http://www.bis.org/cbhub/list/country/country_mexico/index.rss Latest research hub papers from Mexico en http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{69AB2E0F-40DF-8F49-0144-B4ECF08E608C}.pdf Bank of Mexico Working Papers by Lever Guzmán Carlos Price Competition on Network 2011-07-02T06:21:59Z We present a model of imperfect price competition where not all firms can sell to all consumers. A network structure models the local interaction of firms and consumers. We find that aggregate surplus is maximized with a fully connected network, which corresponds to perfect competition, and decreases monotonically as the network becomes less connected until firms become local monopolists. When we study which networks are likely to form in equilibrium, we find that stable networks are not fully connected but are connected enough to rule out local monopolists. Our results extend to oligopolistic competition when consumers can either buy from a single firm or from all firms. Price Competition on Network 2011-07-02T06:21:59Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{69AB2E0F-40DF-8F49-0144-B4ECF08E608C}.pdf Carlos Lever Guzmán Lever Guzmán Carlos 2011 Bank of Mexico Working Papers http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{0DD8BFAB-4815-FFDA-88FC-A0EF60A85882}.pdf Bank of Mexico Working Papers by Ibarra-Ramírez Raúl Stocks, Bonds and the Investment Horizon: A Spatial Dominance Approach 2011-06-15T06:21:59Z Financial advisors typically recommend that a long-term investor should hold a higher percentage of his wealth in stocks than a short-term investor. However, part of the academic literature disagrees with this advice. We use a spatial dominance test which is suited for comparing alternative investments when their distributions are time-varying. Using daily data for the US from 1965 to 2008, we test for dominance of cumulative returns series for stocks versus bonds at different investment horizons from one to ten years. We find that bonds second order spatially dominate stocks for one and two year horizons. For horizons of nine years or longer, we find evidence that stocks dominate bonds. When different portfolios of stocks and bonds are compared, we find that for long investment horizons, only those portfolios with a sufficiently high proportion of stocks are efficient in the sense of spatial dominance. Stocks, Bonds and the Investment Horizon: A Spatial Dominance Approach 2011-06-15T06:21:59Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{0DD8BFAB-4815-FFDA-88FC-A0EF60A85882}.pdf Raúl Ibarra-Ramírez Ibarra-Ramírez Raúl 2011 Bank of Mexico Working Papers http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{14EE8887-387E-251D-7F06-0A9631F55808}.pdf Bank of Mexico Working Papers by Covarrubias Enrique The Number of Equilibria of Smooth Infinite Economies 2011-05-25T06:23:59Z We construct an index theorem for smooth infinite economies that shows that generically the number of equilibria is odd. As a corollary, this gives a new proof of existence and gives conditions that guarantee global uniqueness of equilibria. The Number of Equilibria of Smooth Infinite Economies 2011-05-25T06:23:59Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{14EE8887-387E-251D-7F06-0A9631F55808}.pdf Enrique Covarrubias Covarrubias Enrique 2011 Bank of Mexico Working Papers http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{880F5DD7-D378-692E-945A-7313483BA70A}.pdf Bank of Mexico Working Papers by Kaiser Karen Variety Aversion and Information Overload: An Experimental Approach 2011-05-03T06:21:00Z This paper analyzes the effect of information overload on preference or aversion for variety. According to the model, a rational decision maker who suffers from information overload, faces a two-stage decision process, and is choosing from a set of unknown goods will find it optimal at some point to become variety averse. To test this hypothesis, an experiment is conducted, and its results, that subjects suffering from information overload use variety aversion as a strategy to deal with their cognitive limitations, are consistent with the model. Moreover, results suggest that subjects are, on the average, choosing the optimal number of goods. As the price of the goods increases, subjects become more variety averse. In addition, as they become more experienced, they prefer larger sets of goods. Variety Aversion and Information Overload: An Experimental Approach 2011-05-03T06:21:00Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{880F5DD7-D378-692E-945A-7313483BA70A}.pdf Karen Kaiser Kaiser Karen 2011 Bank of Mexico Working Papers http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{85A22835-4272-F218-10F8-412344010F8B}.pdf Bank of Mexico Working