2. Economics Flashcards
Bid Price
- Price @ which the dealer BUYS
- Price where I sell
Offer Price
- Price @ which the dealer SELLS/OFFERS
- Price where I buy
Fwd (Formula)
Fwd = Spot * [1 + if*(Act/360)] / [1 + id * (Act/360)]
Dealer v Market
Comprar barato: Dealer Offer > Interbank Bid
Vender caro: Dealer Bid < Interbank Offer
Fwd Spread (Formula)
Ff/d - Sf/d = Sf/d * [ (Act/360) / 1 + id (Act/360)] (if-id)
How to Close a Fwd
- Buy currency @ offer / Sell @ the bid
- No dia específico, feche a posição fazendo a operação contrária @ preço + bps futuros do tempo T restante
- Para saber a ordem da conta, check if what you hold apreciou / depreciou
- Desconte a valor presente pelos juros da moeda do payoff (price base)
Rolagem de Fwd no Fechamento (Steps)
- Close the actual position by spot (mid between bid-offer)
- Enters in a new fwd
- Calculate net
Parity Conditions
- Covered Interest Rate Parity
- Uncovered Interest Rate Parity
- Fisher (domestic and international)
- PPP (absolute)
- PPP (relative)
- Juros sempre nominais (checar)
Covered Interest Rate Parity (formula)
Fwd = Spot * (1 + ip)/(1+ib)
Uncovered Interest Rate Parity (formula)
Δ%Sa/b = (Ra - Rb)
- Asset returns should be equal in different countries.
- Interest rates differential adjusts this
- Hold in the long run (not ST, MT)
- Impede profits shorting low yield; long high yield.
Fisher Domestic
If - Id (nominal) = (rf - rd) + (πf - πd)
Diferencial nominal de juros = Yield Spread + Inflation Spread
Fisher International
Ra - Rb (nominal) = πexpA - πexpB
Diferencial de Juros = Diferencial de Expectativas de Inflação
PPP Absolute
Spot = Diferença entre níveis de preço entre 2 países
Pf / Pd = Sf/d
PPP Relative
Δ%Spot A/B = (πA - πB)
Ex Ante PPP
- Igual a Relative PPP , mas usa Expected Inflation
Δ%Spot A/B = (πEXPa - πEXPb)
If Ex Ante PPP + UIRP holds
- Juros global é o mesmo
Supply/Demand Channel (BoP)
If X > M, more people abroad demand local currency and it appreciates (contraintuitivo)
Portfolio Balance Approach (BoP)
Country w/ CA surplus sends capital to country in deficit. Country w/ deficit remains susceptible to selloff.
Debt Sustainability Channel (BoP)
Debt/GDP should be sustainable in the long term
Capital Accounts
Hot Money may be the bad guy
Mundell Fleming
Pensa no fluxo de capitais
↑ High Rates = ↑ Capital Flows (e vice-versa)
Mundell Fleming (Fixed FX)
Monetário Expansionista: Argentina vai ter que recomprar FX com reserva cambial, ou seja, não ajuda tanto o monetário
Fiscal Expansionista: Teoricamente pode vender eternamente
Mundell Fleming (High Mobility)
Canal Fiscal: Juros (Fluxos de Capital)
↑ Juros (Expansionista) = Moeda APRECIA
↓ Juros (Restritiva) = Moeda DEPRECIA
Canal Monetário:
↓ Juros (Expansionista) = Moeda DEPRECIA
↑ Juros (Restritiva) = Moeda APRECIA
Mundell Fleming (Low Mobility)
Canal Fiscal: Demanda Agregada
↑ Demanda (Expansionista) = Moeda DEPRECIA
↓ Demanda (Restritiva) = Moeda APRECIA
Canal Monetário: (X-M)
Expansionista = Moeda DEPRECIA
Restritiva = Moeda APRECIA
Pure Monetary Approach
- Milton Friedman (mv = py)
- If PPP holds, aumento de oferta monetária aumentará inflação doméstica = repasse cambial.
