J. Daniel Aromí - Academia.edu (original) (raw)

Papers by J. Daniel Aromí

This study analyzes mobility patterns during the COVID-19 pandemic for eight large Latin American... more This study analyzes mobility patterns during the COVID-19 pandemic for eight large Latin American cities. Indicators of mobility by socioeconomic status (SES) are generated by combining georeferenced mobile phone information with granular census data. Before the pandemic, a strong positive association between SES and mobility is documented. With the arrival of the pandemic, in most cases, a negative association between mobility and SES emerges. This new pattern is explained by a notably stronger reduction in mobility by high-SES individuals. A comparison of mobility for SES decile 1 vs decile 10 shows that, on average, the reduction is 75% larger in the case of decile 10. According to estimated lasso models, an indicator of government restrictions provides a parsimonious description of these heterogeneous responses. These estimations point to noticeable similarities in the patterns observed across cities. We also explore how the median distance traveled changed for individuals that ...

RePEc: Research Papers in Economics, 2020

Multiple equilibria in models of bank runs imply that coordination of play is a challenging task.... more Multiple equilibria in models of bank runs imply that coordination of play is a challenging task. In particular, for first-play type of situation, successful coordination appears a very strong assumption. We develop a simple representation where depositors tentatively select actions profiles that need not be consistent but can perform research in order to learn about others ’ intentions. We show that changes in fundamentals influence the value of learning about others ’ intentions in a way that can facilitate multiplier effects. This effect can be further amplified by the strategic complementarities in research activities. We identify cases in which the equilibrium is unique. En general, due to strategic complementarities, multiplicity cannot be ruled out. We explore the predictions associated to a form of procedurally rational behavior. 1.

We analyzed the presence of different mean and variance regimens for the misalignment of the real... more We analyzed the presence of different mean and variance regimens for the misalignment of the real exchange rate of Argentina using a switching regimen Markov model with time-varying transition probabilities. Our estimates identified two states in the mean of the real exchange rate misalignment associated with real appreciations and depreciations, being the latter more persistent than the former. On the other hand, we only found one state for the variance of those imbalances. Besides, a close temporal correlation between the mayor stabilization plans and the appreciated state is verified. Finally, we showed that using time-varying transition probabilities is proper approach, being those probabilities explained by domestic variables, like the inflation rate, and international variables, like the US interest rate.

A Bayesian agent is simultaneously learning about the payoff associated to a set of feasible acti... more A Bayesian agent is simultaneously learning about the payoff associated to a set of feasible actions and the precision of the information used to generate the estimate. Learning is endogenous as the agent selects different levels of scarce attention as a function of perceived precision. Variations in attention due to different assessments of precision result in heavier tails and sharper peaks in the distribution of estimation errors. Unlike the known precision case, learning activity can present delays and nonmonotonicities due to revisions in the perception of precision. Another difference with the known precision case is that the sequence of updates shows correlated volatility since a surprising signal leads to a higher level of attention which affects the distribution of future revisions.

This work provides a succinct but rich description of mental processes. These processes are prese... more This work provides a succinct but rich description of mental processes. These processes are presented in an interactive way to illustrate how behavior is a consequence of multiple components. In addition, we present remarks about how these processes are shaped, in the long term, by experience and internal interactions. The findings from psychology are shown to have a potential to fruitfully inform implicit models and formal representations in economic analysis. The connections between this outline and current contributions in economics are considered. Perception: the reception and processing of incoming signals from the environment. This processing sometimes result in conscious representations. Goals: mental representations of desired outcomes or actions. These representations can be activated by cues. This activation can be conscious or unconscious. 3 The goals can be innate (e.g. food consumption) or can be acquired through experience (e.g. entering law school). Attention: allocation of resources to the processing of external stimulus or mental representations. This process can be conscious or not and there are different degrees of resource allocation for this processing. For example, a low level of attention would involve minimum level of processing of visual stimulus. One intermediate example would involve the identification of an object from visual stimulus data. A high level of attention would involve the identification of an object and its conscious representation. Consciousness: the continuous flow of ideas and feelings that can be verbally reported. This process is also known as the executive control system of the mind. This process is has an important role in the activities of planning, reasoning and selfregulation. There is an important constraint in the capacity of system in terms of the ability to represent multiple items. At the same time, this process represents the case with the highest level of integration of supporting mental process. Affect: response to a stimulus that has positive or negative valence. A positive valence stimulus is also known as reward. A negative valence stimulus is also known as punishment. Emotions are complex mental and physiological responses to stimulus that include positive or negative valence, that is, there exist an affect component in emotions. In very simple learning models, rewards serve as positive reinforcers by increasing the frequency of the behavior that results in reward.

