Publications

This occasional paper contains two works recently published by the author in memory of Luis Ángel Rojo, whose professional life was closely linked to the Banco de España and who passed away in May 2011.
The first article is the author’s contribution to a jointly authored book coordinated by Carlos Sebastián which was published in February 2012 by the Fundación Ramón Areces under the title Luis Ángel Rojo. Recuerdo y homenaje (Luis Ángel Rojo. Remembrance and tribute). This article analyses the period of Luis Ángel Rojo at the head of the Banco de España’s Directorate General Economics, Statistics and Research.
The second article is the introduction written by the author for the book published by the Banco de España under the title Luis Ángel Rojo, gobernador del Banco de España. Discursos y conferencias (Luis Ángel Rojo, Governor of the Banco de España. Speeches and conferences). This introduction consists of comments and observations on the speeches included in the book under the following subject headings: presentation of Annual Reports, monetary policy, membership of the euro area, financial and banking system, and economic thought.

This paper reviews some of the applications that use the vast swathes of information provided by Internet user searches for economic analysis and forecasting. This enormous volume of information, available in real time, can be handled by analysts thanks to statistical tools such as "Google Insights for Search", which allow trends in different areas of interest to be classified and evaluated. Previous work focused predominantly on the labour market, on the housing market, on retail sales and on consumer confidence. This paper presents a very specific application for the Spanish economy: British tourist inflows to Spain (the Spanish tourist industry's main customers). The improvement in the forecasting provided by the short-term models that include the G-indicator depends on the benchmark model. This does, however, allow an adjusted indicator of the inflow of British tourists to be obtained with a lead of almost one month.
This is but an initial step in the use of on-line searches for constructing leading indicators of economic activity. Other applications to be explored are car sales, consumer confidence and house purchases. The chief characteristic of these procedures is that, with time and the continuous growth of Internet use, results can only improve in the future. It should nonetheless be recalled that the construction of these G-indicators requires caution so as to avoid mistakes arising, inter alia, from the different use of language in different countries. Not taking due caution and blindly confiding in these indicators may lead to erroneous results being obtained.

This paper focuses on market discipline as a necessary condition to preserve the signaling content of balance sheet indicators and market prices as macroprudential tools. It argues that market discipline enhances the information content of market prices by reflecting the expected private cost of financial distress, including the systemic importance of particular firms. This paper also argues that three conditions are necessary for market discipline to be effective: adequate and timely information on financial institutions’ risk profiles; financial institutions’ creditors must consider themselves at risk; and the reaction to market signals needs to be observable. The paper relies on the existing financial literature and it is particularly timely because policymakers are considering structural measures of banks’ systemic importance as a benchmark for macroprudential policy.

The economic crisis affecting the industrialised countries in recent years has been singular given its intensity, complexity and the difficulties in overcoming it. The aim of this paper is to analyse the determinants behind the crisis that have made it deeper and longer in Spain than in previous instances, and which have meant that there are significant obstacles to emerging from recession. Spanish EMU membership is a crucial aspect for consideration, as it contributes both to explaining the build-up of imbalances in the expansion and to conditioning the nature of the adjustment in the crisis, given that the range of economic policy instruments is significantly narrower in EMU. The macroeconomic and financial imbalances accumulated in the high-growth phase (the real estate boom, excess debt and the loss in competitiveness), which are all closely interlinked, were factors of vulnerability. But even apparently sounder fundamentals on other fronts, such as the budgetary and labour market situation, saw their weaknesses exposed in the crisis. The experience over the past four years allows some lessons to be drawn on the external sector, the real estate market, fiscal policy and the labour market. These lessons point in particular to the need to avoid complacency in economic policy management in boom periods and to the urgency of adapting the structure of goods and factor markets and the behaviour of economic agents in Spain to the requirements imposed by membership of a monetary union.