This paper studies the dynamic asset allocation problem faced by an infinitively lived commodity-based sovereign wealth fund under incomplete markets. Assuming that the fund receives a non-tradable stream of commodity revenues until a predetermined date, the optimal consumption and investment strategies are state and time-dependent. Using data from the Norwegian Petroleum Fund, we find that the optimal demand for equity should decrease gradually from 60% to 40% over the next 60 years. However, the solution is particularly sensitive to the correlation between oil and stock price changes. We also estimate wealth-equivalent welfare losses, relative to the optimal rule, when following alternative suboptimal investment rules.
Golombek, Rolf; Flores, Alfonso Irarrazabal & Ma, Lin (2018)
OPECs Market Power: An Empirical Dominant Firm Model for the Oil Market
We estimate a dominant firm-competitive fringe model for the crude oil market using quarterly data on oil prices for the 1986–2016 period. The estimated structural parameters have the expected signs and are significant. We find that OPEC exercised market power during the sample period. Counterfactual experiments indicate that world GDP is the main driver of long-run oil prices. However, supply (depletion) factors have become more important in recent years.
Chen, Kaiji & Flores, Alfonso Irarrazabal (2015)
The role of allocative efficiency in a decade of recovery
The Chilean economy experienced a decade of sustained growth in aggregate output and productivity after the 1982 nancial crisis. This paper analyzes the role of allocative e¢ ciency on total factor productivity (TFP) in the manufacturing sector by applying the methodology of Hsieh and Klenow (2009) to establishment data from the Chilean manu- facturing census. We nd that a reduction in resource misallocation accounts for about 40 percent of the growth in manufacturing TFP between 1983 and 1996. In particular, a reduc- tion in the least productive plants implicit output subsidies is the primary reason for the reduction in resource misallocation during this period. Moreover, these plants enjoyed above industry-average growth in physical productivity, contributing to the overall improvement in e¢ cient TFP after the nancial crisis. Our evidence suggests that Chile s banking reform during the early and mid-1980s is likely to have played an important role in the observed improvement in allocative e¢ ciency.
Flores, Alfonso Irarrazabal; Moxnes, Andreas & Opromolla, Luca David (2015)
The Tip of the Iceberg: A Quantitative Framework for Estimating Trade Costs
Casual empiricism suggests that additive trade costs, such as quotas, per-unit tariffs, and, in part, transportation costs, are prevalent. In spite of this, we have no broad and systematic evidence of the magnitude of these costs. We develop a new empirical framework for estimating additive trade costs from standard firmlevel trade data. Our results suggest that additive barriers are on average 14 percent, expressed relative to the median price. The point estimates are strongly correlated with common proxies for trade costs. Using our micro estimates, we show that a reduction in additive trade costs produces much higher welfare gains and growth in trade flows than a similar reduction in multiplicative trade costs.
Irarrazabal, Alfonso; Moxnes, Andreas & Ulltveit-Moe, Karen Helene (2013)
HETEROGENEOUS FIRMS OR HETEROGENEOUS WORKERS? IMPLICATIONS FOR EXPORTER PREMIUMS AND THE GAINS FROM TRADE
Ulltveit-Moe, Karen Helene; Moxnes, Andreas & Irarrazabal, Alfonso (2009)
Heterogeneous firms or heterogeneous workers? Implications for the exporter premium and the impact of labor reallocation on productivity
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Golombek, Rolf; Ma, Lin & Irarrazabal, Alfonso (2014)
OPEC's Market Power: An Empirical Dominant Firm Model for the Oil Market
[Conference Lecture]. Event
Ulltveit-Moe, Karen Helene; Moxnes, Andreas & Irarrazabal, Alfonso (2010)
Heterogeneous firms or heterogeneous workers? Implication for Exporter premia and the gains from trade
[Conference Lecture]. Event
Ulltveit-Moe, Karen Helene; Irarrazabal, Alfonso & Moxnes, Andreas (2010)
Heterogeneous firms or heterogeneuos workers? Implications for Exporter premia and the gains from trade.Politics, Economics and Global Governance: The European Dimensions, Research Workshop on International Trade, Villars (Switzerland), March 2010 (organised by HEI, Geneva); 2010-03-18 - 2010-03-19
