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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  • 06/02/2018
    1709. New version of the Quarterly Model of Banco de España (MTBE) (509 KB) Ana Arencibia Pareja, Samuel Hurtado, Mercedes de Luis López and Eva Ortega

    The Quarterly Model of Banco de España (MTBE, Modelo Trimestral del Banco de España), is a large-scale macro-econometric model used for medium term macroeconomic forecasting of the Spanish economy, as well as for performing scenario simulations. The model is specified as a large set of error correction equations, and, especially in the short run, is mostly demand driven. This paper presents an update of the model, estimated with data from 1995 to 2014. In this iteration, a big revamp to the econometric techniques used in estimation has been implemented. Despite that, changes in coefficients and simulation results with respect to the previous version of the model are smaller than what we saw in earlier updates. Compared with MTBE-2014, this new version (MTBE-2017) shows less response of demand to interest rates and stock market prices but more to credit, less response of GDP to world demand but more to world prices and to the price of oil, more positive effects to output and employment from price and wage moderation, and slightly faster and bigger fiscal multipliers for some shocks
    (government consumption and investment, direct taxes to households) but smaller for others
    (indirect taxes, direct taxes to firms).

  • 29/12/2017
    1708. The financial and real performance of non-financial corporations in the euro area: 1999-2015 (717 KB) Vicente Salas, Lucio San Juan and Javier Vallés

    This paper documents the aggregated performance of non-financial corporations in the largest euro area economies and compares it with the performance of the US corporate sector as reported by National Economic Accounts and Financial Accounts. We find significant cross-country structural differences in the behaviour of real and financial indicators that remain long after the creation of the single currency, although there has been convergence in the average cost of debt paid by corporations and in the deleveraging process unfolding after the financial crisis. German corporations stand out, with higher productivity of operating capital and profit margins. Moreover, a lower average cost of debt and also a lower average corporate tax rate have contributed to a higher return of equity in Germany compared with the return in other EU countries and the US. Since the crisis years, German and Spanish companies have joined the US corporations in saving more than they invest. We also find some evidence of a declining proportion of cash-flows allocated to capital investment.

  • 06/10/2017
    1707. Microsimulation tools for the evaluation of fiscal policy reforms at the Banco de España (1 MB) Olympia Bover, José María Casado, Esteban García-Miralles, José María Labeaga and Roberto Ramos

    This paper presents the microsimulation models developed at the Banco de España for the study of fiscal reforms, describing the tool used to evaluate changes in the Spanish personal income tax and also the one for the value added tax and excise duties. In both cases the structure, data and output of the model are detailed and its capabilities are illustrated using simple examples of  hypothetical tax reforms, presented only to illustrate the use of these simulation tools.

  • 18/09/2017
    1706. Monitoring the Spanish Economy through the Lenses of Structural Bayesian VARs (2 MB) Danilo Leiva-Leon

    This paper proposes a suite of Structural Bayesian Vector Autoregression (SBVAR) models used (i) to disentangle the main shocks driving the Spanish economy over time and (ii) to provide short and medium term forecasts of output and inflation. The suite consists of a benchmark model, that includes output, prices and interest rate, along with four extensions that gather information from the labor, financial, and international markets, and from the fiscal sector. The identification of the structural shocks is achieved by relying on sign and exclusion restrictions. The models provide a narrative of the contribution of fundamental economic shocks that agrees with main historic events of the Spanish economy. Moreover, the proposed SBVAR models are used to provide forecasts of output and inflation conditional on diferent scenarios about the development of key macroeconomic variables. Therefore, the suite could be incorporated to the toolkit of quantitative models that the Banco de España uses to perform forecasts.

  • 26/07/2017
    1705. Indicadores para el seguimiento y previsión de la inversión en construcción (834 KB) Ángel Luis Gómez and M.ª del Carmen Sánchez

    This paper presents the indicators available to monitor construction investment and forecast its short-term evolution, in the case of the Spanish economy. In addition, it is described a procedure followed to estimate medium-term forecasts for housing investment, mainly based on demographic fundamentals that determine the demand for primary dwellings. The analysis takes into consideration a number of features of the construction sector: long maturity period supply, heterogeneous products, and regional disparity.

