Central bank research hub - Papers by Sergio A. Lago Alves
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Research hub papers by author Sergio A. Lago AlvesenMonetary Policy, Trend Inflation and Unemployment Volatility
http://www.bcb.gov.br/pec/wps/ingl/wps450.pdf
Central Bank of Brazil Working Papers by Sergio A. Lago AlvesMonetary Policy, Trend Inflation and Unemployment Volatility2016-12-22T17:36:59ZThe literature has long agreed that the canonical DMP model with search and matching frictions in the labor market can deliver large volatilities in labor market quantities, consistent with US data during the Great Moderation period (1985-2005), only if there is at least some wage stickiness. I show that the canonical model can deliver nontrivial volatility in unemployment without wage stickiness. By keeping average US inflation at a small but positive rate, monetary policy may be accountable for the standard deviations of labor market variables to have achieved those large empirical levels. Solving the Shimer (2005) puzzle, the role of long-run inflation holds even for an economy with flexible wages, as long as it has staggered price setting and search and matching frictions in the labor market.Monetary Policy, Trend Inflation and Unemployment VolatilityAbstracthttp://www.bcb.gov.br/pec/wps/port/wp450.asp?idiom=IFull texthttp://www.bcb.gov.br/pec/wps/ingl/wps450.pdfSergio A. Lago AlvesSergio A. Lago Alves2016-12Central Bank of Brazil Working PapersE2E3E5J6Not Just Another Mixed Frequency Paper
http://www.bcb.gov.br/pec/wps/port/wp400.asp?idiom=I
Central Bank of Brazil Working Papers by Sergio Afonso Lago Alves and Angelo Marsiglia FasoloNot Just Another Mixed Frequency Paper2015-09-15T16:53:00ZThis paper presents a new algorithm, based on a two-part Gibbs sampler with FFBS method, to recover the joint distribution of missing observations in a mixed-frequency dataset. The new algorithm relaxes most of the constraints usually presented in the literature, namely: (i) it does not require at least one time series to be observed every period; (ii) it provides an easy way to add linear restrictions based on the state space representation of the VAR; (iii) it does not require regularly-spaced time series at lower frequencies; and (iv) it avoids degeneration problems arising when states, or linear combination of states, are actually observed. In addition, the algorithm is well suited for embedding high-frequency real-time information for improving nowcasts and forecasts of lower frequency time series. We evaluate the properties of the algorithm using simulated data. Moreover, as empirical applications, we simulate monthly Brazilian GDP, comparing our results to the Brazilian IBC-BR, and recover what would historical PNAD-C unemployment rates look like prior to 2012.Not Just Another Mixed Frequency PaperAbstracthttp://www.bcb.gov.br/pec/wps/port/wp400.asp?idiom=IFull texthttp://www.bcb.gov.br/pec/wps/ingl/wps400.pdfSergio A. Lago AlvesAngelo Marsiglia FasoloSergio Afonso Lago Alves and Angelo Marsiglia Fasolo2015-09Central Bank of Brazil Working PapersC11C32C53E27Trend Inflation and the Unemployment Volatility Puzzle
http://www.bcb.gov.br/pec/wps/ingl/wps277.pdf
Central Bank of Brazil Working Papers by Sergio A. Lago AlvesTrend Inflation and the Unemployment Volatility Puzzle2012-05-17T06:21:00ZI show that the combination of small positive trend inflation with staggered prices may account for the large relative volatilities found in US labor market data. The model does not have any wage rigidity and is hit only by an aggregate technology shock. The calibration procedure uses standard parameter values. Controlling for the sample average of the CPI inflation rate and the degree of price stickiness, the model solves the Shimer (2005) puzzle and explains the volatilities observed during two important sample periods: full sample (1951-2005) and Great Moderation (1985-2005).Trend Inflation and the Unemployment Volatility PuzzleAbstracthttp://www.bcb.gov.br/pec/wps/port/wp277.asp?idiom=IFull texthttp://www.bcb.gov.br/pec/wps/ingl/wps277.pdfSergio A. Lago AlvesSergio A. Lago Alves2012-05Central Bank of Brazil Working PapersE2E3E5J6Optimal Policy When the Inflation Target is not Optimal
