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Working Paper
Duration of Capital Market Exclusion: An Empirical Investigation
This paper investigates the duration of market exclusion following a sovereign default and its resolution. We employ multiple definitions of market access, differentiating between gross versus net borrowing and partial versus full access, to measure the time it takes for countries to regain entry into international capital markets following a sovereign default and resolution. Our findings indicate that market re-access can occur immediately under less stringent definitions but may take several years when more demanding criteria are applied. Middle-income countries typically regain access more ...
Working Paper
Global Spillovers of a China Hard Landing
China?s economy has become larger and more interconnected with the rest of the world, thus raising the possibility that acute financial stress in China may lead to global financial instability. This paper analyzes the potential spillovers of such an event to the rest of the world with three methodologies: a VAR, an event study, and a DSGE model. We find the sentiment channel to be the primary spillover channel to the United States, affecting global risk aversion and asset prices such as equity prices and the dollar, in addition to modest real effects through the trade channel. In comparison, ...
Working Paper
The Effect of Monetary Policy on Housing Tenure Choice as an Explanation for the Price Puzzle
In this paper we provide an alternative explanation for the price puzzle (Sims 1992) based on the effect of monetary policy on housing tenure choice and the weight of the shelter component in overall CPI. In the presence of nominal or financial frictions, when interest rates increase, the real cost of owning a house increases, and this increase may make some people prefer to rent instead of buying. This change in consumption behavior increases the price of rents relative to other goods. Starting in 1983, homeownership costs are based on a measure of implied owner equivalent rent, which is ...
Working Paper
Monetary Policy, Housing Rents and Inflation Dynamics
Working Paper
A Tale of Two Sectors : Why is Misallocation Higher in Services than in Manufacturing?
Recent empirical studies document that the level of resource misallocation in the service sector is significantly higher than in the manufacturing sector. We quantify the importance of this difference and study its sources. Conservative estimates for Portugal (2008) show that closing this gap, by reducing misallocation in the service sector to manufacturing levels, would boost aggregate gross output by around 12 percent and aggregate value added by around 31 percent. Differences in the effect and size of productivity shocks explain most of the gap in misallocation between manufacturing and ...
Newsletter
Debt Statistics a La Carte: Alternative Recipes for Measuring Government Indebtedness
According to Eurostat, the Greek government owed ?317 billion in debt at the end of 2014. This is equivalent to more than 177% of gross domestic product (GDP) or 387% of tax revenue, and amounts to almost ?30,000 per person. This seems like a very large sum. For comparison, of the other highly indebted European countries that received financial assistance, Portuguese government debt amounted to 130% of GDP, while Irish government debt amounted to 110% of GDP
Working Paper
Learning, Prices, and Firm Dynamics
We document new facts about the evolution of firm performance and prices in international markets, and propose a theory of firm dynamics emphasizing the interaction between learning about demand and quality choice to explain the observed patterns. Using data from the Portuguese manufacturing sector, we find that: (1) firms with longer spells of activity in export destinations tend to ship larger quantities at lower prices; (2) older exporters tend to use more expensive inputs; (3) revenue growth within destinations (conditional on initial size) tends to decline with market experience; and (4) ...
Discussion Paper
Debt Statistics a la Carte : Alternative Recipes for Measuring Government Indebtedness
In this note, we apply our same measurement techniques to the debts of Greece, Ireland and Portugal and show that plausible alternative measures of indebtedness suggest that Greece is anywhere from as much as 50% more indebted, to as little as half as indebted as either Portugal or Ireland. We argue that most reasonable measures imply that Greece is far less indebted than is commonly reported, and that indebtedness levels across these three economies are roughly similar.