Welcome to Silvana Tenreyro's Web
page Welcome to Silvana Tenreyro's Web
page Current Positions
Reader (Associate Professor with tenure), Department of Economics, London School of Economics.
Member of the Editorial Board, Review of Economic Studies
Associate Editor, Journal of Monetary Economics
Associate Editor, Journal of the European Economic Association
Associate Editor, Economic Journal
Associate Editor, Economica
Director, Macroeconomics Programme, International Growth Centre
Research Associate, CEP
Research Fellow, CEPR
Member of the Council of the European Economic Association
Chair, Women in Economics Committee, European Economic Association
Ex-Officio Member, Royal Economic Society's Women Committee
Education
Ph.D., Harvard University, 2002. (Advisors: A. Alesina, R. Barro (chair), K. Rogoff.)
M.A., Harvard University, 1999.
A.B., Universidad Nacional de Tucuman, Argentina, 1997.
Published Papers
Wage-Setting
Patterns and Monetary Policy: International Evidence
Joint with Giovanni Olivei
Published in Journal
of Monetary Economics,
Volume 57, Issue 7, October 2010. Pages 785-802
Abstract:
Systematic differences in the
timing of wage-setting decisions among industrialized countries provide an ideal
framework to study the importance of wage rigidity for the transmission of
monetary policy. Synchronization in wage-setting decisions is prevalent in Japan
and the United States, yielding varying degrees of wage rigidity within the
year; instead, in France, Germany, and the United Kingdom decisions are more
uniformly spread over time. Exploiting within-year variation in the timing of
wage-setting decisions in these economies, we find support for the long-held but
scarcely tested view that wage rigidity plays a critical role in the
transmission of monetary policy.
*Data discussion: The paper discusses microeconomic evidence of wage rigidity in
the United States, Europe, and Japan.
Currency Unions in
Prospect and Retrospect
Joint with J.M.C.
Santos Silva
Published in
Annual Review
of Economics,
Volume
2, September 2010,
Pages 51-74.
Abstract:
We critically review the recent
literature on currency unions, and discuss the methodological challenges posed
by the empirical assessment of their costs and benefits. In the process, we
provide evidence on the economic effects of the euro. In particular, and in
contrast with estimates of the trade effect of other currency unions, we find
that the impact of the euro on trade has been close to zero. After reviewing the
costs and benefits, we conclude with some open questions on normative and
positive aspects of the theory of currency unions, emphasizing the need for a
unified welfare-based framework to weigh their costs and gains.
Supplemental
Material to "Currency Unions in Prospect and Retrospect"
On the Existence of the
Maximum Likelihood
Estimates for Poisson Regression
Joint
with J.M.C. Santos Silva
Published
in Economics Letters,
Volume 107, Issue 2, May 2010. Pages 310-312.
The Timing of Monetary
Policy Shocks
Joint with Giovanni Olivei
Published in
The American Economic Review, June 2007, Vol
Volatility and
Development
Joint with Miklos Koren
Published in
The
Quarterly Journal of Economics, February 2007, Vol. 122, No. 1: 243-287.
Abstract: Why is GDP growth
so much more volatile in poor countries than in rich ones? We identify three
possible reasons: (i) poor countries specialize in fewer and more volatile
sectors; (ii) poor countries experience more frequent and more severe
aggregate shocks (e.g., from macroeconomic policy); and (iii) poor
countries' macroeconomic fluctuations are more highly correlated with the
shocks affecting the sectors they specialize in. We show how to decompose
volatility into the various sources, quantify their contribution to
aggregate volatility, and study how they relate to the stage of development.
We document the following regularities. First, as countries develop, their
productive structure moves from more volatile to less volatile sectors.
Second, the volatility of country-specific macroeconomic shocks falls with
development. Third, the covariance between sector-specific and
country-specific shocks does not vary systematically with the level of
development. There is also some evidence that the degree of sectoral
concentration declines with development at early stages, and increases at
later stages. We argue that many theories linking volatility and development
are not consistent with these findings, and suggest new directions for
future theoretical work.
Previously circulated as Diversification and Development; FRB Boston Series, paper no. 03-3 (2003).
