Publicaciones

The analysis of the macroeconomic impact of fiscal policies in the euro area has been
traditionally limited by the absence of quarterly fiscal data. To overcome this problem, we
provide two new databases in this paper. Firstly, we construct a quarterly database of euro
area fiscal variables for the period 1980-2008 for a quite disaggregated set of fiscal
variables; secondly, we present a real-time fiscal database for a subset of fiscal variables,
composed of bi-annual vintages of data for the euro area period (2000-2009). All models are
multivariate, state-space mixed-frequencies models estimated with available national
accounts fiscal data (mostly annual) and, more importantly, monthly and quarterly
information taken from the cash accounts of the governments. We provide not seasonallyand
seasonally-adjusted data. Focusing solely on intra-annual fiscal information for
interpolation purposes allows us to capture genuine intra-annual "fiscal" dynamics in the
data. Thus, we provide fiscal data that avoid some problems likely to appear in studies using
fiscal time series interpolated on the basis of general macroeconomic indicators, namely the
well-known decoupling of tax collection from the evolution of standard macroeconomic
tax bases (revenue windfalls/shortfalls).

Do public sector wages exert presures on private sector wages, or has private sector a
leadership role in wage setting?. This paper tries to isolate the pure signalling effect that
one sector might exert on the other by controlling for other determinants of wages (prices,
productivity, institutions) for the main euro area economies (Germany, France, Italy and
Spain) and the periods 1980-2007 and 1991-2007. It exploits avilable quarterly information
not yet used in the literature, and combine different data sources in the framework of mixedfrecuencies
time series models. The quarterly frequency of our data allows us to check
the existence of strong evidence of public wages’ leadership, either in conjunction with bidirectional
links from the private sector (Germany and Spain) or pure public wage leadership
(France in the sample 1991-2007, Italy for within-the-year linkages).

En este trabajo estudiamos las características y los determinantes de las desviaciones entre
las cifras iniciales y finales de los ingresos y gastos públicos incluidos en los presupuestos
generales del Estado en el período 1985-2006. Nuestro objetivo es evaluar el grado de
cumplimiento del presupuesto a través de la localización de desviaciones sistemáticas,
identificando en el caso que sea posible la naturaleza económica, política o institucional
de estas desviaciones. En línea con los trabajos existentes para otros países, y también
para España, detectamos la presencia de sesgos sistemáticos en las previsiones
presupuestarias, que podrían indicar la existencia de un cierto margen de mejora en
la planificación presupuestaria.

Saudi Arabia is the largest player in the world oil market. It maintains ample spare capacity, restricts investment in developing reserves, and its output is negatively correlated with other OPEC producers. While this behavior does not fit into the perfect competition paradigm, we show that it can be rationalized as that of a dominant producer with competitive fringe. We build a quantitative general equilibrium model along these lines which is capable of matching the historical volatility of the oil price, competitive and non-competitive oil output, and of generating the observed comovement among the oil price, oil quantities, and U.S. GDP.
We use our framework to answer questions on which available models are silent: (1) What are the proximate determinants of the oil price and how do they vary over the cycle? (2) How large are oil profits and what losses do they imply for oil-importers? (3) What do different fundamental shocks imply for the comovement of oil prices and GDP? (4) What are the general equilibrium effects of taxes on oil consumption or oil production? We find, in particular, that the existence of an oil production distortion does not necessarily justify an oil consumption tax different from zero.

We construct multivariate, state-space mixed-frequencies models for the main
componentsof the Spanish General Government sector made up of blocks for each one of
its subsectors: Central Government, Social Security and aggregate of Regional and Local
government sectors. Each block is modelled through its total revenue and expenditure
categories, and encompasses a number of indicators, depending on data availability.
The mixed-frequencies approach is particularly relevant for the case of Spain, given its
institutional set-up and the specific data availability for the different subsectors. All in all,
we provide models detailed enough in coverage, while at the same time manageable, to be
used: (i) for real-time monitoring of fiscal policies with a focus on quarterly developments
of the General Government sector; (ii) for the monitoring of general government sub-sectors
for which intra-annual data coverage is limited (Regional and Local governments), and
(iii) to bridge (translate) into National Accounts available monthly information for the
subsectors of the general government.

