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Topics in Emerging Markets

Paper Session

Saturday, Jan. 4, 2020 8:00 AM - 10:00 AM (PDT)

Manchester Grand Hyatt, Promenade B
Hosted By: Latin American and Caribbean Economic Association & American Economic Association
  • Chair: Carmen Reinhart, Harvard University

The Return to Capital in Capital Scare Countries

Anusha Chari
,
University of North Carolina-Chapel Hill and NBER
Jennifer Rhee
,
Federal Deposit Insurance Corporation

Abstract

Capital flows from rich countries (capital-abundant) to poor countries (capital-scarce) fall short of what neoclassical theory predicts. To explain the shortfall in capital flows to capital-scarce countries, this paper uses firm-level data to investigate the relatively-unexplored link between marginal products of capital and financial rates of return. The data show that although firms in capital-scarce countries enjoy higher marginal products of capital, financial investment returns are roughly equal between rich and poor countries. We highlight the importance of cross-country differences in capital accumulation efficiency to explain the observed patterns of financial returns.

Currency Hedging in Emerging Markets: Managing Cash Flow Exposure

Laura Alfaro
,
Harvard University
Mauricio Calani
,
Central Bank of Chile
Liliana Varela
,
London School of Economics

Abstract

Foreign currency derivative markets are among the largest markets in the world. Their role is relatively understudied, in particular in emerging markets. In this paper, we assess firms’ hedging behavior by employing a unique dataset covering the universe of FX derivative transactions in Chile since 2002. Chile’s economy offers a great laboratory to study firms’ use of FX derivatives. Since 2001 it has pursued a floating regime, and has experienced both, periods of large appreciation and depreciation which have had mild overall effects on the real economy and on inflation. Firms tend to borrow abroad in foreign currency. To assess firms’ hedging choices in accordance to their currency exposure, we merge transaction data on forwards and swaps with exports, imports and credit data by currency denomination at the firm level. This unique dataset allows to track closely firms’ exposure to currency risk and their hedging strategy in all economic activities and over a long panel.

Measuring Inflation: Using Crowdsourcing and Mobile Phones

Alberto Cavallo
,
Harvard University

Abstract

This paper uses crowd-sourcing and mobile phones to measure inflation in Venezuela between 2017 and 2019, a period lacking official inflation statistics. I focus on the methodological challenges and opportunities of collecting data using "freelancers" that have no specialized knowledge of price data collection. For more than two years, these workers periodically used a custom-made app on their phones to scan product barcodes, enter prices, take photos of the price tags, and send the information via email. The photos were then used by other freelancers to validate the prices. The resulting data was automatically processed and used to construct a price index with standard CPI methodology. This method could be used in similar settings by organizations that need to collect data independently from the local governments, or by National Statistical Offices that need an alternative approach for categories or locations where traditional methods are not viable.
Discussant(s)
Tim Schmidt-Eisenlohr
,
Federal Reserve Board
Nicolas Magud
,
International Monetary Fund
Fabio Kanczuk
,
World Bank & University of São Paulo
JEL Classifications
  • F0 - General
  • E0 - General