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As usual in this series, Chapter 1 reviews the configuration of global risks and assesses the outstanding short term opportunities and challenges facing the LAC region. We document the significant slowdown in economic activity across the region, and explore the possibility of this being the 'new normal'. In Chapter 2 we assess if the major social gains achieved during the 'Golden Decade', in particular the decline in inequality, will hold in this less supportive environment, and discuss alternative policy responses to preserve and further the equity gains in the region.

Business --- Business Cycle --- Decentralization --- Equity --- Growth --- Inequality --- Inflation --- Macroeconomic Determinants of Inequality --- Social Agenda --- Stability

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This paper builds on previous studies to uncover evidence suggesting that cyclical fluctuations in returns to schooling are determined by fluctuations in foreign demand, which tend to be positively correlated with returns to schooling. The effec

Business Cycle --- Income Volatility --- Pseudo-Panel --- Returns To Education --- Trade And Labor Market Interactions

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This paper estimates private sector credit cycles for most of the oil-importing and oil-exporting countries in the Middle East and North Africa. Credit cycles are the medium-term component in spectral analysis of real private sector credit growth. In addition, the paper estimates the credit cycles for several Western countries and Japan. The analysis finds substantial differences and rare similarities between credit cycles in the Middle East and North Africa and developed countries. Over 1964-2017, credit cycles in the Middle East and North Africa do not appear to be associated with real gross domestic product growth. They only explain a fraction of the growth in private sector credit, and they do not seem to be synchronized across oil exporters and oil importers.

Access to Finance --- Business Cycle --- Credit Cycle --- Finance and Development --- Finance and Financial Sector Development --- Private Finance --- Rural Finance

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In early January 2003, the United States and Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua launched official negotiations for the Central American Free Trade Agreement (CAFTA), a treaty that would expand NAFTA-style trade barrier reductions to Central America. With deeper trade integration between Central America and the United States, it is expected that there will be closer links in business cycles between Central American countries and the United States. The paper finds a relatively low degree of business cycle synchronization within Central America as well as between Central America and the United States. The business cycle synchronization is expected to increase only modestly with further trade expansion, making the coordination of macroeconomic policies within CAFTA somewhat less of a priority.

Business Cycle --- Business Cycle Fluctuations --- Business Cycle Synchronization --- Business Cycles --- Business Environment --- Business in Development --- Competitiveness and Competition Policy --- Currency --- Deeper Trade Integration --- Free Trade --- Free Trade Area --- Impact Of Trade --- Industrial Production --- Industry Trade --- International Economics & Trade --- Monetary Policy --- Private Sector Development --- Public Sector Development --- Regional Integration --- Regional Trade --- Specialization --- Trade Agreement --- Trade Expansion --- Trade Intensity --- Trade Structure

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The spread between value and growth (also called the value premium) is one of the best accepted iterations of a market anomaly, however the reasons for the over performance of value portfolios over growth portfolios is still a source of debate. The nature of the risk that value stocks bear is often related to the fact that these companies have high ratios of fixed assets and thus, are less flexible than growth stocks in making adjustments during recessions.

The aim of this thesis is to contribute to the existing corpus of literature by identifying which macroeconomic factors have an impact on the value premium. This thesis tries to answer two main questions. First, can the value premium be explained by the business cycle risk? Second, do macroeconomic variables have an impact on the volatility of value, growth, and HML returns? Several econometrics models on the financial time series have been applied to answer these questions.

First, we analyzed the impact over business cycles of a set of macroeconomic variables on the value premium using a Markov Switching model. This model suggests several conclusions. First, that asymmetries can be observed over the business cycles for the value, growth and HML portfolios, meaning that they react differently to changes in economic conditions over to the business cycles. Then, during the economic downturn, value excess returns are more strongly affected compared to growth excess returns by certain macroeconomic factors, specifically the growth rate of gross private domestic investments, the growth rate of gross government investments, the term spread changes, the credit spread changes, the inflation rate, the growth rate of industrial production and the growth rate of the aggregated profits. These provide evidence that the value premium can be further explained by economic fundamentals rather than the behavior of investors. Our results prove that value stocks have to bear the macroeconomic risk and this is consistent with the flexibility hypothesis.

Then, this study identifies a set of macroeconomic factors which influence the prediction of the value and growth excess returns using the elastic net algorithm. These results confirm that macroeconomic factors are drivers of the value premium in both economic downturns as well as upturns.

Finally, using a subset of the data available in a monthly frequency, we have tested the impact of a set of macroeconomic variables on the volatility of value, growth and HML returns through the GARCH-G(1,1) and GARCH-S(1,1) models. The findings have led us to conclude that macroeconomic variables have a significant impact on the value and growth excess returns and therefore, also influence the volatility of the value premium.

Value investing --- Business cycle --- Value premium --- Markov Switching model --- Elastic-net --- GARCH --- GARCH-S --- GARCH-G --- Macroeconomic variables --- Sciences économiques & de gestion > Finance