We analyse the impact of fiscal policy shocks in the euro area as a whole, using a newly available quarterly dataset of fiscal variables for the period 1981-2007. To allow for comparability with previous results on euro area countries and the US, we use a standard structural VAR framework, and study the impact of aggregated and disaggregated government spending and net taxes shocks. In addition, to frame euro area results, we apply the same methodology for the same sample period to US data. We also explore the sensitivity of the provided results to the inclusion of variables aiming at measuring "financial stress" (increases in risk) and "fiscal stress" (sustainability concerns). Analysing US and euro area data with a common methodology provides some interesting insights on the interpretation of fiscal policy shocks.

We derive Lagrange Multiplier and Likelihood Ratio specifi cation tests for the null hypotheses of multivariate normal and Student t innovations using the Generalised Hyperbolic distribution as our alternative hypothesis. We decompose the corresponding Lagrange Multiplier-type tests into skewness and kurtosis components, from which we obtain more powerful one-sided Kuhn-Tucker versions that are equivalent to the Likelihood Ratio test, whose asymptotic distribution we provide. We conduct detailed Monte Carlo exercises to study our proposed tests in finite samples. Finally, we present
an empirical application to ten US sectoral stock returns, which indicates that their conditional distribution is mildly asymmetric and strongly leptokurtic.

The paper presents a theory of nominal asset prices for competitively owned oil. Focusing on monetary effects, with flexible oil prices the US dollar oil price should follow the aggregate US price level. But with rigid nominal oil prices, the nominal oil price jumps proportionally to nominal interest rate increases. We find evidence for structural breaks in the nominal oil price that are used to illustrate the theory of oil price jumps. The evidence also indicates strong Granger causality of the oil price by US inflation as is consistent with the theory.

This paper analyzes the determinants of Spain's macroeconomic fluctuations since the inception of the euro in 1999, with a special attention to observed growth and inflation differentials with respect to the rest of the European Monetary Union (EMU). For that purpose we estimate the Banco de España DSGE model of the Spanish economy and the rest of the Eurosystem (BEMOD). We find that observed differentials are the result of a combination of asymmetric country-specific shocks (in particular, demand and productivity shocks for growth and cost-push shocks for inflation) as well as asymmetric economic structure (especially lower nominal wage and price rigidities in Spain). Finally, we find that EMU membership has had a non-negligible effect on observed differentials.

It is generally accepted that International Financial Reporting Standards (IFRS) promote a "true and fair" presentation of financial statements. The improvement of the quality of financial reporting helps investors, bankers and regulators make better decisions. Spanish GAAP, on the other hand, are based on a "prudent" approach for asset and liability recognition and valuation, with the goal of protecting stakeholders. Adjustments introduced as a consequence of IFRS adoption may result in (i) the recognition (or derecognition) of assets and liabilities for the first time (i.e. derivative financial assets and liabilities) and (ii) the application of accounting criteria that differs from those recognised under local GAAP (i.e. cost vs. revaluation model).
The main objective of this study is to examine the financial statements of the firms listed on the Spanish Continuous Stock Market that have been using IFRS since 2005 to determine the accounting policy options they apply under IFRS and, most importantly, to provide evidence of the factors driving these choices. Since there are significant differences in reporting quality between countries as a consequence of different accounting regimes and institutional frameworks, mandatory IFRS adoption provides an opportunity to assess the economic consequences of these differences. The main finding of this paper is that companies apply the most conservative criteria to reduce the number of discrepancies between the two standards, particularly in regards to presentation and measurement practices. Nevertheless, the evitación from Spanish GAAP has a significant impact on reported equity and net income. Firms in Consumer services, Consumer goods, Oil and Gas, and Basic Materials, Manufacturing and Construction industries experience the largest adjustments. Additionally, we find that firm-specific factors such as industry, size, auditor’s opinion and capital structure influence the choice of accounting policy used to prepare financial statements. The findings reported in this paper provide a basis for debate about the quality of financial disclosure and reporting regulation and their impact across countries.

