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  • Editors' Summary
  • Raquel Bernal, Ugo Panizza, Roberto Rigobón, and Rodrigo Soares

This volume of Economía consists of four papers. The first paper discusses the changes in the transmission mechanisms of international business cycles between China and Latin America; the second evaluates the impact of an enhancing program in Brazil's education system; the third studies micro-pricing dynamics in Uruguay using a unique data set collected by the department of commerce; and the last paper studies how industries should adapt to climate change in emerging markets.

The first paper, "China's Emergence in the World Economy and Business Cycles in Latin America" by Ambrogio Cesa-Bianchi, M. Hashem Pesaran, Alessandro Rebucci, and TengTeng Xu, studies how the transmission mechanisms from China's gross domestic product (GDP) shocks to Latin America have changed since the 1990s. Most casual observers would agree that the relationship between Latin America and China has tightened. This paper is the first to actually present evidence of this strengthening. The results are fascinating. The authors find that the transmission to Latin America is three times larger now than before the 1990s, while the transmission to other emerging Asian countries has not changed. The authors go beyond measuring the transmission mechanisms and study the channel of propagation. They find that the most important reason behind the increase in the economic proximity between China and Latin America is the effect that China has had on the United States, rather than a bolstering of bilateral relationships. This indirect trade channel has interesting policy implications, in the sense that little can be done unilaterally. The authors present a very clear methodology for measuring the international transmission mechanisms, and they offer policy discussions for the region.

The recent availability of more detailed price data—usually the raw data used to construct the consumer price index (CPI) in a given country—has generated an explosion in the literature of studies on the dynamics of price setting. What is the average duration of price stickiness? What are [End Page vii] the theories behind it? Are menu-cost or time-dependent models more appropriate? The second paper in our volume, "Retail Price Setting in Uruguay," by Fernando Borraz and Leandro Zipitría, explores some of these issues using a new microeconomic data set with a daily frequency compiled by the department of commerce in Uruguay. The data cover more than 300 grocery stores all over the country and 155 products. This unique data set allows the paper to uncover six important facts: the median duration of prices is two and a half months; there is no evidence of a seasonal pattern; the frequency of price adjustment is only correlated with expected inflation for one product category; the probability of a price change on the first day of the month is nine times higher than on any another day; the probability of a price change is not constant over time; and price changes are highly synchronized in the data. These six stylized facts shed new light on the pricing dynamics in emerging markets—an area that has largely been disregarded by the academic literature. The daily aspect of the data and the coverage across the whole country are two very interesting attributes of the data that make the data set suitable for addressing the open questions in the literature.

The third paper is "Adapting Natural-Resource Enterprises under Global Warming in South America: A Mixed Logit Analysis" by S. Niggol Seo. As Seo stresses in his paper, global warming is happening, and it is likely to continue to accelerate in the future. The question, then, is how countries will adjust their production capacity. Which sectors will benefit, and which ones will be hurt? These are extremely important questions for policymakers and practitioners in emerging market countries, many of which are located near the equator. Seo's paper provides a thorough assessment of the possibilities in the agricultural sector. A key strength of the paper is its integrated approach to the adaptation problem. Seo models firms with different natural resource intensities, including crops, livestock, and forests and both specialized and diversified firms. The empirical analysis is based on rural surveys. The surveys are collected from...


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