Working Papers

The aim of the Working Papers series is to disseminate research papers on economics and finances by Banco de España researchers. The Working Papers are published once they have successfully come through an anonymous evaluation process. Through their publication, the Banco de España seeks to contribute to the economic analysis and knowledge of the Spanish economy and its international context.

The opinions and analyses published in the Working Papers series are the responsibility of the authors and are not necessarily shared by the Banco de España or the Eurosystem.

All documents published in this collection are available in electronic format. If they are not directly available through this website, copies can be requested from the Publications Unit.

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  • 1817 Sandra García-Uribe Multidimensional media slant: complementarities in news reporting by US newspapers (2 MB)

    Are editors’ choices of front page news based on the potential complementarities between
    the news items? This paper studies front page choices made by editors of major newspapers
    in the US. I document that newspapers front pages are biased to certain combinations of
    news on top of biased to certain news. To identify my measures of bias, I exploit the variation
    in news relevance across different topics and days. To measure the news relevance I use lead
    news choices of other US mass media. As a consequence, my measures of bias are relative
    to the overall media bias. I also provide a reader-maximization model for front page decisions
    that I use to interpret the empirical biases of the newspaper as preferences of its population
    of target readers. From my estimation, I recover maps of complementarities among pairs of
    topics for each of the major US newspapers. I find that complementarities between news
    contribute in a large portion to the probability that news on a topic appears in the front page.

  • 1816 Jose Asturias, Manuel García-Santana and Roberto Ramos Competition and the welfare gains from transportation infrastructue: evidence from the Golden Quadrilateral of India (4 MB)

    A significant amount of resources is spent every year on the improvement of transportation
    infrastructure in developing countries. In this paper, we investigate the effects of one such
    large project, the Golden Quadrilateral in India. We do so using a model of internal trade
    with variable markups. In contrast to the previous literature, our model incorporates several
    channels through which transportation infrastructure affects welfare. In particular, the model
    accounts for gains stemming from improvements in the allocative efficiency of the economy.
    We calibrate the model to the Indian manufacturing sector and find real income gains of
    2.7%. We also find that allocative efficiency accounts for 7.4% of these gains. The importance
    of allocative efficiency varies greatly across states, and can account for up to 18% of the
    overall gains in some states. The remaining welfare gains are accounted for by changes in
    labor income, productive efficiency, and average markups that affect states’ terms of trade.

  • 1815 Isabel Argimón, Clemens Bonner, Ricardo Correa, Patty Duijm, Jon Frost, Jakob de Haan, Leo de Haan and Viktors Stebunovs Financial institutions’ business models and the global transmission of monetary policy (862 KB)

    Global financial institutions play an important role in channeling funds across countries and, therefore, transmitting monetary policy from one country to another. In this paper, we study whether such international transmission depends on financial institutions’ business models. In particular, we use Dutch, Spanish, and U.S. confidential supervisory data to test whether the transmission operates differently through banks, insurance companies, and pension funds. We find marked heterogeneity in the transmission of monetary policy across the three types of institutions, across the three banking systems, and across banks within each banking system. While insurance companies and pension funds do not transmit homecountry monetary policy internationally, banks do, with the direction and strength of the transmission determined by their business models and balance sheet characteristics.

    Annex of Tables File PDF: Opens in a new window (589 KB)

  • 1814 Dmitri Kirpichev and Enrique Moral-Benito The costs of trade protectionism: evidence from Spanish firms and non-tariff measures (556 KB)

    The rise in non-tariff protectionist measures has been associated to the weakness in global trade over the last few years. We investigate the effect of non-tariff barriers (NTBs) on exports growth over the period 2009-2013 using administrative data at the firm-product-destination level in Spain. According to our findings, non-tariff protectionist measures significantly reduce exports growth at the product-destination level. Moreover, NTBs also hinder exports growth at the firm level and negatively affect other firm outcomes such as productivity growth. In contrast, the impact of liberalizing non-tariff measures is not statistically significant.