We develop the barebones of a highly stylized theoretical endogenous growth model for analyzing the impact of R&D investment on long run growth. We use this framework to identify a structural vector autoregressive (SVAR) model on GDP growth, inflation and R&D investment, along with the (exogenous) flows of global knowledge, for the period 1970-2006 for the six more developed economies plus Spain. Besides, we also study the impact of private and public R&D on economic activity and prices or whether public R&D investment crowds out private one. Overall, we find that R&D shocks have a positive impact on economic activity, but a heterogeneous effect on prices. Moreover, public R&D disturbances tend to crowd out private R&D investment, except in the less innovative economies. And finally, demand shocks tend to have a negative impact on private R&D spending in the short to medium-run.

This paper develops a dynamic general equilibrium model in which the public and the private sector interact in the labor market. Previous studies that analyze the labor market effects of public sector employment and wages have mostly assumed exogenous rules for public wage and public employment. We show that theories that equalize wages with marginal products in the private sector can rationalize the interaction of public and private sector wages when extended to accommodate a non-trivial government sector/public sector union that endogenously determines public employment and wages. Our model suggests a positive correlation between public and private sector wages. Any increase in tax revenues, coupled with the existence of a positive public-private sector wage gap, makes working in the public sector an attractive option. Thus, a positive neutral productivity shock increases public and private sector wages. More interestingly, even a private-sector specific productivity shock spills-over to the public sector, increasing public wages. These facts lend some support to the wage leading role of the private sector. Nevertheless, at the same time, a positive shock to public sector wages would lead to an increase in private sector wages, via the flow of workers from the private to the public sector.

This paper aims to test the validity of the Ricardian proposition for the Spanish economy from three different approaches: a) by testing its theoretical implications on the stability of national saving and the relationship between fiscal and current account balances, b) by carrying a number of tests on different structural consumption equations and, c) by testing this hypothesis in consumption functions stemming from the Euler equations derived from a consumer’s maximization problem. Our results lean toward rejection of the Ricardian proposition, although some degree of substitution between public and private saving is detected. In terms of policy implications, these results would suggest that there is some room for fiscal policy to exert its countercyclical role in the case of Spain. However, the effectiveness of such a policy might be limited in a context of rising debt ratios that trigger sustainability concerns and make consumers increasingly Ricardian.

In this paper we integrate Schumpeterian endogenous growth into a general equilibrium framework. By explicitely modelling the innovation and technology adoption process we are able to match some stylized economic facts such as entry rates and survival times of firms in the U.S. economy or the maximum convergence rates accross countries. Additionally, it allows us to propose a new definition of what a technology shock is and to compare it with the standard definition. Results show how this framework provides a plausible description of how economies grow and respond to the arrival of new technologies.

We study the effects that the Maastricht treaty, the creation of the ECB, and the Euro changeover had on the dynamics of European business cycles using a panel VAR and data from ten European countries - seven from the Euro area and three outside of it. There are slow changes in the features of business cycles and in the transmission of shocks. Time variations appear to be unrelated to the three events of interest and instead linked to a process of European convergence and synchronization.

Many studies have established that a small number of firms, known as fast-growth firms or
Gazelles, create most of the new jobs. In spite of the importance of this topic from a
policy-point of view, most of those studies are descriptive and limited to a comparison of the
characteristics of the high-growth group with respect to a control group of firms. This paper,
on the other hand, performs a multivariate analysis of the determinants of the fast growth of
Spanish firms controlling for the possible endogeneity of some variables. We use for that
purpose a firm-level database with information for about 200,000 Spanish firms per year
between 1996 and 2003. We find that being a start-up increases the probability of fast
growth by more than 30 percentage points, conditioned on having survived over the period.
Firms with initial higher relative wages and debt ratio, up to a certain point, also experience
higher chances of fast growth. Hence, as it was established elsewhere, better access to
finance and to human capital are key to increase the number and growth of Gazelles.
We also find that high-growth firm sustain their expansion with relatively more debt and
fixed-term contracts than the rest of the firms in the sample.