Papers by Chortareas Georgios E.; Garza-Garcia Jesus Gustavo; Girardone Claudia Banking Sector Performance in Some Latin American Countries: Market Power versus Efficiency 2010-12-20T12:37:59Z The wave of consolidation and the rapid increase in market concentration that took place in most Latin American countries has generated concerns about the rise in banks' market power and its potential effects on consumers. This paper advances the existing literature by testing the market power (Structure-Conduct-Performance and Relative Market Power) and efficient structure (X- and scale efficiency) hypotheses for a sample of over 2,500 bank observations in nine Latin American countries over 1997-2005. We use the Data Envelopment Analysis technique to obtain reliable efficiency measures. We produce evidence supporting the efficient structure hypotheses. Finally, capital ratios and bank size seem to be among the most important factors in explaining profits for these Latin American banks. Banking Sector Performance in Some Latin American Countries: Market Power versus Efficiency 2010-12-20T12:37:59Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{85A22835-4272-F218-10F8-412344010F8B}.pdf Georgios Chortareas Gustavo Garza-Garcia Jesus Claudia Girardone Chortareas Georgios E.; Garza-Garcia Jesus Gustavo; Girardone Claudia 2010 Bank of Mexico Working Papers http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{C4213F73-8E2F-0E2B-E719-F728CEE8EA64}.pdf Bank of Mexico Working Papers by Martínez André; Viarengo Martina; Musacchio Aldo The Great Leap Forward: The Political Economy of Education in Brazil, 1889-1930 2010-12-16T06:23:00Z Recent research links the inequality across countries and regions to colonial institutions. This paper argues that trade shocks could alter the development path of a country or subnational units, in spite of its colonial institutions. This hypothesis is analyzed using state-level data for Brazil, a country with high regional heterogeneity in endowments. We find that positive trade shocks, or improvements in export tax revenues, increased expenditures on education per capita and education outcomes in the period 1889 to 1930. In fact, trade shocks ended up altering the inequality in education levels across states in a permanent way. The paper ends by explaining why politicians spent windfall tax revenues to invest on education. The Great Leap Forward: The Political Economy of Education in Brazil, 1889-1930 2010-12-16T06:23:00Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{C4213F73-8E2F-0E2B-E719-F728CEE8EA64}.pdf Martina Viarengo Aldo Musacchio André Martínez Martínez André; Viarengo Martina; Musacchio Aldo 2010 Bank of Mexico Working Papers http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{F02402AE-3A77-B473-1C9D-22DE8A22CBC9}.pdf Bank of Mexico Working Papers by De la Garza Adrián; Mastrobuoni Giovanni; Sannabe Atsushi; Yamada Katsunori The Relative Utility Hypothesis With and Without Self-reported Reference Wages 2010-12-16T06:23:00Z This article uses survey data of workers in Japan to study the effects of own and self-reported reference wages on subjective well-being. Higher wages lead to higher life and job satisfaction. When workers perceive that their peers earn higher wages, they report lower well-being. We compare our results with relative utility tests in the literature and develop a generalized version of the classical measurement error model to show that the estimated bias of the reference wage effect can go in both directions. We propose an IV strategy when the self-reported reference wage is not available that does not eliminate the bias but delivers a lower bound of the "true" effect. The Relative Utility Hypothesis With and Without Self-reported Reference Wages 2010-12-16T06:23:00Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{F02402AE-3A77-B473-1C9D-22DE8A22CBC9}.pdf Giovanni Mastrobuoni Katsunori Yamada Atsushi Sannabe Adrián De la Garza De la Garza Adrián; Mastrobuoni Giovanni; Sannabe Atsushi; Yamada Katsunori 2010 Bank of Mexico Working Papers http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{F4447369-7102-0A6D-891F-F34AB07D2981}.pdf Bank of Mexico Working Papers by Lever Guzmán Carlos Strategic Spending in Voting Competitions with Social Networks 2010-12-15T06:21:59Z I propose a model of voting competitions (political campaigns and strategic lobbying) where voters are influenced by the opinion of their neighbors on a social network. In the unique pure strategy nash equilibrium, resources are targeted toward individuals with an influential position in the network. This finding contrasts with previous theories on strategic spending which predict that parties (or lobbies) should spend more on individuals