The Log of
Gravity
Joint with J.M.C. Santos Silva
Published in The Review of Economics and Statistics, November 2006, Vol. 88, No. 4: 641-658.
Abstract: Although economists have long been aware of Jensen's inequality, many econometric applications have neglected an important implication of it: under heteroskedasticity, the parameters of log-linearized models estimated by OLS lead to biased estimates of the true elasticities. We explain why this problem arises and propose an appropriate estimator. Our criticism of conventional practices and the proposed solution extend to a broad range of applications where log-linearized equations are estimated. We develop the argument using one particular illustration, the gravity equation for trade. We find significant differences between estimates obtained with the proposed estimator and those obtained with the traditional
method.
Previously
circulated as Gravity-Defying Trade; FRB Boston Series, paper no.
03-1 (2003).
For other questions, data, and codes, please, check the paper's page
here
On the Trade Impact of Nominal Exchange Rate Volatility
Published in Journal of Development Economics, March 2007, Vol. 82, No. 2: 485-508
Abstract: What is the effect of nominal exchange rate variability on trade? I argue that the methods conventionally used to answer this perennial question are plagued by a variety of sources of systematic bias. I propose a novel approach that simultaneously addresses all of these biases, and present new estimates from a broad sample of countries from 1970 to 1997.
The estimates indicate that nominal exchange rate variability has no significant impact on trade flows.
Is Poland the Next
Spain?
Joint with Francesco Caselli
Published in NBER International Seminar on Macroeconomics; R. Clarida, J. Frankel, and F. Giavazzi, editors, 2004.
Abstract: We revisit Western Europe's record with labor-productivity convergence and tentatively extrapolate its implications for the future path of Eastern Europe. The poorer Western European countries caught up with the richer ones through both higher rates of physical capital accumulation and greater total factor productivity (TFP) gains. These (relatively) high rates of capital accumulation and TFP growth reflect convergence along two margins.
One margin (between industries) is a massive reallocation of labor from agriculture to manufacturing and services, which have higher capital intensity and use resources more efficiently.
The other margin (within industries) reflects capital deepening and technology catch-up at the industry level. In Eastern Europe the employment share of agriculture is typically quite large, and agriculture is particularly unproductive. Thus, there are potential gains from sectoral reallocation. However, quantitatively, the between-industry component of the East's income gap is quite small. Therefore, the East seems to have only one real margin to exploit: the within-industry one. Coupled with the fact that within-industry productivity gaps are enormous, this suggests that convergence will take a long time.
On the positive side, however, Eastern Europe already has levels of human capital similar to those of Western Europe. This is good news because human capital gaps have proved very persistent in Western Europe's experience. Hence, Eastern Europe does start out without the handicap that is harder to overcome.
Closed and Open Economy
Models of Marked Up and Sticky Prices
Joint with Robert Barro
Published in The Economic Journal, April 2006, Vol. 116, No. 511: 434-456.
Abstract: Shifts in the extent of competition, which affect markups, are possible sources of aggregate fluctuations. Markups are countercyclical; during booms the economy operates more efficiently. In our benchmark model, markups correspond to the prices of differentiated inputs relative to that of undifferentiated final product. If nominal prices of differentiated goods are relatively sticky, unexpected inflation reduces markups, mimicking the effects of increased competition. Similar effects stem from reductions in markups of foreign intermediates and unexpected inflation abroad. The models imply that prices of less competitive goods are more countercyclical. We find support for this hypothesis using data of four-digit manufacturing industries.
Economic Effects of
Currency Unions
Joint with Robert Barro
Published in Economic Inquiry, January 2007, Vol. 45, No. 1: 1-197.