Economica, 2017

Uncertainty is approximated processing economic press content from 1900 through 2017. The indicat... more Uncertainty is approximated processing economic press content from 1900 through 2017. The indicator exploits word vector representations that are trained to identify terms that are closely related to uncertainty. The resulting index co-moves with alternative proxies for uncertainty and spikes around crisis episodes. In-sample and out-of-sample forecasting exercises indicate that the proposed metric provides valuable information on future levels of expected stock market volatility (VIX). This informational gain is not observed when simpler text processing techniques are implemented.

This work develops a model of strategic uncertainty in the context of a coordination game. A trac... more This work develops a model of strategic uncertainty in the context of a coordination game. A tractable dynamic system determines the evolution of behavior and beliefs. The learning process is multifaceted as behavior is controlled not only by simple responses that result from reinforcement learning but it is also shaped by Bayesian inferences and strategic reasoning. Strategic uncertainty can persist as behavioral innovations are imperfectly inferred. If experienced stimuli are sufficiently intense, strategic uncertainty can increase. The effect of strategic reasoning on the behavioral reaction to adverse shocks is non-monotonous as it results in dampened reactions under small shocks but amplified reactions for sufficiently large shocks. The inability to anticipate others’ reactions implies larger and more persistent reactions to negative stimuli and reduces the basin of attraction of the payoff dominant equilibrium.

This paper is the first to consider the link between information conveyed by the facial expressio... more This paper is the first to consider the link between information conveyed by the facial expressions of a range of economic actors and economic activity. A collection of photographs is used to construct indicators of emotions communicated by the facial expressions. The indicators correspond to the US economy for the period 1996-2018. Significant links between the level of economic activity and indices of emotional states are observed. Beyond contemporaneous associations, the indicators are shown to anticipate business cycle dynamics. Indices summarizing emotions linked to policy making and the stock market contain more information than indicators linked to corporations.

IMF Economic Review, 2021

Using a sample covering 50 advanced and emerging economies over 1990-2017, it is found that large... more Using a sample covering 50 advanced and emerging economies over 1990-2017, it is found that large current account deficits are followed by systematic negative surprises in economic growth. This regularity is verified both in the case of advanced economies and emerging economies. In addition, large current account deficits are reversed significantly faster than what forecasters anticipate and are followed by low asset returns and drops in sentiment. The findings are robust to changes in the specification and do not seem to be explained by efficient learning dynamics. This evidence indicates that analysts are unable to incorporate the negative information transmitted by large current account deficits and has implications for the understanding of past economic events and for the design of macro-prudential policies.

Estudios económicos, 2014

Se evalúan vínculos entre la evolución del mercado cambiario argentino y el nivel de atención asi... more Se evalúan vínculos entre la evolución del mercado cambiario argentino y el nivel de atención asignado a este mercado en un medio gráfico durante el período 2002-2012. Las estimaciones indican que mayores valores de los rezagos del índice de atención están asociados a una menor tasa de devaluación esperada y a aumentos en las medidas de volatilidad. Estos vínculos son más intensos en períodos con mayor volatilidad. Más allá de las asociaciones lineales, se documenta que el índice tiene importante capacidad predictiva para el caso de grandes movimientos en el tipo de cambio. La evidencia es consistente con instancias de sobrerreacción del tipo de cambio y de coordinación de acciones en base a señales públicas.

Economic Modelling, 2021

This paper is the first to consider the link between information in the facial expressions of eco... more This paper is the first to consider the link between information in the facial expressions of economic actors and economic activity. While much research has focused on text based sentiment, little is understood about the possible information conveyed by facial expressions. A collection of media photographs corresponding to the US economy for the period 1996-2018 is used to construct indices of emotions communicated by facial expressions. The indices are correlated with business cycle conditions, and also contain information about the future state of the business cycle, information that is incremental to that contained in commonly used measures of economic conditions. Social cognition means that emotions transmitted via facial expressions can influence expectations regarding economic prospects, decision making and hence future economic outcomes. The results here open up the possibility of using information from facial expressions to augment existing methods for using text-based sentiment for macroeconomic or financial forecasting. ☆ We thank the editor, Sushanta Mallick, and two anonymous referees for comments and suggestions that greatly improved the paper. J. Daniel would also like to thank Daniel Heymann, Eduardo Olaberria and Marcelo Resico for helpful comments and discussions. Adam Clements would also like to thank Benno Torgler and Stephen Whyte for helpful insights on preliminary work. All remaining errors are our own.

International Journal of Forecasting, 2020

This paper develops indicators of unstructured press information by exploiting word vector repres... more This paper develops indicators of unstructured press information by exploiting word vector representations. A model is trained using a corpus covering 90 years of Wall Street Journal content. The information content of the indicators is assessed through business cycle forecast exercises. The vector representations can learn meaningful word associations that are exploited to construct indicators of uncertainty. In-sample and out-of-sample forecast exercises show that the indicators contain valuable information regarding future economic activity. The combination of indices associated with different subjective states (e.g., uncertainty, fear, pessimism) results in further gains in information content. The documented performance is unmatched by previous dictionary-based word counting techniques proposed in the literature.

