Cristina Terra | CY Cergy Paris Université (original) (raw)
Papers by Cristina Terra
Principles of International Finance and Open Economy Macroeconomics, 2015
The exchange rate models presented in this chapter are useful to analyze the short-run dynamics, ... more The exchange rate models presented in this chapter are useful to analyze the short-run dynamics, when prices have not yet completely adjusted to shocks in the economy. This chapter covers two sticky price models. In the first, known as the Mundell–Fleming model, prices are maintained fixed. It represents the very short run where no economic shocks are transferred to prices. In the second, named the Mundell–Fleming–Dornbusch model, prices adjust, however slowly, according to the convergence rule for their long-run value. It allows the analysis of the real impacts of a monetary shock in the transition period after an economic shock.
Principles of International Finance and Open Economy Macroeconomics, 2015
The models to determine the nominal exchange rate can be divided into two broad groups: the monet... more The models to determine the nominal exchange rate can be divided into two broad groups: the monetary models and the portfolio diversification models. This chapter covers the exchange movement in the long run, assuming the prices of goods are perfectly flexible. The focus of this model is the money market and the analysis of the impact of monetary shocks. The model shows how monetary policy affects the exchange rate, abstracting from considerations regarding the real side of the economy.
Principles of International Finance and Open Economy Macroeconomics, 2015
Political motives drive governments into choosing particular exchange rate policies. This chapter... more Political motives drive governments into choosing particular exchange rate policies. This chapter analyzes distributive aspects of the exchange rate when the choice of exchange rate level is based on the conflicting interests of different sectors of the economy. The second part of the chapter examines exchange rate policy as a signal of the degree of government competence and the resulting electoral cycle. The third part considers fiscal policy and the way it affects the equilibrium real exchange rate.
Principles of International Finance and Open Economy Macroeconomics, 2015
Principles of International Finance and Open Economy Macroeconomics, 2015
In this chapter, we develop a model to determine the equilibrium value of the real exchange rate,... more In this chapter, we develop a model to determine the equilibrium value of the real exchange rate, by extending the intertemporal model of the current account described in Chapter 4 to include nontradable goods. We start by showing the relation between the real exchange rate and the price of nontradable goods. We derive the relation between the equilibrium real exchange rate and the current-account balance, and we show that a more depreciated real exchange rate is associated with a higher current-account balance. Finally, we show how the real exchange rate responds to shocks to the economy.
Principles of International Finance and Open Economy Macroeconomics, 2015
SSRN Electronic Journal, 2000
ABSTRACT There is an argument in the literature that open-market sovereign debt repurchases are n... more ABSTRACT There is an argument in the literature that open-market sovereign debt repurchases are not beneficial for the debtor country, even if they can alleviate debt overhang. This paper shows that debt buybacks can actually lead to a worsening of the debt overhang problem. This is possible if the real return on investment in the debtor country is sufficiently high, so that resources used to finance the buyback have a high opportunity cost, and the debt reduction is small compared to the amount of resources allocated to the repurchase. In 1994 the Brazilian government restructured its external debt financing package as part of the Brady plan initiative. The Brady plan was an attempt for severely indebted countries to achieve a debt reduction at a price lower than the one through secondary market buybacks, and therefore retaining some of the (possible) efficiency gains. Using open-market buybacks as benchmark, bounds for possible gains from the deal are calculated, and an assessment is made in respect to whether the deal helped alleviating the debt overhang problem.
Journal of Development Economics, 1999
This paper provides a novel perspective on the dynamics of infant industry protection. Trade poli... more This paper provides a novel perspective on the dynamics of infant industry protection. Trade policies are analyzed when the industrial sector generates positive externalities in production, and there are adjustment costs to changing production between sectors. If the government is able to precommit to its future tariff schedule, the welfare maximizing policy is to maintain a positive tariff forever, even after the steady state is reached. However, if no precommitment is possible, the only time-consistent policy is zero tariff always. The case with precommitment for a limited period of time is also analyzed.
