Person: Levy Yeyati, Eduardo
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Levy Yeyati
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Eduardo
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Levy Yeyati, Eduardo
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Publication An Integrated Epidemiological and Economic Model of COVID-19 NPIs in Argentina(Center for International Development at Harvard University, 2022-11) Rubinstein, Adolfo; Levy Yeyati, Eduardo; López Osornio, Alejandro; Filippini, Federico; Santoro, Adrian; Cejas, Cintia; Bardach, Ariel; Palacios, Alfredo; Argento, Fernando; Balivian, Jamile; Augustovski, Federico; Pichón Riviere, AndrésWe added a multi-sectoral economic framework to a SVEIR epidemiological model, combining the economic rationale of the DAEDALUS model with a detailed treatment of lockdown fatigue and declining compliance with Public Health and Social Measures reported in recent empirical work, to quantify the epidemic and economic benefits and costs of alternative lockdown and PHSM policies, both in terms of intensity and length. Our calibration replicates key features of the case and death-curves and economic cost for Argentina in 2021. The model allows us to quantify the short-term policy trade-off between lives and livelihoods and show that it can be significantly improved with targeted pharmaceutical policies such as vaccine rollout to reduce mainly severe disease and the death toll from COVID-19, as has been highlighted by previous studies.Publication Lockdown Fatigue: The Diminishing Effects of Quarantines on the Spread of COVID-19(Center for International Development at Harvard University, 2021-02) Goldstein, Patricio; Levy Yeyati, Eduardo; Sartorio, LucaNon-Pharmaceutical Interventions (NPIs) have been for most countries the key policy instrument utilized to contain the impact of the COVID-19 pandemic. In this article, we conduct an empirical analysis of the impact of these policies on the virus’ transmission and death toll, for a panel of 152 countries, from the start of the pandemic through December 31, 2020. We find that lockdowns tend to significantly reduce the spread of the virus and the number of related deaths. We also show that this benign impact declines over time: after four months of strict lockdown, NPIs have a significantly weaker contribution in terms of their effect in reducing COVID-19 related fatalities. Part of the fading effect of quarantines could be attributed to an increasing non-compliance with mobility restrictions, as reflected in our estimates of a declining effect of lockdowns on measures of actual mobility. However, we additionally find that a reduction in de facto mobility also exhibits a diminishing effect on health outcomes, which suggests that lockdown fatigues may have introduced broader hurdles to containment policies.Publication On the effectiveness of exchange rate interventions in emerging markets(Center for International Development at Harvard University, 2014-09) Daude, Christian; Levy Yeyati, Eduardo; Nagengast, ArneWe analyze the effectiveness of exchange rate interventions for a panel of 18 emerging market economies during the period 2003-2011. Using an error-correction model approach we find that on average intervention is effective in moving the real exchange rate in the desired direction, controlling for deviations from the equilibrium and short-term changes in fundamentals and global financial variables. Our results are robust to different samples and estimation methods. We find little evidence of asymmetries in the effect of sales and purchases, but some evidence of more effective interventions for large deviations from the equilibrium. We also explore differences across countries according to the possible transmission channels and nature of some global shocks.Publication The Cost of Holding Foreign Exchange Reserves(Center for International Development at Harvard University, 2019-05) Levy Yeyati, Eduardo; Gómez, Juan FranciscoRecent studies that have emphasized the costs of accumulating reserves for self-insurance purposes have overlooked two potentially important side-effects. First, the impact of the resulting lower spreads on the service costs of the stock of sovereign debt, which could substantially reduce the marginal cost of holding reserves. Second, when reserve accumulation reflects countercyclical LAW central bank interventions, the actual cost of reserves should be measured as the sum of valuation effects due to exchange rate changes and the local-to-foreign currency exchange rate differential (the inverse of a carry trade profit and loss total return flow), which yields a cost that is typically smaller than the one arising from traditional estimates based on the sovereign credit risk spreads. We document those effects empirically to illustrate that the cost of holding reserves may have been considerably smaller than usually assumed in both the academic literature and the policy debate.Publication Varieties of Capital Flows: What Do We Know?(Center for International Development at Harvard University, 2015-05) Levy Yeyati, Eduardo; Zuniga, JimenaCapital flows have been the subject of key policy concern since the Brady plan launched the emerging markets asset class. Their massive volume, coupled with their volatile and procyclical nature, is often associated with a variety of financial and real risks: excess exchange rate volatility (gradual overvaluation and sharp corrections), dollar liquidity crunches, distressed asset sales, and crisis propensity. These risks have changed over time. Emerging market crises in the 1990s and 2000s were inherently driven by financial dollarization and balance sheet effects, the latter were intimately related with capital inflows in the form of growing foreign liability positions. But, now that financial dollarization has receded in the emerging market word (either through debt deleveraging or international reserve accumulation), the focus shifted to the macroeconomic effects of cross market flows, including extended periods of exchange rate misalignment and the amplification of business cycles in a context of large and persistent terms-of-trade shocks and global liquidity swings. Hence, the difficulty of evaluating capital flows based on data mostly from the 1990s and early 2000s. Hence, also, the emphasis on the recent empirical literature that revisits the issue with fresh data and an open mind. Capital flows cannot