who have a higher probability of being pivotal for the vote. I next test the model using data on campaign contributions by interests groups in the US. House of Representatives. I find that both network influence and pivotality are significant predictors of campaign contributions. Strategic Spending in Voting Competitions with Social Networks 2010-12-15T06:21:59Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{F4447369-7102-0A6D-891F-F34AB07D2981}.pdf Carlos Lever Guzmán Lever Guzmán Carlos 2010 Bank of Mexico Working Papers http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{DFEC9239-3798-C4E6-0792-A67EBF5B345B}.pdf Bank of Mexico Working Papers by Abarca Gustavo; Rangel José Gonzalo; Benavides Guillermo Exchange Rate Market Expectations and Central Bank Policy: The case of the Mexican Peso-US Dollar from 2005-2009 2010-12-15T06:21:59Z We examine two approaches characterized by different tail features to extract market expectations on the Mexican peso-US dollar exchange rate. Expectations are gauged by risk-neutral densities. The methods used to estimate these densities are the Volatility Function Technique (VFT) and the Generalized Extreme Value (GEV) approach. We compare these methods in the context of monetary policy announcements in Mexico and the US. Once the surprise component of the announcements is considered, our results indicate that, although both VFT and GEV suggest similar dynamics at the center of the distribution, these two methods show significantly different patterns in the tails. Our empirical evidence shows that the GEV model captures better the extreme values. Exchange Rate Market Expectations and Central Bank Policy: The case of the Mexican Peso-US Dollar from 2005-2009 2010-12-15T06:21:59Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{DFEC9239-3798-C4E6-0792-A67EBF5B345B}.pdf Guillermo Benavides Gustavo Abarca Jose Gonzalo Rangel Abarca Gustavo; Rangel José Gonzalo; Benavides Guillermo 2010 Bank of Mexico Working Papers http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{22F5356A-CBD1-D3F1-C30B-4804A150E40D}.pdf Bank of Mexico Working Papers by Alcaraz Carlo; Chiquiar Daniel; Salcedo Alejandrina Remittances, Schooling, and Child Labor in Mexico 2010-10-29T06:21:59Z This paper studies the effects of remittances from the U.S. on child labor and school attendance in recipient Mexican households. We identify these effects using the impact of the 2008-2009 U.S. recession on remittance receipts. The methodology employed is a differences-in-differences strategy that compares households that were remittance recipients before the crisis with never-recipient households. To avoid possible selection problems, we instrument for membership in the remittance recipient group. We find that the negative shock on remittance receipts caused a significant increase in child labor and a significant reduction of school attendance. Remittances, Schooling, and Child Labor in Mexico 2010-10-29T06:21:59Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{22F5356A-CBD1-D3F1-C30B-4804A150E40D}.pdf Daniel Chiquiar Alejandrina Salcedo Carlo Alcaraz Alcaraz Carlo; Chiquiar Daniel; Salcedo Alejandrina 2010 Bank of Mexico Working Papers http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{3D80DA42-A6AC-BB0C-9104-B145111BDE86}.pdf Bank of Mexico Working Papers by Benavides Guillermo Forecasting Short-Run Inflation Volatility using Futures Prices: An Empirical Analysis from a Value at Risk Perspective 2010-10-28T06:23:00Z In this research paper ARCH-type models are applied in order to estimate the Value-at-Risk (VaR) of an inflation-index futures portfolio for several time-horizons. The empirical analysis is carried out for Mexican inflation-indexed futures traded at the Mexican Derivatives Exchange (MEXDER). To analyze the VaR with time horizons of more than one trading day bootstrapping simulations were applied. The results show that these models are relatively accurate for time horizons of one trading day. However, the volatility persistence of ARCH-type models is reflected with relatively high VaR estimates for longer time horizons. These results have implications for short-term inflation forecasts. By estimating confidence intervals in the VaR, it is possible to have certain confidence about the future range of inflation (or extreme inflation values) for a specified time horizon. Forecasting Short-Run Inflation Volatility using Futures Prices: An Empirical Analysis from a Value at Risk Perspective 2010-10-28T06:23:00Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{3D80DA42-A6AC-BB0C-9104-B145111BDE86}.pdf Guillermo Benavides Benavides Guillermo 2010 Bank of Mexico Working Papers http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{24A16017-15C2-7A63-BC8C-2AAD402897EE}.pdf