The term spread may play a major role in a monetary policy rule whenever data revisions of output and inflation are not well behaved. In this paper we use a structural approach based on the indirect inference principle to estimate a standard version of the New Keynesian Monetary (NKM) model augmented with term structure using both revised and real-time data. The estimation results show that the term spread becomes a significant determinant of the U.S. estimated monetary policy rule when revised and real-time data of output and inflation are both considered.

In a search and matching environment, this paper assesses a range of modeling setups against
macro evidence for the monetary transmission mechanism in the euro area. In particular, we
assess right-to-manage vs. efficient bargaining, flexible vs. sticky wages, interactions at the firm
level between price and wage-setting, alternative forms of hiring frictions, search on-the-job and
endogenous job separation. Models with wage stickiness and right-to-manage bargaining or
with firm-specific labour imply a sufficient degree of real rigidity, and so can reproduce inflation
dynamics well. However, they imply too small a response on the employment margin. The other
model variants fit employment dynamics better, but then imply too little real rigidity and, so, too
volatile inflation, owing to strong responses of marginal wages and hours per employee. Further
sources of real rigidities - possibly from outside of the labour market - seem to be needed to
simultaneously explain the responses of wages, inflation and employment.

We present evidence about the loss of the so-called "plucking effect", that is, a high-growth phase of the cycle typically observed at the end of recessions. This result matches the belief, presented informally by different authors, that recession may have now permanent effects, or recession have now an L shape versus old-time recessions that always had a V shape. We also show that the loss of the "plucking effect" can explain part of the Great Moderation. We postulate that these two phenomena may be due to changes in inventory management brought about by improvements in information and communications technologies.

This paper studies the implications of cross-country housing market heterogeneity for a monetary union, also comparing the results with a flexible exchange rate and independent monetary policy setting. I develop a two-country new Keynesian general equilibrium model with housing and collateral constraints to explore this issue. Results show that in a monetary union, consumption reacts more strongly to monetary policy shocks in countries with high loan-to-value ratios (LTVs), a high proportion of borrowers or variable-rate mortgages. As for asymmetric technology shocks, output and house prices increase by more in the country receiving the shock if it can conduct monetary policy independently. I also find that after country-specific housing price shocks consumption does not only increase in the country where the shock takes place, there is an international transmission. From a normative perspective, I conclude that housing-market homogenization in a monetary union is not beneficial per se, only when it is towards low LTVs or predominantly fixed-rate mortgages. Furthermore, I show that when there are asymmetric shocks but identical housing markets, it is beneficial to form a monetary union with respect to having a flexible exchange rate regime. However, for the examples I consider, net benefits decrease substantially if there is LTV heterogeneity and are negative under different mortgage contracts.

The worldwide availability of easy external financing has been an essential driver of recent M&A activity and a growing perception exists that such conditions may have resulted in a large number of non-value increasing transactions. This paper evaluates the interaction between credit conditions, the method of payment and value creation in a sample of European M&A transactions. The contribution of the paper is twofold. First, we analyze to what extent more generous financing conditions lead to deals that were less-likely to be value creating. Second, we estimate a joint model on the likelihood of choosing cash as a method of payment and the amount of value-created by such deals, controlling for the impact of financial conditions. We find that lower corporate bond spreads are correlated with less value creation in M&A deals suggesting that easy financial conditions may have resulted in M&A deals less-likely to generate value. We also find that higher leverage and a better cash-flow position of the target are more likely to result in cash deals and these deals provide higher excess returns to targets although do not generate value for the deal.