  • 1813 James Cloyne, Clodomiro Ferreira and Paolo Surico Monetary policy when households have debt: new evidence on the transmission mechanism (937 KB)

    How do changes in monetary policy affect consumption? Using household data for the US
    and the UK, we show that most of the aggregate response of consumption to interest rates
    is driven by households with a mortgage. Outright home owners do not adjust expenditure
    at all and renters change their spending but by less than mortgagors. Income rises for all
    households as interest rate cuts directly affect firm investment and household consumption,
    boosting aggregate demand. A key dierence between these housing tenure groups is the
    composition of their balance sheets: mortgagors hold sizable illiquid assets but little liquid
    wealth, consistent with a higher marginal propensity to consume.

  • 1812 Juan S. Mora-Sanguinetti and Rok Spruk Industry vs Services: do enforcement institutions matter for specialization patterns? Disaggregated evidence from Spain (3 MB)

    We exploit historical differences in foral law to consistently estimate the contribution of the
    quality of enforcement institutions to economic specialization across Spanish provinces in
    the period 1999-2014. The distribution of economic activity in Spain as of today shows a
    strong pattern of geographical specialization. Regions less specialized in manufacturing
    (industry) and oriented to services sectors (Andalusia, Extremadura) in the south are compared
    with industrialized/manufacturing regions in the north such as the Basque Country, Navarre
    or Aragon. We construct province-level congestion rates across three different jurisdictions
    (civil, labor and administrative) from real judicial data measuring the performance of the
    Spanish judicial system over time, and estimate the effect of judicial efficacy on the share of
    manufacturing and services in the total output. Using a variety of estimation techniques, the
    evidence unveils strong and persistent effects of judicial efficacy on province-level economic
    specialization with notable distributional differences. The provinces with a historical experience
    of foral law are significantly more likely to have more efficient enforcement institutions at the
    present day. In turn, greater judicial efficacy facilitates specialization in high-productivity
    manufacturing while greater judicial inefficacy encourages service-intensive specialization. The
    effect of judicial efficacy on economic specialization does not depend on confounders, holds
    across a number of specification checks and appears to be causal. Lastly, the three
    jurisdictions seem relevant to explain specialization, although the administrative jurisdiction
    appears to have a more pronounced impact than the labor or civil jurisdictions.

  • 1811 Gabriel Jiménez, Enrique Moral-Benito and Raquel Vegas Bank lending standards over the cycle: the role of firms’ productivity and credit risk (646 KB)

    We show that bank lending standards are influenced by macroeconomic conditions. We use
    monthly data from the Banco de España Central Credit Register, which allow us to monitor all
    loan applications made by non-financial firms to non-current banks from 2002 to 2015. To
    test the pro-cyclicality of banks’ appetite for risk, we investigate how two firm characteristics
    (ex-ante credit risk and productivity) interacting with two macroeconomic indicators (business
    cycle and the monetary policy stance) affect the probability of granting a loan. In order to
    enhance identification we account for unobserved heterogeneity by means of firm and banktime
    fixed effects. Our findings indicate that banks soften their credit standards during booms
    or when monetary policy is loose to harden them during busts or when short-term interest
    rates increase. This pattern is especially relevant in the case of firms’ productivity, which might
    partly explain the dismal evolution of aggregate productivity in Spain during the pre-crisis
    period. Finally, we also find that these results are more pronounced among less capitalized,
    less liquid and more profitable banks.

  • 1810 Roberto Ramos and Carlos Sanz Backing the incumbent in difficult times: the electoral impact of wildfires (734 KB)

    How do voters react to large shocks that are (mostly) outside the control of politicians? We address this question by studying the electoral effects of wildfires in Spain during 1983-2011. Using a difference-in-difference strategy, we find that a large accidental fire up to nine months ahead of a local election increases the incumbent party’s vote share by almost 8 percentage points. We find that a rally-behind-the-leader effect best explains the results. A simple formalization of this mechanism yields an implication – that the effect should be larger for stronger (more voted) incumbents – that is supported by the data.

