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Author: fpcordeiro

_pages/research.md

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 - **[Long-term Yields Implied by Stochastic Discount Factor Decompositions](https://periodicos.fgv.br/bre/article/view/76365)** [Brazilian Review of Econometrics, Vol. 39 No. 1 (2019)] _with [Caio Almeida](https://sites.google.com/view/caio-almeida)_
   ><span style="font-size:0.75em">We use the framework developed by Christensen (2017) and Hansen and Scheinkman (2009) to study the long-term interest rates in the US and Brazil. We apply a nonparametric estimator to US and Brazilian data to identify how the yield of a long-term zero-coupon bond responds to the initial state of the economy. Using a flexible specification for the state process leads to an interesting non-linear response of the yield to changes in the initial state. As a by-product of our work, we assess the performance of Christensen’s estimator using Monte Carlo simulations based on two widely adopted asset pricing models (rare disasters and habit formation). Adopting US and Brazilian data on aggregate consumption and dividends, we also provide an empirical analysis based on the different asset pricing models analyzed and further including the Epstein-Zin model with unitary elasticity of substitution adopted by Christensen (2017). While long-term yields for the rare disasters and habit models appear to be too high, we identify plausible values for those yields when adopting the Epstein–Zin model, respectively of 5.7% (US) and 5.4% (Brazil) per year.</span>
 
-- **[Just Words? A Quantitative Analysis of the Communication of the Central Bank of Brazil](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2335825)** (Revista Brasileira de Economia 67, December 2013; SSRN update in 2014) _with [Carlos Viana de Carvalho](https://sites.google.com/site/cvianac2/carloscarvalho) and Juliana Vargas_
+- **[Just Words? A Quantitative Analysis of the Communication of the Central Bank of Brazil](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2335825)** [Revista Brasileira de Economia 67, December 2013; SSRN update in 2014] _with [Carlos Viana de Carvalho](https://sites.google.com/site/cvianac2/carloscarvalho) and Juliana Vargas_
   ><span style="font-size:0.75em">We quantify the informational content of statements issued by the interest-rate setting committee of the Central Bank of Brazil (COPOM), building on the methodology developed by Lucca and Trebbi (2011). Using Google search queries, we measure the extent to which each COPOM statement is perceived to be associated with more "hawkish" or "dovish" language. This allows us to construct a time-series of the informational content of COPOM statements, which we then use in regressions to explain changes in the term-structure of interest rates around COPOM meetings -- together with a market-based measure of interest-rate surprises. We find that, during Governor Tombini's tenure, interest-rate surprises started to be "passed through" one-to-one (or more) even at long maturities, as markets seem to have bought into the idea that the interest-rate cuts that began in mid-2011 would lead to lower yields in Brazil into the foreseeable future. Most importantly, changes in the informational content of COPOM statements seem to have meaningful effects on yields at short-to-medium maturities. However, this result only holds for the period prior to Tombini's tenure.</span>
 
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