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 the Working Papers published since 1990 are available here. Earlier ones, going back to the first one published in 1978, are available in the Institutional RepositoryOpens in a new window

All documents are available in PDF format PDF File. Opens in a new window

  • 26/01/2023
    2307. Do Renewables Create Local Jobs? (1 MB) Natalia Fabra, Eduardo Gutiérrez, Aitor Lacuesta and Roberto Ramos

    We investigate whether investments in renewable energy – solar and wind plants – create jobs in the municipality where they are located. Using 13 years of monthly data, we exploit the variation in the timing and size of investment projects across more than 3,200 municipalities in Spain, a country with substantial investments in this area. We use a new estimator for staggered differences-in-differences analysis that extends the local projections approach with clean controls (Dube et al., 2022). We find strong heterogeneity in the magnitude and pattern of the impacts of solar and wind investments. On average, solar investments increase employment by local firms, but the effects on the unemployment of local residents are weak. The effects of wind investments on local employment and unemployment are mostly non-significant. These findings have important implications for public policy.

  • 24/01/2023
    2306. Trust and accountability in times of pandemics (1 MB) Monica Martinez-Bravo and Carlos Sanz

    The COVID-19 pandemic took place against the backdrop of growing political polarization and distrust in political institutions in many countries. Did deficiencies in government performance further erode trust in public institutions? Did citizens’ ideology interfere with the way they processed information on government performance? To investigate these two questions, we conducted a pre-registered online experiment in Spain in November 2020. Respondents in the treatment group were provided information on the number of contact tracers in their region, a key policy variable under the control of regional governments. We find that individuals greatly over-estimate the number of contact tracers in their region. When we provide the actual number of contact tracers, we find a decline in trust in governments, a reduction in willingness to fund public institutions and a decrease in COVID-19 vaccine acceptance. We also find that individuals endogenously change their attribution of responsibilities when receiving the treatment. In regions where the regional and central governments are controlled by different parties, sympathizers of the regional incumbent react to the negative news on performance by attributing greater responsibility for it to the central government. We call this the blame shifting effect. In those regions, the negative information does not translate into lower voting intentions for the regional incumbent government. These results suggest that the exercise of political accountability may be particularly difficult in settings with high political polarization and areas of responsibility that are not clearly delineated.

  • 20/01/2023
    2305. A production network model for the Spanish economy with an application to the impact of NGEU funds (1 MB) Alejandro Fernández-Cerezo, Enrique Moral-Benito and Javier Quintana

    This paper introduces a sectoral model for the Spanish economy that allows a better understanding of the propagation of sector-specific shocks taking into account different network interdependencies. In particular, the model features sector interactions along several dimensions in an open economy setting, either in the provision of intermediate inputs and capital goods or competing in the labour market. This framework is flexible enough to provide insights into the effect of several policy-relevant shocks, such as global value chain bottlenecks, increases in production costs in energy-intensive sectors or large public investment programmes. In order to illustrate the role of such sectoral interactions, we consider a sectorisation of Next Generation EU (NGEU) funds based on Spain’s Recovery, Transformation and Resilience Plan (RTRP) which will mobilize €69.5 bn in grants. According to our findings, the average impact over a 5-year horizon is 1.15% of GDP if we consider only the direct effect of the investment programmes and expenditure plans, but it increases to 1.75% if we take into account the increase in the productive capacity of certain sectors and its propagation through the production network. Moreover, the resulting expansion is particularly strong in sectors highly dependent on high-skilled labour, such as IT and professional services, which might lead to shortages of high-skilled workers, reducing the aggregate impact on GDP by 25%.

  • 17/01/2023
    2304. New supply bottlenecks index based on newspaper data. (7 MB) Pablo Burriel, Iván Kataryniuk, Carlos Moreno Pérez and Francesca Viani

    We develop a new monthly indicator of supply bottlenecks using newspaper articles. The supply bottlenecks index (SBI) provides a consistent narrative of supply issues related to wars, natural disasters, strikes and, most recently, the COVID-19 pandemic. Innovations in the SBI have important macroeconomic implications: an increase in the SBI functions as a cost-push shock, decreasing industrial production and employment, and pushing prices up, so that monetary policy faces important trade-offs.

  • 05/01/2023
    2303. Evaluating central bank asset purchases in a term structure model with a forward-looking supply factor (1 MB) Juan Equiza, Ricardo Gimeno, Antonio Moreno and Carlos Thomas

    The theoretical literature on term structure models emphasises the importance of the expected absorption of duration risk during the residual life of term bonds in order to understand the yield curve effect of central banks’ government bond purchases. Motivated by this, we develop a forward-looking, long-horizon measure of euro area government bond supply net of Eurosystem holdings, and use it to estimate the impact of the ECB’s asset purchase programmes in the context of a no-arbitrage affine term structure model. We find that an asset purchase shock equivalent to 10% of euro area GDP lowers the 10-year average yield of the euro area big four by 59 basis points (bp) and the associated term premium by 50 bp. Applying the model to the risk-free (OIS) yield curve, the same shock lowers the 10-year rate and term premium by 35 and 26 bp, respectively.

  • 13/01/2023
    2302. A tale of two margins: monetary policy and capital misallocation (1 MB) Silvia Albrizio, Beatriz González and Dmitry Khametshin

    This paper explores the impact of monetary policy on capital misallocation through its heterogeneous effects on firms. Using Spanish firm-level data covering the period 1999-2019, we show that an expansionary monetary policy shock leads to a decrease in capital misallocation, as measured by the within-industry dispersion of firms’ marginal revenue product of capital (MRPK). To analyse the mechanism behind this finding, we first explore the intensive margin and show that high-MRPK firms increase their investment and their debt financing relatively more than low-MRPK firms after monetary policy easing. We also document that a firm’s MRPK is a much stronger driver of its investment sensitivity to monetary policy than its age, leverage or cash. These findings suggest that MRPK is a good proxy for financial frictions. Second, we explore the extensive margin and show that monetary policy easing increases entry and decreases exit, although the effect is quantitatively small, and it does not lead to significant changes in the composition of high- and low-MRPK entrants or exiters. Overall, the evidence points to expansionary monetary policy decreasing capital misallocation mainly through the relaxation of financial frictions of incumbent, productive, constrained firms.

  • 03/01/2023
    2301. The forgotten lender: the role of multilateral lenders in sovereign debt and default (2 MB) María Bru Muñoz

    The role of multilateral lenders in sovereign default has been traditionally overlooked by the literature. However, these creditors represent a significant share of lending to emerging markets and feature very distinct characteristics, such as lower interest rates and seniority. By including these creditors in a traditional DSGE model of sovereign default, I reproduce the high debt levels found in the data while maintaining default probabilities within realistic values. Additionally, I am able to analyze the role of multilateral debt in emerging economies. Multilateral loans complement private financing and reduce the incompleteness of international financial markets. Also, multilateral funding acts as an insurance mechanism in bad times, providing countries with some degree of consumption smoothing, opposite to the role of front-loading consumption fulfilled by private financing.

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