Journal of Economic Dynamics and Control, 2015
This paper proposes a unified theoretical framework where formal and informal firms coexist and f... more This paper proposes a unified theoretical framework where formal and informal firms coexist and face the same type of product and labor market imperfections: they have monopoly power in the goods market, they are subject to matching frictions in the labor market, and wages are determined by bargaining between large firms and their workers, through either individual or collective bargaining. Our model matches the main stylized facts on informality for developing countries and appears to be a good candidate for policy analysis. In this framework, we study the impact on informality, wages and unemployment of policies that may be used to reduce informality. We consider changes in product market regulation (PMR) and in two types of fiscal policies, labor taxes and formality enforcement. We find that lessening PMR decreases informality and unemployment simultaneously, indicating that there is not necessarily a tradeoff between informality and unemployment. The tradeoff appears when fiscal policies are used, though. Moreover, the impacts of PMR on unemployment and on wages are larger under collective than individual bargaining. With respect to wage inequality, lessening PMR reduces it, while lower taxes tend to increase the formal sector wage premium.
como quesito parcial à obtenção do grau de Mestre em
Any opinions expressed here are those of the author(s) and not those of IZA. Research published i... more Any opinions expressed here are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. IZA Discussion Papers often represent preliminary work and are circulated to enco...
Among East Asian countries, real exchange rates (RER) tend to be more depreciated before and appr... more Among East Asian countries, real exchange rates (RER) tend to be more depreciated before and appreciated after elections, forming an electoral cycle in the opposite direction of the one exhibited by Latin American countries. This paper proposes a theoretical model that explains the opposite RER electoral cycle in these two regions. In a setup where policy-makers differ in their preference bias towards non-tradable and tradable sector citizens, the RER is used a noisy signal of the incumbent’s type in an uncertain economic environment. The mechanism behind the cycle is engendered by the incumbent trying to signal he is median voter’s type, biasing his policy in favor of the majority of the population before elections. The driving forces of the opposite exchange rate populism in these two regions is the RER distributive effects and the difference of the relative size of tradable and non-tradable sectors in these two regions. ∗Université de Cergy-Pontoise, THEMA, F-95000 Cergy-Pontoise...
Principles of International Finance and Open Economy Macroeconomics, 2015
The exchange rate models presented in this chapter are useful to analyze the short-run dynamics, ... more The exchange rate models presented in this chapter are useful to analyze the short-run dynamics, when prices have not yet completely adjusted to shocks in the economy. This chapter covers two sticky price models. In the first, known as the Mundell–Fleming model, prices are maintained fixed. It represents the very short run where no economic shocks are transferred to prices. In the second, named the Mundell–Fleming–Dornbusch model, prices adjust, however slowly, according to the convergence rule for their long-run value. It allows the analysis of the real impacts of a monetary shock in the transition period after an economic shock.
Principles of International Finance and Open Economy Macroeconomics, 2015
The models to determine the nominal exchange rate can be divided into two broad groups: the monet... more The models to determine the nominal exchange rate can be divided into two broad groups: the monetary models and the portfolio diversification models. This chapter covers the exchange movement in the long run, assuming the prices of goods are perfectly flexible. The focus of this model is the money market and the analysis of the impact of monetary shocks. The model shows how monetary policy affects the exchange rate, abstracting from considerations regarding the real side of the economy.
Principles of International Finance and Open Economy Macroeconomics, 2015
Political motives drive governments into choosing particular exchange rate policies. This chapter... more Political motives drive governments into choosing particular exchange rate policies. This chapter analyzes distributive aspects of the exchange rate when the choice of exchange rate level is based on the conflicting interests of different sectors of the economy. The second part of the chapter examines exchange rate policy as a signal of the degree of government competence and the resulting electoral cycle. The third part considers fiscal policy and the way it affects the equilibrium real exchange rate.
Principles of International Finance and Open Economy Macroeconomics, 2015
Principles of International Finance and Open Economy Macroeconomics, 2015
In this chapter, we develop a model to determine the equilibrium value of the real exchange rate,... more In this chapter, we develop a model to determine the equilibrium value of the real exchange rate, by extending the intertemporal model of the current account described in Chapter 4 to include nontradable goods. We start by showing the relation between the real exchange rate and the price of nontradable goods. We derive the relation between the equilibrium real exchange rate and the current-account balance, and we show that a more depreciated real exchange rate is associated with a higher current-account balance. Finally, we show how the real exchange rate responds to shocks to the economy.