Bank of Mexico Working Papers by Capistrán Carlos; López Moctezuma Gabriel Forecast Revisions of Mexican Inflation and GDP Growth 2010-10-28T06:23:00Z We analyze forecasts of inflation and GDP growth contained in Banco de México´s Survey of Professional Forecasters for the period 1995-2009. The forecasts are for the current and the following year, comprising an unbalanced three-dimensional panel with multiple individual forecasters, target years, and forecast horizons. The fixed-event nature of the forecasts enables us to examine efficiency by looking at the revision process. The panel structure allows us to control for aggregate shocks and to construct a measure of the news that impacted expectations in the period under study. The results suggest that respondents seem to rely for longer than appears to be optimal on their previous forecasts, and that they do not seem to use past information in an efficient manner. In turn, this means there are areas of opportunity to improve the accuracy of the forecasts, for instance, by taking into account the positive autocorrelation found in forecast revisions. Forecast Revisions of Mexican Inflation and GDP Growth 2010-10-28T06:23:00Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{24A16017-15C2-7A63-BC8C-2AAD402897EE}.pdf Gabriel López Moctezuma Carlos Capistrán Capistrán Carlos; López Moctezuma Gabriel 2010 Bank of Mexico Working Papers http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{82090083-8040-261A-F80B-584AE25191BA}.pdf Bank of Mexico Working Papers by Covarrubias Enrique The Equilibrium Set of Economies with a Continuous Consumption Space 2010-07-26T17:42:59Z We study global properties of the equilibrium set of economies with a continuous consumption space. This framework is important in intertemporal allocation problems (continuous or infinite time), financial markets with uncertainty (continuous states of nature) and commodity differentiation. We show that the equilibrium set is contractible which implies that (i) there is a continuous economic policy linking any two equilibrium states, and (ii) any two such economic policies can be continuously deformed one into the other. We also give three equivalent formulations of the problem of global uniqueness of equilibria in terms of the projection map from the equilibrium set to the space of parameters. We finally study the local and global effects that the existence of critical economies has on the equilibrium set. The Equilibrium Set of Economies with a Continuous Consumption Space 2010-07-26T17:42:59Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{82090083-8040-261A-F80B-584AE25191BA}.pdf Enrique Covarrubias Covarrubias Enrique 2010 Bank of Mexico Working Papers D50 D51 D80 D90 http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{8D7AEC68-86FE-E997-7EF9-BBB1560C002E}.pdf Bank of Mexico Working Papers by Ysusi Carla Consumer Price Behavior in Mexico Under Inflation Targeting: A Microdata Approach 2010-06-24T06:29:00Z In this paper we do a statistical analysis of the Mexican Consumer Price Index microdata set to characterize the rigidities of the price setting process in the different sectors of the Mexican economy. The microdata set goes from July 2002 to December 2009. Broadly, results show that there exists a considerable heterogeneity in the price setting behavior across different sectors and over time. Evidence was found that when big shocks affect inflation, there is a strong co-movement of the fraction of the firms that change prices with the level of inflation. Consumer Price Behavior in Mexico Under Inflation Targeting: A Microdata Approach 2010-06-24T06:29:00Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{8D7AEC68-86FE-E997-7EF9-BBB1560C002E}.pdf Carla Ysusi Ysusi Carla 2010 Bank of Mexico Working Papers C19 E31 http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{B2955D87-88EA-6D94-140C-E50C8B34FF94}.pdf Bank of Mexico Working Papers by García Verdú Santiago Equilibrium yield curves under regime switching 2010-06-18T06:27:59Z This paper studies how inflation as a macroeconomic indicator affects nominal bond prices. I consider an economy with a representative agent with Epstein- Zin preferences. Regime switching affects the state-space capturing inflation and consumption growth. Thus, the agent is concerned about the intertemporal distribution of risk, which is affected by the persistence of the variables and the regimes. Regime switching allows for structural changes in the volatility of unexpected shocks. To the extent that inflationary unexpected shocks indicate lower consumption growth, nominal bond holders need to be compensated for these shocks. It follows that a switch in the