computer labs, teaching supplies, and teacher training are reduced in the presence of corruption. Overall, our findings suggest that in environments where basic schooling resources are lacking, money does matter for student achievement.

This article analyzes the determinants of local institutions in Brazil. We show

that institutional quality and distribution of land are partly inherited from the

colonial histories experienced by different areas of the country. The sugar cane

boom—characterized by an oligarchic society—is associated with more land

inequality. The gold boom—characterized by a heavily inefficient presence of

the Portuguese state—is associated with worse governance and access to justice.

We do not find similar effects for a postcolonial boom (coffee). We also find

that the colonial episodes are correlated with lower provision of public goods