Dornbusch Overshooting Model
Prices lag to respond (sticky)
Short Run: ↑ M0 = ↑ CPI does not change
Long Run: ↑ M0 = ↑ CPI = ↓ Sf/d
FX Interventions (IMF Guidelines)
FX undervalued: don’t act
FX overvalued:
π threat: ↑ M0, mas esteriliza vendendo bonds
π not a threat: Pode imprimir M0
- Macro Balance Approach (IMF Guidelines)
FX aprecia/deprecia p/ fechar a Conta Corrente
- External Sustainability (IMF Guidelines)
FX aprecia/deprecia p/ balanear as Contas Externas
- Reduced Form Econometric Model (IMF Guidelines)
FX = Função de várias coisas
Equity and Economic Growth Relationship (Formula)
Δ%Peqt = Δ%GDP + Δ%E/GDP + Δ%P/E
Cobb-Douglas Function (Formula)
Y = T* (K^α) * (L^(1-α))
Production Function
Alpha (α) Definition
% of GDP allocated to Kapital
(1-α) Definition
% of GDP allocated to Labor
“T” or “A” Definition
Total Factor Productivity
Capital Deepening Limitations
It has diminishing marginal returns
Alpha (α) Formula
α = rK/Y
MPK (Formula / Definition)
MPK = r = αY/K
Work Productivity Definition
Labor Productivity = Growth Technology + Growth Capital Deepening (limited)
Growth Accounting Relations
ΔY/Y = ΔA/A + α (ΔK/K) + [(1-α) *ΔL/L]
- Coloca tudo em derivada
- Usa pra calcular PIB Potencial
Potential GDP Formulas
1) Δ% GDP = (α * Δ%K) + [(1-α) * Δ%L]
2) Δ% GDP = Δ%Labor Force + Δ%Productivity
3) Δ% GDP = Tech + (αKapital) + [(1-α)Labor]
Malthus Model
- Income rises, population growths until additional resources are completely depleted
Neoclassical Model
- Parte da função de produção de Cobb-Douglas
- No equilíbrio, k e y (capital e output per worker) crescem a uma mesma taxa CONSTANTE
- Nos eixos X e Y estarão k e y, respectivamente
- No steady state, Capital Deepening não afeta (i) taxa de cresciemnto da economia ou (ii) MPK
Output Per Capital Growth Rate (Formula)
g* = θ / (1-α)
Output Growth Rate (Formula)
G* = θ / (1-α) + ΔL/L
Fórmula da Constante Y/K
Ψ = Y/K = (1/s) * [θ / (1-α)] + δ + ΔL/L, where
s = savings δ = depreciation
S = [θ / (1-α) + δ + n] *k, pra manter a porra toda
Endogenous Growth Theory
- K has no diminishing marginal returns
↑ S ou ↑ Inv = ↑ Rate of Economic Growth
Convergence Theories (types)
É do modelo neoclássico. Não é endógeno.
1) Abolute: EM will achieve DM because everyone has the same technology
2) Conditional: Convergence occurs only if countries have the same Savings, Population Growth and Production Functions
3) Club Convergence: OECD rules
Economics of Regulation RATIONALE
1) Informational assymetry
2) Externalities
Eco of Regulation PURPOSE
1) Regulate commerce (tax, labor, banking, bankruptcy, contract, competition)
2) Regulate financial markets
Net Regulatory Burden (Formula)
- NRB = (Reg Burden - Private Benefits)
- Reg Burden = Cost of Compliance for Regulated Entity
- Cost of Compliance = Direct + Unanticipated + Unintended
Organization Classifications
- Self-Regulatory Bodies: Regulate its own members. Power from its own members.
- Self-Regulatory Org: SRB recognized by the government
Regulatory Competition
EU v. UK for financial markets
Regulatory Arbitrage
Buscar jurisdições favoráveis ao invés de mudar o próprio comportamento
Regulatory Capture
Conflito de interesse entre profissionais de mercado e management de instituições reguladoras
Regulatory Intervention Mechanisms
- Price (tax, subsidies)
- Restriction for licenses
- Provision of public goods (monopoly - PETR4)