This paper analyzes the joint effect of EPL and financial market imperfections on investment,
capital-labour substitution, labour productivity and job reallocation in a cross-country
framework. In the spirit of Rajan and Zingales (1998) and Ciccone and Papaioannou (2006),
we exploit variation in the need for reallocation at the sectoral and aggregate level to assess
the average effect of EPL on firms’ policies. Then, exploiting firm-level information we study
if the effect of EPL is stronger in firms with lower levels of internal resources. We find that, on
average, EPL reduces investment per worker, capital per worker and value added per
worker in high reallocation sectors relative to low reallocation sectors. The reduction in the
capital-labour ratio is less pronounced in firms with higher internal resources, suggesting
that financial constraints exacerbate the negative effects of EPL on capital deepening.

In this paper we analyse the role that Social Security wealth and incentives play in the
transition to retirement in Spain. We use the labour records and other relevant information
contained in a newly released database [Muestra Continua de Vidas Laborales (2006)]
to construct incentive measures stemming from the Social Security provisions in relation to
retiring at old age and investigate the role played by such incentives and by other
socio-economic variables on the retirement hazard. We compute the effects of the reform
that took place in 2002, which made the requirements to access a pension stricter in
general. We carry out a dynamic reduced-form analysis of the retirement decision using a
duration model.
Our results show that both the pension wealth and substitution effects have a
significant role on retirement decisions, but that the latter has less relevance since the reform
introduced in 2002.

We develop a dynamic factor model to compute short term forecasts of the Spanish GDP growth in real time. With this model, we compute a business cycle index which works well as an indicator of the business cycle conditions in Spain. To examine its real time forecasting accuracy, we use real-time data vintages from 2008.02 through 2009.01. We conclude that the model exhibits good forecasting performance in anticipating the recent and sudden downturn.

This paper analyses the risk and return of loans portfolios in a joint setting. I develop a model to obtain the distribution of loans returns. I use this model to describe the investment opportunity set of lenders using mean-variance analysis with a Value at Risk constraint. I also obtain closed form expressions for the interest rates that banks should set in compensation for borrowers' credit risk under absence of arbitrage opportunities and I use these rates as a benchmark to interpret actual loans' prices. Finally, I study the risk-return trade-off in an empirical application to the Spanish banking system.

This paper analyzes empirically what explains the low profitability of Chinese banks for the period 1997-2004. We find that better capitalized banks tend to be more profitable. The same is true for banks with a relatively larger share of deposits and for more X-efficient banks. In addition, a less concentrated banking system increases bank profitability, which basically reflects that the four state-owned commercial banks -China's largest banks- have been the main drag for system's profitability. We find the same negative influence for China's development banks (so called Policy Banks), which are fully state-owned. Instead, more market oriented banks, such as joint-stock commercial banks, tend to be more profitable, which again points to the influence of government intervention in explaining bank performance in China. These findings should not come as a surprise for a banking system which has long been functioning as a mechanism for transferring huge savings to meet public policy goals.

We show that the distribution of any portfolio whose components jointly follow a location-scale mixture of normals can be characterised solely by its mean, variance and skewness. Under this distributional assumption, we derive the mean-variance-skewness frontier in closed form, and show that it can be spanned by three funds. For practical purposes, we derive a standardised distribution, provide analytical expressions for the log-likelihood score and explain how to evaluate the information matrix. Finally, we present an empirical application in which we obtain the mean-variance-skewness frontier generated by the ten Datastream US sectoral indices, and conduct spanning tests.

Existe evidencia de que la regulación del comercio minorista puede generar efectos significativos
sobre variables como los precios, el empleo o la productividad. En el caso español este sector se
caracteriza por una regulación autonómica muy extensa. En este contexto, en este trabajo se aporta,
en primer lugar, una base de datos y unos indicadores de las principales restricciones al comercio
minorista presentes entre 1997 y 2007 (ambos inclusive) en las distintas Comunidades Autónomas
(CCAA) en relación con los siguientes aspectos: horarios comerciales, temporada de rebajas,
definición de grandes superficies, exigencia de licencia autonómica a las tiendas de descuento
duro, moratorias comerciales e impuestos específicos a las grandes superficies. En segundo
lugar, se ofrece un indicador agregado a partir de estas restricciones, elaborado a partir de
técnicas de análisis factorial. Finalmente, se estima, mediante técnicas de datos de panel, el
efecto del grado de restrictividad comercial (medida a partir del indicador agregado) sobre la
densidad comercial, los ocupados en el sector y la inflación en las CCAA. Los resultados de esta
investigación apuntan a que existe en la actualidad una regulación más estricta que la que estaba
en vigor al comienzo del período analizado. Además, se encuentra evidencia de que una mayor
regulación estaría asociada a una mayor inflación, una menor ocupación en el sector y una mayor
densidad comercial. En todo caso, los resultados deben tomarse con cautela dadas las
limitaciones del indicador de regulación utilizado y del periodo de datos disponible.