http://www.bcb.gov.br/pec/wps/ingl/wps271.pdf
Central Bank of Brazil Working Papers by Sergio A. Lago AlvesOptimal Policy When the Inflation Target is not Optimal2012-03-22T06:21:00ZI assess the optimal policy to be followed by a welfare-concerned central bank when assigned an inflation target that is not necessarily welfare-optimal. I treat the inflation target as the trend inflation and I have three main contributions: (i) a welfare-based loss function fully derived under trend inflation, showing how the non-optimal inflation target acts as an extra inefficiency source; (ii) I show that the trend inflation does affect the relative weight of the output gap: they are inversely related; (iii) under trend inflation, I derive time consistent optimal policies with both unconditional and timeless commitment, and I show how to translate the pursuit of the inflation target into an additional constraint in the minimization step.Optimal Policy When the Inflation Target is not OptimalAbstracthttp://www.bcb.gov.br/pec/wps/port/wp271.asp?idiom=IFull texthttp://www.bcb.gov.br/pec/wps/ingl/wps271.pdfSergio A. Lago AlvesSergio A. Lago Alves2012-03Central Bank of Brazil Working PapersE31E52E58The Role of Consumer's Risk Aversion on Price Redigity
http://www.bcb.gov.br/pec/wps/ingl/wps121.pdf
Central Bank of Brazil Working Papers by Sergio A. Lago Alves and Mirta N. S. BugarinThe Role of Consumer's Risk Aversion on Price Redigity2006-11-14T07:08:59ZThis paper aims to contribute to the research agenda on the sources of price rigidity. Based on broadly accepted assumptions on the behavior of economic agents, we show that firms¿ competition can lead to the adoption of sticky prices as a sub-game perfect equilibrium strategy to optimally deal with consumers¿ risk aversion, even if firms have no adjustment costs. To this end, we build a model economy based on consumption centers with several complete markets and relax some traditional assumptions used in standard monetary policy models by assuming that households have imperfect information about the inefficient time-varying cost shocks faced by the .rms. Furthermore, we assume that the timing of events is such that, at every period, consumers have access to the actual prices prevailing in the market only after choosing a particular consumption center. Since such choices under uncertainty may decrease the expected utilities of risk-averse consumers, competitive firms adopt some degree of price stickiness in order to minimize the price uncertainty and "attract more customers".The Role of Consumer's Risk Aversion on Price RedigityAbstracthttp://www.bcb.gov.br/pec/wps/port/wp121.asp?idiom=IFull texthttp://www.bcb.gov.br/pec/wps/ingl/wps121.pdfSergio A. Lago AlvesMirta N. S. BugarinSergio A. Lago Alves and Mirta N. S. Bugarin2006-11Central Bank of Brazil Working PapersThe Recent Brazilian Disinflation Process and Costs
http://www.bcb.gov.br/pec/wps/ingl/wps109.pdf
Central Bank of Brazil Working Papers by Alexandre A. Tombini and Sergio A. Lago AlvesThe Recent Brazilian Disinflation Process and Costs2006-07-01T12:00:00ZThis work revisits the recent disinflation process in Brazil and finds that solely the agents' perception that a policy rupture could occur is capable of triggering a change in the way firms and households used to behave in their pricing and consuming decisions. This change was captured by structural breaks in the parameters of a generalized hybrid Phillips curve, following the 2002 inflation shock. The paper also shows that such parameter changes led to an increase in the disinflation cost evidenced by a free market inflation gain that would have been observed should the coefficients on the Phillips curve have not changed. The paper finds that, maintaining the occurred paths for interest rates, output gap, nominal exchange rates, administered price inflation and exogenous shocks, the free market inflation would have been significantly lower in the absence of such structural break in the underlying inflation process, since mid 2002.The Recent Brazilian Disinflation Process and CostsAbstracthttp://www.bcb.gov.br/pec/wps/port/wp109.asp?idiom=IFull texthttp://www.bcb.gov.br/pec/wps/ingl/wps109.pdfSergio A. Lago AlvesAlexandre A. TombiniAlexandre A. Tombini and Sergio A. Lago Alves2006-06Central Bank of Brazil Working PapersTargets and Inflation Dynamics