regime state affecting the covariance of inflation and consumption growth can be interpreted as a change in the price of risk. I find coefficients of risk aversion from 40 to 90, and subjective discount factors above 0.99, depending on the exact specification of the model. The model yields have on average a positive slope, a consistent Principal Components decomposition, and predictability as in Cochrane and Piazzesi (2002). Equilibrium yield curves under regime switching 2010-06-18T06:27:59Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{B2955D87-88EA-6D94-140C-E50C8B34FF94}.pdf Santiago García Verdú García Verdú Santiago 2010 Bank of Mexico Working Papers E31 E42 E43 E44 G12 http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{EA68D592-2D2E-7169-B722-4650F0F63532}.pdf Bank of Mexico Working Papers by Salcedo Alejandrina; Schoellman Todd; Tertilt Michèle Families as Roommates: Changes in U.S. Household Size from 1850 to 2000 2010-06-18T06:27:59Z The size of the average American household has fallen dramatically -from six in 1850 to three in 2000. To explain this decline we model households as collections of roommates who share the costs of household public goods. If private goods are more income elastic than public goods, as we document in the paper, an increase in income endogenously leads to smaller households. We calibrate the model to match data from 2000. Changing incomes to their 1850 levels, we find that our mechanism can explain 37 percent of the observed reduction in the number of adults per household and 16 percent of the reduction in the number of children. Families as Roommates: Changes in U.S. Household Size from 1850 to 2000 2010-06-18T06:27:59Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{EA68D592-2D2E-7169-B722-4650F0F63532}.pdf Todd Schoellman Alejandrina Salcedo Michèle Tertilt Salcedo Alejandrina; Schoellman Todd; Tertilt Michèle 2010 Bank of Mexico Working Papers D10 E10 J11 N30 O10 http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{946C1861-A39E-AA85-6637-5DDF94A5E50B}.pdf Bank of Mexico Working Papers by Noriega Antonio E.; Ventosa-Santaulària Daniel Spurious Long-Horizon Regression in Econometrics 2010-06-08T06:29:00Z This paper extends recent research on the behaviour of the t-statistic in a long-horizon regression (LHR). We assume that the explanatory and dependent variables are generated according to the following models: a linear trend stationary process, a broken trend stationary process, a unit root process, and a process with a double unit root. We show that, both asymptotically and in finite samples, the presence of spurious LHR depends on the assumed model for the variables. We propose an asymptotically correct inferential procedure for testing the null hypothesis of no relationship in a LHR, which works whether the variables have a long-run relationship or not. Our theoretical results are applied to an international data set on money and output in order to test for long-run monetary neutrality. Under our new approach and using bootstrap methods, we find that neutrality holds for all countries. Spurious Long-Horizon Regression in Econometrics 2010-06-08T06:29:00Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{946C1861-A39E-AA85-6637-5DDF94A5E50B}.pdf E. Noriega Antonio Daniel Ventosa-Santaulària Noriega Antonio E.; Ventosa-Santaulària Daniel 2010 Bank of Mexico Working Papers C12 C22 E51 http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{8F532460-0427-65C2-83BE-AA08A90A0520}.pdf Bank of Mexico Working Papers by Rodríguez-Zamora Carolina; Lim Jean The Optimal Tax Rule in the Presence of Time Use 2010-06-08T06:29:00Z Using Mexican data on household time use and consumption, we find significant substitution between goods and time in home production and different elasticities of substitution for different household commodities. Adding these findings to the Ramsey optimal tax problem, we show it is optimal to impose higher taxes on market goods used in the production of commodities with a lower elasticity of substitution between goods and time. The reason is that government wants to minimize the distortionary substitution from market purchases toward untaxed time use in home production. This is an analog of the classical Corlett and Hague (1953-1954) result, differing in that we allow for the possibility of substitution between goods and time in the production of commodities. Leaving aside distributional considerations, we conclude that higher taxes should be imposed on market goods used in the production of `Eating` and lower taxes imposed on market goods used in the production of `Recreation`. The Optimal Tax Rule in the Presence of Time Use 2010-06-08T06:29:00Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{8F532460-0427-65C2-83BE-AA08A90A0520}.pdf