  • 1809 Laura Alfaro, Manuel García-Santana and Enrique Moral-Benito On the direct and indirect real effects of credit supply shocks (920 KB)

    We consider the real effects of bank lending shocks and how they permeate the economy through buyer-supplier linkages. We combine administrative data on all firms in Spain with a matched bank-firm-loan dataset incorporating information on the universe of corporate loans for 2003-2013. Using methods from the matched employer-employee literature for handling large data sets, we identify bank-specific shocks for each year in our sample. Combining the Spanish Input-Output structure and firm-specific measures of upstream and downstream exposure, we construct firm-specific exogenous credit supply shocks and estimate their direct and indirect effects on real activity. Credit supply shocks have sizable direct and downstream propagation effects on investment and output throughout the period but no significant impact on employment during the expansion period. Downstream propagation effects are comparable or even larger in magnitude than direct effects. The results corroborate the importance of network effects in quantifying the real effects of credit shocks and show that real effects vary during booms and busts.

  • 1808 Miguel García-Posada Gómez Credit constraints, firm investment and growth: evidence from survey data (920 KB)

    We assess the impact of credit constraints on investment, inventories and other working capital and firm growth with a large panel of small and medium-sized enterprises from 12 European countries for the period 2014-2016. The data come from the Survey on the access to finance of enterprises (SAFE), a survey that is especially designed to analyse the problems in the access to external finance of European SMEs. The key identification challenge is a potential reverse-causality bias, as firms with poor investment and growth opportunities may have a higher probability of being credit constrained. We implement several strategies to overcome this obstacle: proxies for investment opportunities, lagged regressors, random effects and instrumental variables. Our findings suggest that credit constraints, both in bank financing and other financing (e.g. trade credit), have strong negative effects on investment in fixed assets, while the impact on firm growth and working capital is less robust.

  • 1807 Guilherme Bandeira Fiscal transfers in a monetary union with sovereign risk (707 KB)

    This paper investigates the welfare and economic stabilization properties of a fiscal transfers scheme between members of a monetary union subject to sovereign spread shocks. The scheme, which consists of cross-country transfer rules triggered when sovereign spreads widen, is incorporated in a two-country model with financial frictions. In particular, banks hold government bonds in their portfolios, being exposed to sovereign risk. When this increases, a drop bank’s equity value forces them to contract credit and to raise lending rates at the same time as they retain funds to build up their net worth. I show that, when domestic fiscal policy is not distortionary, fiscal transfers improve welfare and macroeconomic stability. This is because fiscal transfers can reduce banks’ exposure to government debt, freeing credit supply to the private sector. On the contrary, when domestic fiscal policy is distortionary, fiscal transfers cause welfare losses, despite stabilizing the economy. This result arises because the distortions caused by funding the scheme outweigh the positive effects of fiscal transfers in smoothing the adjustment of the economy hit by the shock.

  • 1806 Pablo Martín-Aceña Money in Spain. New historical statistics (1830-1998) (10 MB)

    The purpose of this Working Paper is to present a reconstruction of the main monetary aggregates for the period 1830, when the first modern banknotes were issue, to 1998, the last year before the substitution of the peseta by the euro. It offers series for currency in circulation and its components, bank deposits and its components, high-powered money and the money supply. With regard to previous monetary historical statistics, this Working Paper improves the quality and the time-span of the series, covering a period of more than 150 years. The Working Paper offers also a short approach to the long-term evolution of the quantity of money in Spain and the changes in its composition. The sources and methodology employed is explain in detail.


  • 1805 Angela Abbate and Dominik Thaler Monetary policy and the asset risk-taking channel (762 KB)

    How important is the risk-taking channel for monetary policy? To answer this question, we develop and estimate a quantitative monetary DSGE model where banks choose excessively risky investments, due to an agency problem which distorts banks’ incentives. As the real interest rate declines, these distortions become more important and excessive risk taking increases, lowering the efficiency of investment. We show that this novel transmission channel generates a new and quantitatively significant monetary policy trade-off between inflation and real interest rate stabilization: it is optimal for the central bank to tolerate greater inflation volatility in exchange for lower risk taking.