  • 10/07/2017
    1704. Labour market adjustment in Europe during the crisis: microeconomic evidence from the Wage Dynamics Network survey (764 KB) Mario Izquierdo, Juan Francisco Jimeno, Theodora Kosma, Ana Lamo, Stephen Millard, Tairi Rõõm and Eliana Viviano

    Against the backdrop of continuing adjustment in EU labour markets in response to the Great Recession and the sovereign debt crisis, the European System of Central Banks (ESCB) conducted the third wave of the Wage Dynamics Network (WDN) survey in 2014-15 as a follow-up to the two previous WDN waves carried out in 2007 and 2009. The WDN survey collected information on wage-setting practices at the firm level. This third wave sampled about 25,000 firms in 25 European countries with the aim of assessing how firms adjusted wages and employment in response to the various shocks and labour market reforms that took place in the European Union (EU) during the period 2010-13. This paper summarises the main results of WDN3 by identifying some patterns in firms’ adjustments and labour market reforms. It seeks to lay out the main lessons learnt from the survey in terms of both the general response of EU labour markets to the crisis and how these responses varied across the countries that took part in the survey.

  • 27/02/2017
    1703. A suite of inflation forecasting models (4 MB)

    Published in: Journal of Policy Modeling Volume 41, Issue 4, July-August 2019, Pages 568-585Opens in a new window

    As “Inflation projections for monetary policy decision making”

    Luis J. Álvarez and Isabel Sánchez

    This paper describes the econometric models used by the Banco de España to monitor consumer price inflation and forecast its future trends. The strategy followed heavily relies on the results from a set of econometric models, supplemented by expert judgment. We consider three different types of approaches and highlight the relevance of heterogeneity in price-setting behaviour and the importance of using models that allow for a slowly evolving local mean when forecasting inflation.

  • 16/01/2017
    1702. Regional business cycles across Europe (1 MB) Eduardo Bandrés, María Dolores Gadea-Rivas and Ana Gómez-Loscos

    Large contractionary shocks such as the Great Recession or the sovereign debt crisis in Europe have rekindled interest in analyzing the overall patterns of business cycles. We study these patterns for Europe both at the national and the regional level. We first examine business cycles’ comovements and then, using Finite Mixture Markov Models, we obtain a dating of the different business cycles and identify clusters among them. We also propose an index to analyze within-country homogeneity. Our main findings are the following: (i) we find evidence of just one cluster amongst the European countries while, at the regional level, there is more heterogeneity and we identify five different groups of European regions; (ii) the groups are characterized as follows: the first contains most of the Greek regions; groups two and three include, in most cases, regions from Germany (plus a couple of regions from southern European countries in group two and some regions of the core countries in group three); group four is populated mainly by regions belonging to northern European countries; and group five is the largest and is composed of the rest of European regions; (iii) we notice that the degree of homogeneity of regional business cycles within countries is quite different; (iv) we also observe that spatial correlation increased during the convergence process towards the introduction of the euro and has taken a big leap with the Great Recession, both at country and regional level. In fact, comovements among regions have mainly increased during the last decade. These results have important implications for policymakers in the design of convergence policies at the European level and also in the design of fiscal policies to reduce regional disparities at the country level.

  • 13/01/2017
    1701. The Spanish public pension system: current situation, challenges and reform alternatives (2 MB) Pablo Hernández de Cos, Juan Francisco Jimeno and Roberto Ramos

    The Spanish Social Security System’s deficit rose to 1.5% of GDP in 2015, in contrast to a pre-crisis surplus of 2.2% of GDP in 2007. This deterioration is primarily due to an increase in contributory pension spending (as a % of GDP), as a result of the rise in the dependency ratio, the increase in the pension replacement rate and the decline in the employment rate. Beyond this short-term situation, the Spanish public pension system, as is the case in other developed countries, faces major challenges arising from expectations of significant longevity gains and the attendant growth of the retirement-age population. In this context, this paper aims to contribute to the debate on the situation of the pension system through an analysis of its recent evolution, forward-looking projections that include the impact of the latest reforms and the challenges outstanding.

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

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