Carolina Rodríguez-Zamora Jean Lim Rodríguez-Zamora Carolina; Lim Jean 2010 Bank of Mexico Working Papers D13 H21 J22 http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{687AB152-CD27-993D-1FB8-C05468E33C30}.pdf Bank of Mexico Working Papers by Capistrán Carlos; Aiolfi Marco; Timmermann Allan Forecast Combinations 2010-06-02T06:27:00Z We consider combinations of subjective survey forecasts and model-based forecasts from linear and non-linear univariate specifications as well as multivariate factora-augmented models. Empirical results suggest that a simple equal-weighted average of survey forecasts outperform the best model-based forecasts for a majority of macroeconomic variables and forecast horizons. Additional improvements can in some cases be gained by using a simple equal-weighted average of survey and model-based forecasts. We also provide an analysis of the importance of model instability for explaining gains from forecast combination. Analytical and simulation results uncover break scenarios where forecast combinations outperform the best individual forecasting model. Forecast Combinations 2010-06-02T06:27:00Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{687AB152-CD27-993D-1FB8-C05468E33C30}.pdf Marco Aiolfi Allan Timmermann Carlos Capistrán Capistrán Carlos; Aiolfi Marco; Timmermann Allan 2010 Bank of Mexico Working Papers C53 http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{A37473DF-33D5-931D-8227-69C026162C03}.pdf Bank of Mexico Working Papers by Covarrubias Enrique Regular Infinite Economies 2010-04-12T17:42:00Z The main contribution of this paper is to place smooth infinite economies in the setting of the equilibrium manifold and the natural projection map à la Balasko. We show that smooth infinite economies have an equilibrium set that has the structure of a Banach manifold and that the natural projection map is smooth. We define regular and critical economies, and regular and critical prices, and we show that the set of regular economies coincides with the set of economies whose excess demand function has only regular prices. Generic determinacy of equilibria follows as a by-product. Regular Infinite Economies 2010-04-12T17:42:00Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{A37473DF-33D5-931D-8227-69C026162C03}.pdf Enrique Covarrubias Covarrubias Enrique 2010 Bank of Mexico Working Papers D5 D50 D51 D80 D90 http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{40528184-3AC9-E6C0-BDD7-7212D4944F2C}.pdf Bank of Mexico Working Papers by Kaiser Karen Limited Attention and Choice 2010-04-12T17:42:00Z This paper analyzes a boundedly rational decision maker who is uncertain about his preference and faces the following trade-off: adding a good to the choice set has a positive option value but increases the complexity of the choice problem. The increased complexity is modeled as a reduction of the information available for each good. Because of this trade-off there is an optimal number of goods that the decision maker wants to analyze before making his final choice. The choice of the optimal set can be interpreted as the choice among stores. Stores maximize profits and choose a quality, an assortment, and a price. A lower cost of providing quality implies higher price and higher quality. Assortment will be small for very high levels of quality. Better quality of information implies greater variety and higher price. Greater variety combined with good consumer service can be a signal for high quality of the store. Limited Attention and Choice 2010-04-12T17:42:00Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{40528184-3AC9-E6C0-BDD7-7212D4944F2C}.pdf Karen Kaiser Kaiser Karen 2010 Bank of Mexico Working Papers D01 D11 D21 http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{8D19AFA2-30A2-47E9-46CD-A6F20B6F9496}.pdf Bank of Mexico Working Papers by Ibarra-Ramírez Raúl Forecasting Inflation in Mexico Using Factor Models: Do Disaggregated CPI Data Improve Forecast Accuracy? 2010-04-12T17:42:00Z In this paper we apply a dynamic factor model to generate out of sample forecasts for the inflation rate in Mexico. We evaluate the role of using a wide range of macroeconomic variables with particular interest on the importance of using CPI disaggregated data to forecast inflation. Our data set contains 54 macroeconomic series and 243 CPI subcomponents from 1988 to 2008. Our results indicate that: i) Factor models outperform the benchmark autoregressive model at horizons of one, two, four and six quarters, ii) Using disaggregated price data improves forecasting performance, and iii) The factors are related to key variables in the economy such as output growth and inflation. Forecasting Inflation in Mexico Using Factor Models: Do Disaggregated CPI Data Improve Forecast Accuracy? 