Luis Otavio Leal

Being honest and straightforward. If you don't know, say you're not familiar with the topic and move on. If you do know, try to keep it as simple as possible, because the beauty of an explanation lies in its simplicity

Financial crises are the most dangerous ones for the economy, as they cause an automatic lock-up due to their impact on the economic entity that serves as an intermediary between capital holders and credit takers. This results in a loss of wealth that takes years to recover, as observed in the crises of 1929 and 2008. Therefore, preventing the recurrence of such crises is essential, albeit not without costs. For instance, the establishment of mechanisms to regulate systematically important financial entities incurs costs, as does the determination of liquidity buffers and maximum leverage limits for banks. However, the benefits of avoiding a repetition of the wealth destruction caused by a financial crisis are priceless.

The first thing to bear in mind is that everyone is an adult and doesn't need a babysitter. Understanding this will save a lot of time. Once this stage is passed, we must remember that economic agents are guided by incentives. Hence the importance of defining goals, deadlines, rewards, and penalties, but keeping in mind that goals and deadlines must be feasible and rewards and penalties appropriate. Finally, keeping the team motivated. A motivated team ensures quality work within the deadline and minimizes hassles.

It depends on the crisis; a financial crisis is best addressed through an expansionary monetary policy and injection of liquidity into the financial system. In the case of a demand shock, which may accompany a financial crisis, addressing it requires not only an expansionary monetary policy but also an expansionary fiscal policy. Finally, a supply shock does not have a one-size-fits-all solution, such as the oil shocks in the 1970s and the recent crisis in supply chains. However, the most important thing is not to treat a supply shock as a demand shock and vice versa, treating each as a financial crisis... comparing apples to apples, and bananas to bananas.

The internalization of a negative externality essentially involves compelling the producer of that externality to consider it as a cost. Commonly, the solution is to impose a tax on its production, which would be the "sin" taxes as in our tax reform. However, with the advent of the carbon credit market, perhaps the internalization of production externalities does not need to be as coercive. It will still be a cost for the polluting company but will generate positive externalities in the economy that go beyond tax revenue.

The two types of dependency in time series are the autocorrelation of residuals and non-stationary series. In the former, the series can be inertial, with the model omitting a variable among others, leading to biased results and an overestimation of R-squared. In the latter, the mean and variance change over time, an undesirable characteristic in a time series.