The literature points out that retail trade regulations may have a significant impact on prices,
employment and productivity. In the case of Spain, the retail trade sector is subject to a rich set of
regional regulations. This paper provides a database and a set of indicators on the main
restrictions to retail trade in place in Spain’s Autonomous Regions (Comunidades Autónomas)
between 1997 and 2007. Those restrictions bear on the following regulatory aspects: shopping
hours, blue laws, seasonal discounts, definitions of «big» stores, licensing of discount stores,
moratoria in retail trade licence issuing and taxes on big stores. The paper presents then an
aggregate indicator constructed on the basis of these restrictions using factor analysis. Finally, this
research estimates the effect of the commercial restrictiveness (using the aggregate indicator)
among the regions on the commercial density, the number of employees of the sector and the
rate of inflation. For that, panel data techniques are applied to the analysis. On the one hand, the
results of this research point to an increase in the level of regulation throughout the period. On the
other hand the estimates show that an increase in the level of restrictiveness increases commercial
density and inflation among the regions but diminishes the number of persons employed in the
sector. In either case, the results of this research must be taken with care due to the limitations of
the regulation indicator studied and the limited availability of data for the period under study.

This paper develops an error components model that is used to examine the impact of
job changes on the dynamics and variance of individual log earnings. I use data on work
histories drawn from the Panel Study of Income Dynamics (PSID), that makes possible to
do the distinction between voluntary an involuntary job-to-job changes. The potential endogeneity
of job mobility in relation to earnings es circumvented by means of an instrument
variable estimation method that also allows to control for unobserved individual-job specific
heterogeneity.

In this paper we propose an affine model that uses as observed factors the Nelson and
Siegel (NS) components summarising the term structure of interest rates. By doing so, we
are able to reformulate the Diebold and Li (2006) approach to forecast the yield curve in
a way that allows us to incorporate a non-arbitrage opportunities condition and risk
aversion into the model. These conditions seem to improve the forecasting ability of
the term structure components and provide us with an estimation of the risk premia.
Our approach is somewhat equivalent to the recent contribution of Christiensen, Diebold
and Rudebusch (2008). However, not only does it seem to be more intuitive and far easier
to estimate, it also improves that model in terms of fitting and forecasting properties.
Moreover, with this framework it is possible to incorporate directly the inflation rate as an
additional factor without reducing the forecasting ability of the model. The augmented model
produces an estimation of market expectations about inflation free of liquidity, counterparty
and term premia. We provide a comparison of the properties of this indicator with others
usually employed to proxy the inflation expectations, such as the break-even rate, inflation
swaps and professional surveys.

This paper estimates the steady state mark-ups of 23 branches of activity in seven
developed countries (USA, Japan, Germany, France, UK, Italy and Spain). The empirical
methodology departs from the Hall (1988) seminal approach and incorporates the possibility
of non-competitive labour markets. Besides, it is used a time varying parameter (TVP)
estimation technique in order to compute the evolution of steady state mark-ups. Looking at
the constant parameter estimations, it emerges a clear dichotomy between two groups of
countries: USA and UK, with the lowest mark-ups, and Japan and Germany, in the other
side of the spectrum; Italy and Spain keep an intermediate position. With respect to the
bargaining power of trade unions, the dichotomy between Anglo-Saxon countries, where it is
almost inexistent, and Central European countries is even more marked. Allowing these
parameters to evolve in time, the results are also interesting: there have been increases in
mark-ups in Italy, France and Germany; on the contrary, in USA, Japan, UK and Spain they
have diminished. In the case of the bargaining power of the trade unions, all these countries
have shown reductions since 1980, with the only exception of Germany. Finally, the paper
finds a quite robust inverse relation between productivity growth, mark-ups and the
bargaining power of trade unions, although the quantitative effects are moderated.