Abstract: This paper develops a new instrumental-variable (IV) approach to estimate the effects of different exchange rate regimes on bilateral outcomes. The basic idea is that the characteristics of the exchange rate regime between two countries (exchange rate variability, fixed or float, autonomous or common currencies) are partially related to the independent decisions of these countries to peg --explicitly or de facto-- to a third currency, notably that of a main anchor. Our approach is to use this component of the exchange rate regime as an IV in regressions of bilateral outcomes. We illustrate the methodology with one specific application: the economic effects of currency unions. The likelihood that two countries independently adopt the currency of the same anchor country is used as an instrument for whether they share or not a common currency. Three findings stand out. First, sharing a common currency enhances trade, supporting previous work by Rose [2000]. Second, a common currency increases price co-movements; this finding is consistent with the observation that a large part of the variation in real exchange rates is caused by fluctuations in nominal exchange rates. Finally, a common currency decreases the co-movement of shocks to real GDP. This is consistent with the view that currency unions lead to greater specialization.
Optimal Currency Areas
Joint with Alberto Alesina and Robert Barro
Published in NBER Macroeconomics Annual, Mark Gertler and Kenneth Rogoff, eds. Cambridge, MA: MIT Press, 2002.
Abstract: As
the number of independent countries increases and their economies become
more integrated, we would expect
to observe more multi-country currency unions. This paper explores the pros
and cons for different countries to adopt as an anchor the dollar, the euro,
or the yen. Although there appear to be reasonably well-defined euro and
dollar areas, there does not seem to be a yen area. We also address the
question of how trade and co-movements of outputs and prices would respond
to the formation of
Other Publications
Further Simulation
Evidence on the Performance of the Poisson-PML Estimator
Joint with J.M.C
Santos-Silva, January 2009
Forthcoming in
Economics Letters, 2011
Volatility,
Diversification and Development in the Gulf Cooperation Council Countries
Joint with Miklos
Koren
Fothcoming in
The Transformation of the Gulf: Politics, Economics
and the Global Order,
David Held
and
Kristian Ulrichsen,
eds. 2011.
poisson: Some convergence issues
Joint with JMC Santos Silva
Forthcoming in STATA
Journal
Has the euro increased
trade?
Joint with JMC Santos Silva
Published in
CentrePiece, 15(2).
Working Papers
Technological
Diversification
Joint with Miklos Koren
Abstract: Economies at early
stages of development are often shaken by abrupt changes in growth rates,
whereas advanced economies tend to feature relatively stable growth rates
(Lucas, 1988). To explain this pattern, we propose a theory of technological
diversification. Production makes use of different input varieties, which
are subject to imperfectly correlated shocks. Technological progress takes
the form of an increase in the number of varieties, raising average
productivity. In addition, the expansion in the number of varieties in our
model provides diversification benefits against variety-specific shocks and
it can hence lower the volatility of output growth. Technological complexity
evolves endogenously in response to profit incentives. The decline in
volatility thus arises as a by-product of firms' incentives to increase
profits and is hence an almost inexorable outcome of the development
process. We quantitatively asses the predictions of the model in light of
the empirical evidence and find that for reasonable parameter values, the
model can generate a decline in volatility with development consistent with
empirical patterns. Our model thus highlights a hitherto overlooked
implication of the class of expanding-variety growth models introduced by
Romer (1990) and Grossman-Helpman (1991), which makes them suitable to
explain the decline in volatility that accompanies the development process.
Hot and Cold Seasons
in the Housing Market
Joint with Rachel Ngai
Abstract:
Every year during the second and third
quarters (the "hot season") housing markets in the UK and the US experience
systematic above-trend increases in both prices and transactions. During the
fourth and first quarters (the "cold season"), house prices and transactions
fall below trend. We propose a search-and-matching framework that sheds new
light on the mechanisms governing housing market fluctuations. The model has a
"thick-market" effect that can generate substantial differences in the volume of
transactions and prices across seasons, with the extent of seasonality in prices
depending crucially on the bargaining power of sellers. The model can
quantitatively mimic the seasonal fluctuations in transactions and prices
observed in the UK and the US.
- Featured in
Financial Times - FT Weekend Magazine (pdf)
- See also Tim Harford's page in
Slate (pdf)
Is it Different for
Zeros? Discriminating Between Models for Nonnegative Data with Many Zeros
Joint with J.M.C. Santos Silva and Frank Windmeijer
Abstract: In
many economic applications, the variate of interest is non-negative and its
distribution is characterized by a mass-point at zero and a long right-tail.