http://www.bcb.gov.br/pec/wps/ingl/wps100.pdf
Central Bank of Brazil Working Papers by Sergio A. L. Alves and Waldyr D. AreosaTargets and Inflation Dynamics2005-11-01T12:00:00ZBrazil has experienced crucial changes in its inflation process since the adoption of inflation targeting in mid 1999. This article addresses changes in the analytical framework employed to track the inflation dynamics, specifically the relevance of an explicit target for inflation. A New-Keynesian Phillips curve (NKPC) is derived incorporating indexation not only to past inflation but also to inflation targets, generalizing the Woodford (2003) hybrid curve. In our modeling, firms that do not optimally set their prices in a given period adjust them only by indexing their previous prices to a weighted average of the inflation target and lagged inflation. In such a framework, the impact of inflation targets on agents' decisions regarding the supply side can be analytically measured by the parameter associated to the inflation target. It is shown that inflation target affects the welfare-based monetary policy objective function by penalizing deviations of actual inflation from target instead of from zero. This result establishes the micro foundation basis for ad-hoc loss functions as indicated in traditional literature. Therefore, the inflation target also affects the optimal target criterion. We also present a microfounded specification to model inflation expectations, and conclude that when firms attribute a high weight to the government's inflation target when setting their own prices, exchange rate and demand shocks are unable to alter significantly inflation expectations. Such a result gives some light to empirical ad hoc assessment conducted in traditional literature. Our empirical evidence shows that even after major shocks, the target ability of anchoring inflation has been restored. Although not formally tested, such a fact followed the monetary authorities' firm commitment to meet the inflation targets, reinforced by the government's necessary support through a consistent fiscal policy.Targets and Inflation DynamicsAbstracthttp://www.bcb.gov.br/pec/wps/port/wp100.asp?idiom=IFull texthttp://www.bcb.gov.br/pec/wps/ingl/wps100.pdfSergio A. Lago AlvesWaldyr D. AreosaSergio A. L. Alves and Waldyr D. Areosa2005-10Central Bank of Brazil Working PapersMedium-Size Macroeconomic Model for the Brazilian Economy
http://www.bcb.gov.br/pec/wps/ingl/wps64.pdf
Central Bank of Brazil Working Papers by Marcelo Kfoury Muinhos and Sergio Afonso Lago AlvesMedium-Size Macroeconomic Model for the Brazilian Economy2003-03-01T12:00:00ZThis paper presents a medium-scale structural model for the Brazilian economy with more than 30 equations. The potential output is derived from a Cobb-Douglas production function and the demand side is divided in estimated equation for: consumption of the families, investment in machinery and construction, government spending and net exports. The estimated Phillips curve has two interesting features: dummies for the structural break in the pass-through and also a term that includes labor productivity on the Phillips equation. An algorithm to run the model with a model consistent forward-looking term in the Phillips curve is implemented. There are long-run equilibrium conditions for the external and fiscal debts and also for the real interest rate. External and supply shocks hit the medium-size model to generate impulse responses in order to compare with small-scale structural models.Medium-Size Macroeconomic Model for the Brazilian EconomyAbstracthttp://www.bcb.gov.br/pec/wps/port/wp64.asp?idiom=IFull texthttp://www.bcb.gov.br/pec/wps/ingl/wps64.pdfMarcelo Kfoury MuinhosSergio A. Lago AlvesMarcelo Kfoury Muinhos and Sergio Afonso Lago Alves2003-02Central Bank of Brazil Working PapersE12E27F43F47