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The European Central Bank (ECB) has already moved interest rates several times since it started to operate in January 1999 and yet we don't know what the magnitude and timing of the effects of its actions actually are. What are the effects on prices and output of a change in the common short-term interest rate? How long do these effects take to materialize? Are there differences in the impact across European countries and regions? Are these differences changing over time? We propose to overcome some of these difficulties by rephrasing some of the questions above in the framework of a dynamic heterogenous panel data model recently proposed by Canova and Ciccarelli (2000).

We propose a two-region two-sector model of uneven development, where technological change benefits either the lagging or the leading region. In this framework inter-regional transfers may lead to persistent underdevelopment; by raising wages without changing productivity, transfers reduce the chance of the backward region adopting a new technology and taking off. Due to uncertainty about which region benefits from technological change, the backward region may rationally choose to remain underdeveloped, while the advanced region continues to pay transfers. The Model provides a rationale for cases, such as Italy's Mezzogiorno, where the same rich region subsidizes the same poor region on a continuous basis.

The user instructions for Program TSW are provided. TSW is a Windows version, developed by G. Caporello and A. Maravall, of Programs TRAMO and SEATS (Gomez and Maravall, 1996), that incorporates several modifications and new facilities.

In this paper we measure, at sectoral level, the sources of Spanish productivity growth, distinguishing among the roles played by labor productivity, the degree of factor substitution and total factor productivity (Solow residual). In terms of value added, total factor productivity growth in the manufacturing sector is higher than in services (2.4% and 1.1% respectively), although the Communication Sector constitutes an exception. In terms of gross production productivity growth in both sectors is virtually the same (0.6% and 0.7% respectively) because of the relative lower weight of intermediate inputs in producing services. During the latest cyclical expansion, 1995-1999, we have observed a marked deceleration in labor productivity, associated to an increase in employment, and to a deceleration in the capital-labor ratio, while total factor productivity has remained more stable.