International Journal of Forecasting, 2019

We compare the medium-term GDP growth forecasts generated by experts to those generated by simple... more We compare the medium-term GDP growth forecasts generated by experts to those generated by simple models. This study analyzes a large set of forecasts that covers 48 countries from 1997 to 2016. Out-of-sample exercises indicate that no noticeable difference in performance is observed for advanced economies. In contrast, in the case of emerging economies, model forecasts perform better than expert forecasts. In addition, similar patterns are found for a collection of forecasts from a different set of experts, which suggests that the reported regularity is prevalent. Further analyses suggest that the documented difference in performance can be explained by an optimism bias, excessive reactions to innovations in growth trajectories, and insufficient responses to the information contained in the current account balance.

Journal of Applied Economics, 2017

This study evaluates the performance of stock market indices after times of extreme opinions. The... more This study evaluates the performance of stock market indices after times of extreme opinions. The underlying conjecture is that extreme opinions are associated to overreactions in the perception of wealth. The analysis covers 34 countries from 1988 through 2013. In a novel approach, views regarding economic performance are approximated using content in the global economic press. Consistent with the overreaction conjecture, stock market indices are shown to under-perform following extreme optimistic views and over-perform after pessimistic views. A long-short contrarian portfolio earns 11% annually over the next five years. This persistent and predictable difference in returns cannot be explained by risk considerations and cannot be replicated using alternative strategies based on past returns or past economic growth.

Economica, 2013

Se estudia un modelo de corrida bancaria en el que los depositantes no llegaron a un consenso sob... more Se estudia un modelo de corrida bancaria en el que los depositantes no llegaron a un consenso sobre la acción a elegir pero pueden informarse acerca de las intenciones de los otros jugadores. La propiedad de equilibrio indeterminado reaparece en el juego con adquisición de información. En el escenario bajo análisis, el equilibrio con niveles positivos de adquisición de información resulta en mayores probabilidades de quiebra del banco. La correlación en las señales aumenta el espacio de parámetros para el cual existen equilibrios con niveles positivos de adquisición de información y mayor probabilidad de quiebra del banco. Clasificación JEL: C72, G21.

En este trabajo estudiamos para Argentina la presencia de diferentes regimenes en la media y la v... more En este trabajo estudiamos para Argentina la presencia de diferentes regimenes en la media y la varianza de los desequilibrios del TCR respecto de su equilibrio, utilizando un modelo de cambios de regimen tipo Markov con probabilidades de transicion variables. Nuestras estimaciones reconocen dos estados persistentes en la media de los desequilibrios del TCR argentino asociadas a apreciaciones y depreciaciones reales, siendo las depreciaciones reales mas persistentes que las apreciaciones. Por otro lado, encontramos un solo estado de la varianza de dichos desequilibrios. Ademas, se verifica una correspondencia temporal cercana entre los principales planes de estabilizaciA³n y el estado apreciado. Por ultimo, mostramos que el uso de probabilidades de transicion cambiantes en el tiempo es apropiado, siendo dichas probabilidades explicadas por variables locales, como la tasa de inflacion, e internacionales, como la tasa de interes de EE.UU.

Journal of Applied Economics, 2013

We develop a comprehensive quantitative account of changing practices in economics in the last 12... more We develop a comprehensive quantitative account of changing practices in economics in the last 122 years. The analysis uses word detection algorithms to partially characterize prevailing practices. We document a shift toward isolation from other disciplines during most of the twentieth century. In sharp contrast, the most recent decades show a strong move towards a more connected discipline. Periods of more connectedness are associated with openness to a broader set of features of economic agents and the economic environment. In parallel, the 1960s and 1970s show a notable acceleration in the move towards a more mathematical approach. This development did not reverse. As a result, the current state of the discipline is characterized by an embrace of mathematical tools together with openness to a wider set of aspects and findings developed in other disciplines. Most of the reported variables show surprisingly high correlations across disciplines and across journals.

Title of Dissertation: MODELS OF SUPPLY FUNCTION EQUILIBRIUM WITH APPLICATIONS TO THE ELECTRICITY... more Title of Dissertation: MODELS OF SUPPLY FUNCTION EQUILIBRIUM WITH APPLICATIONS TO THE ELECTRICITY INDUSTRY Jose Daniel Aromi, PhD, 2007 Dissertation directed by: Professor Lawrence Ausubel Department of Economics Electricity market design requires tools that ...

Page 1. Asymmetric Supply Function Equilibrium with Applications to Investment Decisions in the E... more Page 1. Asymmetric Supply Function Equilibrium with Applications to Investment Decisions in the Electricity Industry ∗ J. Daniel Aromı University of Maryland Job Market Paper January 29, 2007 ∗I am extremely grateful to my ...