We make a case for the usefulness of an optimal control approach for the central banks' choice of interest rates in inflation target regimes. We illustrate it with data from selected developed and emerging countries with longest experience of inflation targeting.

Nontraded inputs account for the lion's share of a Big Mac price (Ong 1997, Parsley and Wei 2003). Major departures from Big Mac PPP may then be explained by the Balassa-Samuelson income differences effect, as shown e.g. by Click (1996). But it has been argued that Click''s result is not robust...

Following the real appreciation of the US dollar in the first half of the 1980s, travel expenditures in the current account soared. Employing standard regression techniques as well as Markov-switching regime analysis we show that such expenditures did not return to their pre-appreciation levels...

We evaluate the performance of 307 Brazilian stock mutual funds employing stochastic frontiers. We list the top ten actively managed funds and the bottom ten for the period April 2001-July 2003, and show that a fund's efficiency increases with management skill to beat the market. We also find...

Employing both cointegration analysis and a variety of Granger causality tests, we examine whether the Brazilian stockmarket is efficient in processing new information about public macroeconomic data (semi-strong efficiency). We find the stockmarket to be inefficient, which is in line with most...

We consider the cointegration approach of generalized purchasing power parity to show that a necessary condition for Mercosur to be an optimum currency area is met. Yet there are still large cross-country differences as to cast doubt on the success of either monetary union or official...

The scaling of the probability distribution of the Sao Paulo Stock Exchange index is shown to be described by a Levy stable stochastic process for the modal region of the distribution. Data refer to daily records for the 30-year period 1968-1998. The truncated Levy process is characterized by a...

We show that a two-harmonic log-periodic formula fits the high-frequency data from the Dow Jones Industrial Average index, which encompass the recent episode known as the “flash crash†of May 6, 2010.

We examine the relationship between stock returns and foreign investment in Brazil, and find that the inflows of foreign investment boosted the returns from 1995 to 2005. There was a strong contemporaneous correlation, although not Granger causality. Foreign investment along with the exchange...