Peer Reviewed Articles

Abstract

We analyze the macroeconomic effects of macroprudential policy – in the form of legal reserve requirements – in three Latin American countries (Argentina, Brazil, and Uruguay). To correctly identify innovations in changes in legal reserve requirements, we develop a narrative approach that classifies each change into endogenous or exogenous to the business cycle. We show that this distinction is critical in understanding the macroeconomic effects of reserve requirements. In particular, we show that output falls in response to exogenous increases in legal reserve requirements but is not affected when using all changes and relying on traditional time-identifying strategies. This bias reflects the practical relevance of the misidentification of endogenous countercyclical changes in reserve requirements.

Abstract

This paper examines the economic implications of a novel concept of trade diversification—latent diversification. In contrast to traditional measures, latent diversification accounts for potential movements of factors of production into activities where the country has previous exporting experience, hence presenting an additional margin through which countries can respond to shocks. The paper shows that the gap between traditional measures of diversification and latent diversification is sizeable and that latent diversification is in its own right an important determinant of macroeconomic stability. More diversified latent export baskets are associated with lower terms-of-trade volatility and, in turn, lower GDP per capita volatility, even after controlling for the degree of contemporaneous export diversification and other country characteristics.

Abstract

This paper explores the drivers of the volatility of international trade. It decomposes trade growth into six components that have gained attention in the literature and studies their contribution to overall volatility. It yields three main findings. First, trade volatility in the 1990–2015 period is mostly explained by a common factor, changes in the gravity-related characteristics of a country's trading partners and country-specific factors. Product composition and the identity of trading partners appear to be less important in explaining volatility. Second, the pre-2009 decline in volatility and the post-2009 increase in volatility appear to be driven by different factors. The former is mostly explained by a decline in the variance of country-specific factors; the latter appears to be driven by an increase in the volatility of common factors. Third, diversification is a likely force behind the steady decline in the volatility stemming from country-specific factors, especially in developing countries.

Abstract

Informal employment is ubiquitous in developing countries, but no existing studies have estimated workers’ switching costs between informal and formal employment. This paper builds on the empirical literature grounded in discrete choice models to estimate these costs for workers in Brazil and Mexico. The results suggest that inter-industry labor mobility costs are large, but entry costs into informal employment are significantly lower than the costs of entry into formal employment. Simulations of labor-market adjustments caused by a trade-related fall in manufacturing goods prices indicate that the share of informally employed workers rises after liberalization, but this is due to entry into the labor market by previously idle labor, a mechanism that has been seldom analyzed in the existing literature.

Resumen

Este trabajo analiza la relevancia de la actividad turística y su posible impacto sobre la economía costarricense, desde un punto de vista teórico. La ausencia de estudios formales cercanos a la realidad costarricense, y la utilización de políticas e incentivos para la promoción del turismo hacen necesaria esta investigación. Primero, se analizan los diferentes modelos que se han desarrollado en la literatura. Luego se construye un modelo que se acerca a las condiciones de la economía de Costa Rica. La construcción de dicho modelo es el principal objetivo de esta investigación. De forma específica, se tiene por objetivo discutir las siguientes preguntas: 1) ¿Cuál es el posible resultado sobre la producción interna, de largo plazo, de un aumento del gasto de los turistas?, 2) ¿En el largo plazo, qué sectores pueden ver aumentada su producción y que sectores pueden verla disminuida ante un aumento del gasto de los turistas? y, 3) ¿Cuál es el comportamiento esperado de los precios relativos, de largo plazo, ante un aumento del gasto de los turistas?

Abstract

A pseudo-panel approach is used to estimate the returns to schooling (RtS) in Costa Rica. this approach ameliorates the  “ability”  bias due to the correlation between the level of education and non-observable characteristics of the individual. We found that RtS are higher for older samples. Once we study the behavior of the RtS -using different settings and estimators- we analyze their correlation with  Deaton’s year,  cohort, and age effects.  We found that the income of younger cohorts is greater than the income of older cohorts,  once experience and short-run fluctuations of the economy are accounted for. This difference in income between generations is explained by differences in levels of education.  Other factors that differ between generations seem to be less important to explain their income differences. Finally, we present preliminary evidence suggesting that short-run fluctuations of the GDP affect to a greater extent those with less education.