Abstracts

"Non-linear Tests of Weakly Efficient Markets: Evidence from Government Bond Markets in the Euro Area," with João Teixeira, forthcoming in Cadernos do Mercado de Valores Mobiliários, nº3, First Semestre, 1999, Comissão do Mercado de Valores Mobiliários.

Abstract: This paper investigates the existence of non-linear dependence in twelve financial time series namely ten years government bonds price quotes. Non-linear dependence may exist in a series even if we have already concluded for the lack of linear dependence. If present, non-linear dependence would contradict the random walk model and the financial markets weak form efficiency hypothesis. Using daily observations for the price quotes of the ten years government bonds benchmarks, for the Euro area, some so-called non-linearity tests are performed in order to decide whether it is possible to accept the weak form efficiency hypothesis

JEL classification: C14, G14.

Keywords: market efficiency; non-linearity tests; bond markets; Euro area.

"Credit Rationing and Monetary Transmission: Evidence for Portugal," with Miguel St. Aubyn, Department of Economics, ISEG-UTL, Working Paper nº 7/98, April, 1998.

Abstract The hypothetical existence of rationing in the credit market is of paramount importance to understand the transmission mechanism of monetary policy. Two indirect empirical tests of credit rationing are presented and discussed using Portuguese data. The first test is a stickiness test to the response of loan rates to changes in money market conditions. For the second test a VAR is estimated in order to analyse the implied causality relations.

JEL classification: E44.

Keywords: credit rationing; credit market; banking; causality tests; Portugal.

"Uma Nota sobre o Value at Risk: Conceitos e Utilização na Banca Portuguesa," Department of Economics, ISEG-UTL, Working Paper nº 1/98, January, 1998.

Abstract: This article briefly presents the Value at Risk (VaR) concept, the techniques available for its computation and the problems inherent to the measure. An inquiry to the Portuguese banking sector was also conducted, on November 1997, in order to assess whether the measure was actively used. A first conclusion seems to be that only 31 per cent of the sector is actually computing VaR, although almost every bank admits that the VaR statistic is a very important calculation.

"Is There Credit Rationing in Portuguese Banking?" with Miguel St. Aubyn, Department of Economics, ISEG-UTL, Working Paper nº 6/97, October, 1997.

Abstract: The (hypothetical) existence of credit rationing in the credit market is of paramount importance for understanding the transmission mechanism of monetary policy. We present the main theoretical results concerning this issue and discuss a number of empirical tests and findings for other countries. Tests for credit rationing are proposed and performed using Portuguese data. Results are interpreted so that a tentative answer to the title question is provided.

JEL classification: E44;

Keywords: credit rationing; credit market; banking; causality tests; Portugal.

"The Economics of Budget Deficits and Public Debt", Department of Economics, ISEG-UTL, Working Paper nº 5/97, October, 1997.

Abstract: The relationship between the Central Bank and the Treasury, concerning deficit financing, may be seen as a game where the two players only arrive to the best common outcome if they co-operate. Long-run debt arithmetic’s unpleasantness relies crucially on the eventuality that real interest rate exceeds real economic growth. This paper offers some known theoretical considerations on these topics. Results concerning the key hypothesis of the long-run arithmetic’s for the Portuguese reality, for the period 1974-1996, are also presented, showing the existence of an explosive public debt difference equation from 1992 to 1996.

"Normality and Efficiency in Portuguese Stock Exchange Indexes", Estudos de Economia, XVI-XVII, Winter, 1997, 101-106.

Abstract: This paper tries to assess the normality of two portuguese stock exchange indexes, using daily returns for the period 1990-1995. The results of the tests allow to discard the hypothesis of normality. Weak form efficiency, evaluated through runs tests, is also rejected.

"Efficiency in Portuguese Stock Exchange Indexes: Runs Tests and BDS Statistic," with João Teixeira, Department of Economics, ISEG-UTL, Working Paper nº 2/97, April, 1997.

Abstract: This paper tries to assess the efficiency of the Portuguese sector stock exchange indexes. Using daily returns for the period 1990-1996 an old (runs tests) and a new test (BDS statistic) are performed in order to decide whether we can accept the weak form efficiency hypothesis. Computation of the BDS statistic led us to conclude that stock exchange indexes daily returns are non-linearly dependent. The runs tests show that at best, some of those series may be linearly independent.

"Public Deficits and Inflation, some more Results for Portugal", Estudos de Economia, XV (3), April-June, 1995, 273-286.

Abstract: This paper intends to evaluate the existence of a relation between public deficits and inflation using quarterly data for Portugal. For the period 1978:2-1994:4 some reaction functions were tested in order to assess the inflationary effect of public deficits The results allow us to accept the absence of effects of the deficit upon the money supply or even upon the monetary base. It is however possible to validate the existence of a direct effect of the deficit on inflation, which corroborates the findings of other papers (see Santos (1992)) and of other approaches (Afonso (1992, 1993)).

"Causality between Public Deficits and Inflation: Some Tests for the Portuguese Case", Estudos de Economia, XIII (4), July-September, 1993, 349-362.

Abstract: The empirical research of the relation between deficits and inflation can be conducted through Granger-causality tests. Results presented by several authors are inconclusive and even contradictory. The tests made for Portugal, for the 1979:1 1994:4 period, show some evidence that deficits cause inflation. This is true in a bivariate model and also in a trivariate model which includes the monetary base (or even the money stock measured by M2). The stock of internal direct debt is used to build a proxy for the deficit. There is no evidence that inflation causes the deficits and the same is true for the monetization hypothesis, so that one can assume that the relation between deficits and inflation is probably through aggregate demand.

Défices Públicos e Inflação (Public Deficits and Inflation), October, 1992, Master’s thesis.

Abstract: Economic theory usually sustains that increases in budget deficits produce higher rates of inflation. This relationship can be established either through aggregate demand or as a result for debt monetization. Sargent and Wallace's unpleasant monetarist arithmetic model is discussed and one can conclude that its main hypothesis is not verified in Portugal for the period 1985-90. Empirical research of the relation between deficits and inflation is commonly based upon the estimation of money supply regressions, where a proxy for the deficit appears as an independent variable, and through Granger-causality tests. Results presented by several authors are inconclusive and even contradictory. The tests made for Portugal show some evidence that deficits cause inflation. This is true in a bivariate model and also in a trivariate model which includes the monetary base (or even the money stock measured by M2). The stock of internal direct debt is used to build a proxy for the deficit. There is no evidence that inflation causes the deficits and the same is true for the monetization hypothesis, so that one can assume that the relation between deficits and inflation is probably through aggregate demand. The reaction functions estimated are consistent with these results.