Publications

Occasional Papers

The Occasional Papers series seeks to disseminate the work carried out by the Banco de España within its sphere of competence that is considered to be of general interest for knowledge of the functioning of the Spanish economy and of its international environment.

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

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  • 23/11/2012
    1209. The fall of the labour income share in advanced economies (609 KB) Ángel Estrada and Eva Valdeolivas

    The labour income share is a key determinant of relevant macroeconomic variables, such as competitiveness, inflation, human capital accumulation, demand and income distribution. Simple economic models predict that the labour income share will fluctuate around a long-run value, thus implying a balanced growth path. However, in the past three decades a downward trend has been observed in various countries, especially in developed ones. To determine the sources of this trend, it is necessary, firstly, to address measurement issues, in particular the behaviour of self-employment, the role played by the non-market economy and the effect of the sectoral reallocation of activity. Then, various theoretical explanations are tested empirically, such as technological factors (capital-skill complementarity), international trade and changes in product and labour market regulations, controlling for the possible effects of the business cycle. This analysis reveals that the technological factors seem to be the most relevant determinants of the trend, and the labour income share is procyclical, but it lags one-year output movements.

  • 12/11/2012
    1208. Fiscal rules in Latin America: a survey (2 MB) Juan Carlos Berganza

    This survey first discusses general characteristics, advantages and disadvantages of different types of fiscal rules. The criterion for classifying them is based on the emphasis given: longterm sustainability (reducing the deficit bias and controlling the growth in public debt) or reducing the procyclicality of fiscal policy (short-term stabilisation). It then reviews the experience with fiscal rules in seven Latin American countries, as their use has become more widespread since the early 2000s. Only Chile targets cyclically adjusted indicators, although Colombia is also taking that ap proach and the Mexican rule offers some stabilisation properties. Argentina, Brazil and Peru apply numerical rules targeting the overall/primary
    public balance and/or public spending. The Venezuelan framework has, in practice, been diluted after its introduction. The coverage of the rule depends on the degree of decentralisation of fiscal systems, with many countries including debt limits on the subnational governments as a key tool to face the common pool problem that emerges in federal states. All in all, fiscal rules in Latin America have been more effective in helping to strengthen long-term sustainability than in responding to shocks, as proved by the recent financial crisis. Fiscal rules have had to be fine-tuned over the years and a “second generation” of fiscal rules – combining the sustainability objective with greater flexibility to accommodate economic shocks – appears to be necessary in order to increase their efficiency.

  • 06/09/2012
    1207. Los retos para la política económica en un entorno de tipos de interés próximos a cero (1 MB) Ignacio Hernando, Jimena Llopis and Javier Vallés

    Almost four years after the collapse of Lehman Brothers, the monetary policy stance in most advanced economies remains extraordinarily loose, with policy rates close to zero and a number of non-conventional stimuli still in place. The resulting prominence of monetary policy responds, first, to the need to restore the functioning of the monetary transmission mechanism by contributing to the stabilisation of various financial market segments; and further, to the objective of stimulating economic agents´ spending decisions. This paper summarises the monetary policy measures adopted in the main advanced economies and reflects on the role played by different economic policy instruments, drawing both on the results of academic literature and on the recent positions taken by international institutions and national authorities. The paper concludes by summarising the main economic policymaking lessons to be learnt from the current crisis and it identifies issues still eliciting controversy.

  • 05/07/2012
    1206. Long-run growth and demographic prospects in advanced economies (945 KB) Galo Nuño, Cristina Pulido and Rubén Segura-Cayuela

    This paper analyses the long-run growth rates of advanced economies, based on demographic factors. To this end, growth is broken down into two components: growth in productivity (GDP per working-age person) and the projected rate of growth of the working-age population. Productivity is assumed to grow in the longrun at a constant rate equal to that of the technology leader, whereas the demographic projections are those of the United Nations. This simple methodology abstracts from other factors normally considered in the literature on long-term growth, such as the convergence process (we focus on advanced economies) and heterogeneity in participation and employment rates. However, the results do not differ much from those obtained using these other approaches (which are richer, but also more speculative), although the growth rates turn out to be somewhat lower in most cases. They indicate a general deceleration of growth in advanced economies in the coming two decades, due to a slowdown in working-age population growth. Japan, Germany, Italy and Spain face the least favourable growth dynamics in our sample, as these countries face reductions in the size of their workforces. By 2050 France and the United Kingdom could have overtaken Germany to become the largest economies in Europe. In the case of Spain (whose working-age population is expected to peak in 2024) the growth rate of GDP will progressively decline to just below 2% over the following decade.

  • 28/05/2012
    1205. El impacto de la consolidación fiscal sobre el crecimiento económico. Una ilustración para la economía española a partir de un modelo de equilibrio general (521 KB) Pablo Hernández de Cos and Carlos Thomas

    This study illustrates the effects of different fiscal consolidation measures on economic activity through simulations performed with a general equilibrium model calibrated to the Spanish economy. Overall, our results show that fiscal consolidation has short-run costs but sizable long-run benefits in terms of growth. Regarding the short-run costs, their magnitude depends crucially on the presence of confidence effects due to the consolidation process, which tend to reduce the value of fiscal multipliers.

  • 18/04/2012
    1204. Luis Ángel Rojo en el Banco de España (467 KB) José Luis Malo de Molina

    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.

  • 23/03/2012
    1203. Tracking the future on the web: construction of leading indicators using internet searches (1 MB) Concha Artola and Enrique Galán

    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.

    There is a Spanish version of this edition with the same number

  • 16/03/2012
    1202. What role, if any, can market discipline play in supporting macroprudential policy? (361 KB) María J. Nieto

    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.

  • 26/01/2012
    1201. The Spanish economic crisis: key factors and growth challenges in the euro area (619 KB) Eloísa Ortega and Juan Peñalosa

    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.

    There is a Spanish version of this edition with the same number.

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