Many regression strategies have been proposed to deal with data of this type
but, although there has been a long debate in the literature on the
appropriateness of different models, formal statistical tests to choose between
the competing specifications are rarely, if at all, used in practice. In this
paper we propose a novel and simple regression-based specification test that can
be used to test these models against each other.
Diversification through
Trade
Joint with F. Caselli, M. Koren,
and M. Lisicky
Abstract: Existing wisdom
links increased openness to trade to greater macroeconomic volatility, as trade
induces a country to specialize, increasing its exposure to sector-specific
shocks. Evidence suggests, however, that country-wide shocks are at least as
important as sectoral shocks in shaping volatility patterns. We argue that if
country-wide shocks are dominant, the impact of trade on volatility can be
negative, because trade becomes a source of diversification. For example, trade
allows domestic goods producers to respond to shocks to the domestic supply
chain by shifting sourcing abroad. Similarly, when a country has multiple
trading partners, a domestic recession or a recession in any one of the trading
partners translates into a smaller demand shock for its producers than when
trade is more limited. Using a calibrated version of the Eaton-Kortum and
Alvarez-Lucas model, we quantitatively assess the impact of lower trade barriers
on volatility since the 1970s in a broad group of countries.
Notes
Reply to "The Log of
Gravity Revisited"
Joint with J.M.C
Santos-Silva, January 2009
Trading Partners and Trading Flows: Implementing
the Helpman-Melitz-Rubinstein Model Empirically
Joint
with J.M.C. Santos Silva, October 2008
Abstract:
Helpman, Melitz, and Rubinstein (2008)---HMR---present a rich theoretical model
to study the determinants of bilateral trade flows across countries. The model
is then empirically implemented through a two-stage estimation procedure. This
note seeks to clarify some econometric aspects of the estimation approach used
by HMR and explore the consequences of possible departures from the maintained
distributional assumptions.
For other questions, data, and codes, please, check the Log-of-Gravity page here
Selected Comments and Discussions
Subprime-Related Losses and Board In-Competence: Private vs. Public Banks in Germany, by Harald Hau and Marcel Thum (2009). Forthcoming in Economic Policy.
The Estimated Effects of the Euro on Trade, (slides) by Jeff Frankel (2008). Forthcoming in NBER volume, edited by Alberto Alesina and Francesco Giavazzi. MIT Press.
Productivity and the Dollar, by Giancarlo Corsetti, Luca Dedola, and Sylvain Leduc (2007).
Do Exports Generate Higher
Productivity? Evidence from Slovenia, by Jan DeLoecker (2004).
Relative Prices and Relative
Prosperity , by
Chang-Tai Hsieh and Peter Klenow (2003).
Globalization and Inflation,
by Natalie Chen, Jean Imbs, and Andrew Scott (2003).
Exchange Rate Volatility and the Composition of Trade,
by Christian Broda and
John Romalis (2003).
The
Effect of Common Currencies on International Trade: A Meta-Analysis, by Andy
Rose (2002).
Latin American Insecurity, by Dany Rodrik, with Mariano Tomassi (2000).
Referee
American Economic Journal, American Economic Review, Canadian Journal of Economics, Economica,
Economic Journal, Economics of Transition, Empirical
Economics, European Economic Review, European Journal of Political Economy,
Fiscal Studies, International Economic Review, IMF Staff Papers,
Journal
of Applied Economics, Journal of Development Economics, Journal of Economic Dynamics and
Control, Journal of the European Economic
Association, Journal of International Economics, Journal of International
Money
and Finance,
Journal of International Trade and Development, Journal of Monetary Economics,
Journal of Political Economy,
National Science Foundation, Oxford Bulletin of Economics and Statistics, Quarterly Journal of
Economics, Review of Economics and Statistics,
Review of Economic Studies,
Review of International Economics.
Teaching Timetable 2011
EC442 (Macroeconomics for Ph.D. students). Lectures: Tuesdays 2.30-5.30. LT.
EC475 (Quantitative Economics). Lectures: Mondays 16:00-18:00. Classes: Mondays 10:30-11:30. MT.
EC532 (International Economics). Tuesdays 9:30-12:30. MT.
EC501 (Research on International Economics). Wednesdays 12:30-14:00. MT.