be addressed indistinctly or in isolation. Increasingly, academics and practitioners have flagged that different types of capital flows display different behaviors. Conventional wisdom tends to assume that, within portfolio flows, fixed income assets (bonds) are more harmful than equity in that they may introduce currency imbalances that may create deleterious balance sheet effects in the event of sharp exchange rate depreciation. By the same token, it is usually assumed that portfolio flows (including equity securities) are more volatile than foreign direct investment (FDI), because the latter is "sunk" in illiquid instruments that, precisely because of their illiquidity, are not prone to react to speculative motives or short-lived financial distress. However, even this simple order of riskiness deserves some reassessment. Within debt liabilities, a distinction needs to be made between foreign and local currency denominated instruments, at a time when foreign-currency instruments still dominate local-currency ones as emerging market investments; duration is another critical aspect to consider. Is equity "safer" than a long domestic currency bond from a macro prudential perspective?Publication Specificity of Human Capital: An Occupation Space Based on Job-to-Job Transitions(Center for International Development at Harvard University, 2020-05) Levy Yeyati, Eduardo; Montané, MartínUsing job transition data from Argentina’s Household Survey, we document the extent to which human capital is specific to occupations and activities. Based on workers’ propensity to move between occupations/industries, we build Occupation and Industry Spaces to illustrate job similarities, and we compute an occupation and industry similarity measures that, in turn, we use to explain wage transition dynamics. We show that our similarity measures influence positively post-transition wages. Inasmuch as wages capture a worker's marginal productivity and this productivity reflects the degree to which a worker matches the job’s skill demand, our results indicate that a worker's human capital is specific to both occupation and activity: closer occupations share similar skill demands and task composition (in other words, demand similar workers) and imply a smaller human capital loss in the event of a transition.Publication Classifying Exchange Rate Regimes: 15 Years Later(Center for International Development at Harvard University, 2016-06) Levy Yeyati, Eduardo; Sturzenegger, FedericoLevy Yeyati and Sturzenegger (2001, 2003, 2005) proposed an exchange rate regime classification based on cluster analysis to group countries according to the relative volatility of exchange rates and reserves, thereby shifting the focus from a de jure to de facto approach in the empirical analysis of exchange rate policy. This note extends the classification through 2014 and broadens the country sample, increasing the number of classified country-year observations from 3335 to 5616. Based on this extension, the note documents the main stylized facts in the 2000s, including the behavior of exchange rate policy around the global financial crisis, and the prevalence of floating regimes.Publication How ETFs Amplify the Global Financial Cycle in Emerging Markets(Center for International Development at Harvard University, 2019-05) Converse, Nathan; Levy Yeyati, Eduardo; Williams, TomasSince the early 2000s exchange-traded funds (ETFs) have grown to become an important in- vestment vehicle worldwide. In this paper, we study how their growth affects the sensitivity of international capital flows to the global financial cycle. We combine comprehensive fund- level data on investor flows with a novel identification strategy that controls for unobservable time-varying economic conditions at the investment destination. For dedicated emerging mar- ket funds, we find that the sensitivity of investor flows to global financial conditions for equity (bond) ETFs is 2.5 (2.25) times higher than for equity (bond) mutual funds. In turn, we show that in countries where ETFs hold a larger share of financial assets, total cross-border equity flows and prices are significantly more sensitive to global financial conditions. We conclude that the growing role of ETFs as a channel for international capital flows amplifies the global financial cycle in emerging markets.Publication What Works for Active Labor Market Policies?(Center for International Development at Harvard University, 2019-07) Levy Yeyati, Eduardo; Montane, Martin; Sartorio, LucaThe past 5 years have witnessed a flurry of RCT evaluations that shed new light on the impact and cost effectiveness of Active Labor Market Policies (ALMPs) aiming to improve workers´ access to new jobs and better wages. We report the first systematic review of 102 RCT interventions comprising a total of 652 estimated impacts. We find that (i) a third of these estimates are positive and statistically significant (PPS) at conventional levels; (ii) programs are more likely to yield positive results when GDP growth is higher and unemployment lower; (iii) programs aimed at building human capital, such as vocational training, independent worker assistance and wage subsidies, show significant positive impact, and (iv) program length, monetary incentives, individualized follow up and activity targeting are all key features in determining the effectiveness of the interventions.Publication Leaning-against-the-wind intervention and the “carry-trade” view of the cost of reserves(Center for International Development at Harvard University, 2022-10) Levy Yeyati, Eduardo; Gómez, Juan FranciscoFor a sample of emerging economies, we estimate the quasi-fiscal costs of sterilized foreign exchange interventions as the P&L of an inverse carry trade. We show that these costs can be substantial when intervention has a neo-mercantilist motive (preserving an undervalued currency) or a stabilization motive (appreciating the exchange rate as a nominal anchor) but are rather small when interventions follow a countercyclical, leaning-against-the-wind (LAW) pattern to contain exchange rate volatility. We document that under LAW, central banks outperform a constant size carry trade, as they additionally benefit from buying against cyclical deviations, and that the cost of reserves under the carry-trade view is generally lower than the one obtained from the credit-risk view (which equals the marginal cost to the country´s sovereign spread).