  • 1804 Moritz A. Roth International co-movements in recessions (1 MB)

    Business cycle correlations are state-dependent and higher in recessions than in expansions. In this paper, I suggest a mechanism to explain why this is the case. For this purpose, I build an international real business cycle model with occasionally binding constraints on capacity utilization which can account for state-dependent cross-country correlations in GDP growth rates. The intuition is that firms can only use their machines up to a capacity ceiling. Therefore, in booms the growth of an individual economy can be dampened when the economy hits its capacity constraint. This creates an asymmetry that can spill-over to other economies, thereby creating state-dependent cross-country correlations in GDP growth rates. Empirically, I successfully test for the presence of capacity constraints using data from the G7 advanced economies in a Bayesian threshold autoregressive (T-VAR) model. This finding supports capacity constraints as a prominent transmission channel of cross-country GDP asymmetries in recessions compared to expansions.

  • 1803 Pablo Aguilar and Jesús Vázquez Term structure and real-time learning (1 MB)

    This paper introduces the term structure of interest rates into a medium-scale DSGE model. This extension results in a multi-period forecasting model that is estimated under both adaptive learning and rational expectations. Term structure information enables us to characterize agents’ expectations in real time, which addresses an imperfect information issue mostly neglected in the adaptive learning literature. Relative to the rational expectations version, our estimated DSGE model under adaptive learning largely improves the model fit to the data, which include not just macroeconomic data but also the yield curve and the consumption growth and inflation forecasts reported in the Survey of Professional Forecasters. Moreover, the estimation results show that most endogenous sources of aggregate persistence are dramatically undercut when adaptive learning based on multi-period forecasting is incorporated through the term structure of interest rates.

  • 1802 Ignacio Hernando, Irene Pablos, Daniel Santabárbara and Javier Vallés Private Saving. New Cross-Country Evidence Based on Bayesian Techniques (658 KB)

    The existing literature exhibits high uncertainty over the theoretical and empirical determinants of private world saving. This paper reports new evidence on the drivers of private saving by applying Bayesian techniques, using data from the world’s 35 largest economies in the period 1980-2012. After reviewing the main theories of consumption and saving decisions, and discussing the potential effects of different determinants, we specify a general model that incorporates the most commonly used factors in the literature, considering the potential endogeneity of some of the regressors. The Bayesian Model Averaging (BMA) approach summarises the information embedded in all combinations of the explanatory variables considered by averaging each specification according to its likelihood. We find that in the medium term private credit to GDP ratio, the government surplus to GDP ratio, the terms of trade, life expectancy and the old-age dependency ratio are key determinants of cross-country private saving behaviour. Lastly, we assess the long-term effect of expected demographic changes in private saving globally.

  • 1801 Olympia Bover, Laura Hospido and Ernesto Villanueva The impact of high school financial education on financial knowledge and choices: evidence from a randomized trial in Spain (654 KB)

    We study how a 10-hour course about personal finance delivered in compulsory secondary education affects a wide range of student’s outcomes over a three months horizon. The contents of the course covered budgeting, banking relationship and saving vehicles, but also awareness about future outcomes. To obtain reliable estimates, we conducted a randomized field experiment where 3,000 9th grade students coming from 78 Spanish high schools received financial education at different points of the academic year. Right after the course, performance in standardized tests of financial knowledge increased by 16% of one standard deviation, and treated youths were more likely to become involved in financial matters at home and showed a higher degree of patience in hypothetical saving choices. An incentivized saving task conducted three months after delivering the course suggests that treated youths displayed more patient choices at various interest rates and maturities than a control group of 10th graders. The results of higher performance in financial test scores and the higher degree of patient choices in the incentivized saving task among the treated are statistically significant in strata with students with a relatively more disadvantaged background.

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