2010-04-12T17:42:00Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{8D19AFA2-30A2-47E9-46CD-A6F20B6F9496}.pdf Raúl Ibarra-Ramírez Ibarra-Ramírez Raúl 2010 Bank of Mexico Working Papers C22 C53 E37 http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{B27BAF4A-0741-A858-1DD9-141E38A4F735}.pdf Bank of Mexico Working Papers by Peña Tonatiuh; Martínez Serafín; Abudu Bolanle Bankruptcy Prediction: A Comparison of Some Statistical and Machine Learning Techniques 2010-04-12T17:42:00Z We are interested in forecasting bankruptcies in a probabilistic way. Specifically, we compare the classification performance of several statistical and machine-learning techniques, namely discriminant analysis (Altman's Z-score), logistic regression, least-squares support vector machines and different instances of Gaussian processes (GP's) -that is GP's classifiers, Bayesian Fisher discriminant and Warped GP's. Our contribution to the field of computational finance is to introduce GP's as a potentially competitive probabilistic framework for bankruptcy prediction. Data from the repository of information of the US Federal Deposit Insurance Corporation is used to test the predictions. Bankruptcy Prediction: A Comparison of Some Statistical and Machine Learning Techniques 2010-04-12T17:42:00Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{B27BAF4A-0741-A858-1DD9-141E38A4F735}.pdf Tonatiuh Peña Bolanle Abudu Serafín Martínez Peña Tonatiuh; Martínez Serafín; Abudu Bolanle 2009 Bank of Mexico Working Papers C11 C14 C45 http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{BB3852E9-60BD-DB10-5156-DDAF18D673B6}.pdf Bank of Mexico Working Papers by Engle Robert F.; Rangel José Gonzalo High and Low Frequency Correlations in Global Equity Markets 2010-04-12T17:42:00Z This study models high and low frequency variation in global equity correlations using a comprehensive sample of 43 countries that includes developed and emerging markets, during the period 1995-2008. These two types of variations are modeled following the semi-parametric Factor-Spline-GARCH approach of Rangel and Engle (2008). This framework is extended and modified to incorporate the effect of multiple factors and to address the issue of non-synchronicity in international markets. Our empirical analysis suggests that the slow-moving dynamics of global correlations can be described by the Factor-Spline-GARCH specifications using either weekly or daily data. The analysis shows that the low frequency component of global correlations increased in the current financial turmoil; however, this increase was not equally distributed across countries. The countries that experienced the largest increase in correlations were mainly emerging markets. High and Low Frequency Correlations in Global Equity Markets 2010-04-12T17:42:00Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{BB3852E9-60BD-DB10-5156-DDAF18D673B6}.pdf Robert F. Engle Jose Gonzalo Rangel Engle Robert F.; Rangel José Gonzalo 2009 Bank of Mexico Working Papers C32 C51 C52 G12 G15 http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{63D63024-98E2-B59D-DE95-E1D28C60ADFB}.pdf Bank of Mexico Working Papers by Sámano Daniel Explaining Taxes at the Upper Tail of the Income Distribution: The Role of Utility Interdependence 2010-04-12T17:42:00Z Optimal tax theory has difficulty rationalizing high marginal tax rates at the upper end of the income distribution. In this paper, I construct a model of optimal income taxation in which agents' preferences are interdependent. I derive a simple expression for optimal taxes that accommodates consumption externalities within Mirrlees (1971) Framework. Using this expression, I conduct a positive analysis of taxation: assuming that observed taxes are optimal, I derive analytic expressions for i) a parameter that measures the degree of agents' utility interdependence and ii) a function that quantifies the consumption externality agents of different income impose to society. Using these expressions, I rationalize income taxes in the United States and the United Kingdom for the 1995-2004 period. I show that only a moderate amount of utility interdependence is sufficient for this. My estimations indicate that the progressivity of tax schedules may be driven by corrective considerations. Explaining Taxes at the Upper Tail of the Income Distribution: The Role of Utility Interdependence 2010-04-12T17:42:00Z Full text http://www.banxico.org.mx/publicaciones-y-discursos/publicaciones/documentos-de-investigacion/banxico/{63D63024-98E2-B59D-DE95-E1D28C60ADFB}.pdf Daniel Sámano Sámano Daniel 2009 Bank of Mexico Working Papers D62 H21 H23