In this paper we use the Continuous Sample of Working Histories 2005 (MCVL2005) to
analyze the earnings assimilation of migrants from outside the EU-15 in Spain. Using our
panel dataset we show that immigrants reduce around the half of the initial wage gap
respect to natives the first 5 to 6 years after arrival. However, no further reductions of the
remaining wage gap are estimated. We also show that results based on cross-section data
are downward biased since an important increase in the quality of migrants has taken place
over the recent years. This skill upgrading of new immigrant cohorts is evident in the Spanish
case as well as the depreciation of the value of most of the experience that is brought from
abroad. We can associate the improvement in the skill of immigrants to a change in the
composition of new entrants. An important mechanism underlying the assimilation is the
higher likelihood of recent immigrants in changing jobs among different sectors and firms,
but also improving their situation within the same firm. Finally, some caveats should be taken
into account when interpreting our results given that immigration phenomenon is quite recent
in the Spanish labour market and it has taken place in an especially positive economic
environment.

The aim of this paper is twofold. First, I study how the proportion of fixed and variable-rate mortgages in an economy can affect the way shocks are propagated. Second, I analyze optimal implementable simple monetary policy rules and the welfare implications of this proportion. I develop and solve a New Keynesian dynamic stochastic general equilibrium model that features a housing market and a group of constrained individuals who need housing collateral to obtain loans. A given proportion of constrained households borrows at a variable rate, while the rest borrows at a fixed rate. The model predicts that in an economy with mostly variable-rate mortgages, an exogenous interest rate shock has larger effects on borrowers than in a fixed-rate economy. Aggregate effects are also larger for the variable-rate economy. For plausible parametrizations, differences are muted by wealth effects on labor supply and by the presence of savers. More persistent shocks, such as inflation target and technology shocks, cause larger aggregate differences. From a normative perspective I find that, in the presence of collateral constraints, the optimal Taylor rule is less aggressive against inflation than in the standard sticky-price model. Furthermore, for given monetary policy, a high proportion of fixed-rate mortgages is welfare enhancing.

Does emigration really drain human capital accumulation in origin countries? This paper
explores a unique household survey purposely designed and conducted to answer this
specific question for the case of Cape Verde. This is allegedly the African country suffering
from the largest “brain drain”, despite also having a fast-growing stock of human capital. Our
micro data enables us to propose a novel, explicit test of “brain gain” arguments according
to which the possibility of own future emigration positively impacts educational attainment
in the origin country. The innovative empirical strategy we propose hinges on the ideal
characteristics of our survey, namely on full histories of migrants and on a new set of
exclusion restrictions. Our results point to a very substantial impact of the “brain gain”
channel on the educational attainment of those who do not emigrate. Alternative channels
(namely remittances, family disruption, and general equilibrium effects at the local level)
are also considered, but do not seem to play an important role. Our findings are robust
to the choice of instruments and the empirical model.

This paper highlights the importance of product differentiation and endogenous R&D in determining the optimal R&D policy, in a model where investment in cost reducing R&D is committed before firms compete in a differentiated-goods third-country export market. R&D is always taxed in oligopolies for high degrees of product differentiation. For lower degrees of product differentiation the duopoly is subsidized or the government remains inactive. In contrast, the monopoly is always subsidized. The government with a duopoly may be active or inactive depending on the degree of product differentiation. Thus, we may observe a reversal in the sign of the optimal R&D policy if the degree of product differentiation changes or, alternatively, if there is a change in the number of firms. Similar qualitative results hold if trade policy uses output subsidies, instead of R&D promotion.