Principles of International Finance and Open Economy Macroeconomics, 2015
SSRN Electronic Journal, 2000
ABSTRACT There is an argument in the literature that open-market sovereign debt repurchases are n... more ABSTRACT There is an argument in the literature that open-market sovereign debt repurchases are not beneficial for the debtor country, even if they can alleviate debt overhang. This paper shows that debt buybacks can actually lead to a worsening of the debt overhang problem. This is possible if the real return on investment in the debtor country is sufficiently high, so that resources used to finance the buyback have a high opportunity cost, and the debt reduction is small compared to the amount of resources allocated to the repurchase. In 1994 the Brazilian government restructured its external debt financing package as part of the Brady plan initiative. The Brady plan was an attempt for severely indebted countries to achieve a debt reduction at a price lower than the one through secondary market buybacks, and therefore retaining some of the (possible) efficiency gains. Using open-market buybacks as benchmark, bounds for possible gains from the deal are calculated, and an assessment is made in respect to whether the deal helped alleviating the debt overhang problem.
Journal of Development Economics, 1999
This paper provides a novel perspective on the dynamics of infant industry protection. Trade poli... more This paper provides a novel perspective on the dynamics of infant industry protection. Trade policies are analyzed when the industrial sector generates positive externalities in production, and there are adjustment costs to changing production between sectors. If the government is able to precommit to its future tariff schedule, the welfare maximizing policy is to maintain a positive tariff forever, even after the steady state is reached. However, if no precommitment is possible, the only time-consistent policy is zero tariff always. The case with precommitment for a limited period of time is also analyzed.
Journal of Economic Dynamics and Control, 2015
This paper proposes a unified theoretical framework where formal and informal firms coexist and f... more This paper proposes a unified theoretical framework where formal and informal firms coexist and face the same type of product and labor market imperfections: they have monopoly power in the goods market, they are subject to matching frictions in the labor market, and wages are determined by bargaining between large firms and their workers, through either individual or collective bargaining. Our model matches the main stylized facts on informality for developing countries and appears to be a good candidate for policy analysis. In this framework, we study the impact on informality, wages and unemployment of policies that may be used to reduce informality. We consider changes in product market regulation (PMR) and in two types of fiscal policies, labor taxes and formality enforcement. We find that lessening PMR decreases informality and unemployment simultaneously, indicating that there is not necessarily a tradeoff between informality and unemployment. The tradeoff appears when fiscal policies are used, though. Moreover, the impacts of PMR on unemployment and on wages are larger under collective than individual bargaining. With respect to wage inequality, lessening PMR reduces it, while lower taxes tend to increase the formal sector wage premium.
como quesito parcial à obtenção do grau de Mestre em
Any opinions expressed here are those of the author(s) and not those of IZA. Research published i... more Any opinions expressed here are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. IZA Discussion Papers often represent preliminary work and are circulated to enco...
Among East Asian countries, real exchange rates (RER) tend to be more depreciated before and appr... more Among East Asian countries, real exchange rates (RER) tend to be more depreciated before and appreciated after elections, forming an electoral cycle in the opposite direction of the one exhibited by Latin American countries. This paper proposes a theoretical model that explains the opposite RER electoral cycle in these two regions. In a setup where policy-makers differ in their preference bias towards non-tradable and tradable sector citizens, the RER is used a noisy signal of the incumbent’s type in an uncertain economic environment. The mechanism behind the cycle is engendered by the incumbent trying to signal he is median voter’s type, biasing his policy in favor of the majority of the population before elections. The driving forces of the opposite exchange rate populism in these two regions is the RER distributive effects and the difference of the relative size of tradable and non-tradable sectors in these two regions. ∗Université de Cergy-Pontoise, THEMA, F-95000 Cergy-Pontoise...