News and highlights

Call for papers: joint CEPR and Banco de España Tenth Economic History Seminar

The seminar is an event organized by the Centre for Economic Policy Research (CEPR) and the Banco de España. The Economic History Seminar aims to bring together leading researchers in the field of economic history, and to foster interaction between junior and senior researchers across academia and policy institutions.

Contributions are invited on topics including, but not necessarily limited to: Macroeconomic and financial history; Economic growth in the very long run; Institutions and economic development; History of the international economy.

Call for papers: here.
Submission Deadline: Sunday, May 19, 2024.

Call for papers 4th WE_ARE_IN Macroeconomics and Finance Conference

The Centre for Economic Policy Research (CEPR), Bank of Spain, the Bank for International Settlements (BIS) and the European Central Bank (ECB) are inviting submissions for their 2024 conference “WE_ARE_IN Macroeconomics and Finance” (16th – 17th September 2024 in Madrid, Spain).

Submission Deadline: Tuesday, 30 April 2024.

Research Feature - January 2024

Climate-conscious monetary policy.

Anton Nakov and Carlos Thomas

Abstract. We study the implications of climate change and the associated mitigation measures for optimal monetary policy in a canonical New Keynesian model with climate externalities. Provided they are set at their socially optimal level, carbon taxes pose no trade-offs for monetary policy: it is both feasible and optimal to fully stabilize inflation and the welfare-relevant output gap. More realistically, if carbon taxes are initially suboptimal, trade-offs arise between core and climate goals. These trade-offs however are resolved overwhelmingly in favor of price stability, even in scenarios of decades-long transitions to optimal carbon taxation. This reflects the untargeted, inefficient nature of (conventional) monetary policy as a climate instrument. In a model extension with financial frictions and central bank purchases of corporate bonds, we show that green tilting of purchases is optimal and accelerates the green transition. However, its effect on CO2 emissions and global temperatures is limited by the small size of eligible bonds’ spreads. Click here.

Research Feature - December 2023

A score function to prioritize editing in household survey data: a machine learning approach.
Nicolás Forteza and Sandra García-Uribe

Abstract. Errors in the collection of household finance survey data may proliferate in population estimates, especially when there is oversampling of some population groups. Manual case-by-case revision has been commonly applied in order to identify and correct potential errors and omissions such as omitted or miss-reported assets, income and debts. We derive a machine learning approach for the purpose of classifying survey data affected by severe errors and omissions in the revision phase. Using data from the Spanish Survey of Household Finances we provide the best-performing supervised classification algorithm for the task of prioritizing cases with substantial errors and omissions. Our results show that a Gradient Boosting Trees classifier outperforms several competing classifiers. We also provide a framework that takes into account the trade-off between precision and recall in the survey agency in order to select the optimal classification threshold. Click here.

Call for applications for the economic history research grants programme

The Banco de España has for some time been pursuing a range of initiatives aimed at promoting
research into economic history, particularly on financial and banking-related matters, and above
all research drawing on the archives of the Banco de España itself. You can find more information here.

Research Feature - November 2023

Public Guarantees and Private Banks’ Incentives: Evidence from the COVID-19 Crisis.
Gabriel Jiménez, Luc Laeven, David Martínez-Miera and Jose-Luis Peydró

Abstract. We show that private incentives shape the allocation of public guaranteed loans (PGL), resulting in weaker banks shifting riskier corporate loans to taxpayers. We exploit credit register data during the COVID-19 shock in Spain, and a stylized model guides the empirics. Unlike non-PGL, banks provide more PGL to riskier firms in which banks have higher pre-crisis shares of firm total credit. Importantly, effects are stronger for less solid banks. Results using firm(-bank) fixed effects and loan volume/price information suggest a supply-driven mechanism. Exploiting exogenous variation across similar firms with different PGL access, we corroborate our previous findings, and show that PGL increases banks’ overall lending — and credit share — to riskier firms, especially for less solid banks. We show how these results have relevant real effects at the firm level in terms of firm survival and investment. Click here.

We are on the Job Market!

The Banco de España seeks to hire PhDs in economics, finance or related fields, with experience or recent graduates, for our headquarters in Madrid. We have a special interest in candidates with a focus on monetary and fiscal policies, finance, environmental economics, macroeconomic modelling, empirical microeconomics and industrial organization. A good command of written and spoken Spanish will be highly valued.

The Banco de España offers an excellent work and research environment, an attractive benefits package, the opportunity to collaborate with a team of committed and highly-qualified professionals, and to participate in working groups with other international institutions. For more details click here and here.

Access to Microdata on Loans and Economic Indicators (CIR_CBI) at BELab

External researchers can now explore granular data on loans to legal persons from the Central Credit Register (CCR) alongside economic and financial indicators sourced from the Central Balance Sheet Data Office (CBSO). This combination allows researchers to comprehensively profile and analyze companies. If you want to learn more details about this new dataset, click here.

Research Feature - October 2023

New technologies and jobs in Europe.
Stefania Albanesi, António Dias da Silva, Juan F. Jimeno, Ana Lamo and Alena Wabitsch

Abstract. We examine the link between labour market developments and new technologies such as artificial intelligence (AI) and software in 16 European countries over the period 2011- 2019. Using data for occupations at the 3-digit level in Europe, we find that on average employmentshares have increased in occupations more exposed to AI. This is particularly the case for occupations with a relatively higher proportion of younger and skilled workers. This evidence is in line with the Skill-Biased Technological Change theory. While there is heterogeneity across countries, very few countries show a decline in the employment shares of occupations more exposed to AI-enabled automation. Country heterogeneity for this result appears to be linked to the pace of technology diffusion and education, but also to the level of product market regulation (competition) and employment protection laws. In contrast to the findings for employment, we find little evidence for any correlation between wages and potential exposures to new technologies. Click here.

Banco de España published its external evaluation of research activities

This Evaluation —initiated in 2022— comprises the critical review of the Banco de España's research with a focus on governance and the impact of research activity on the exercise of the Banco de España's functions, at both national and international level. Click here for the full report.

Joint CEPR and 9th Banco de España History Seminar

The programme for the Joint CEPR and Ninth Banco de España Economic History Seminar, which will take place on 29 September 2023 at the Banco de España headquarters in Madrid is now available. Save the date and register now!

(Participation at the event is free of charge, but registration is compulsory)

Research Feature - September 2023

Underlying inflation and asymmetric risks.
Hervé Le Bihan, Danilo Leiva-León and Matías Pacce

Abstract. We propose a new measure of underlying inflation that provides real-time information on asymmetric risks in the inflation outlook. The new indicator is based on a multivariate regime-switching framework estimated using disaggregated sub-components of euro area Harmonized Index of Consumer Prices (HICP) and has several additional advantages. First, it can swiftly infer abrupt changes in underlying inflation. Second, it helps track turning points in underlying inflation on a timely basis. Third, the proposed indicator also performs satisfactorily vis-à-vis several criteria relevant to inflation monitoring. Click here.

Research Feature - August 2023

The public investment multiplier in a production network
Alessandre Peri, Omar Rachedi and Iacopo Varotto

Abstract. Aggregate and sectoral effects of public investment crucially depend on the interaction between the output elasticity to public capital and Input-Output linkages. We uncover this fact through the lens of a New Keynesian production network. This setting doubles the socially optimal amount of public capital relative to the one-sector model, leading to a substantial amplification of the public-investment multiplier. We also document novel sectoral implications of public investment. Although public investment is concentrated in far fewer sectors than public consumption, its effects are relatively more evenly distributed across industries. We validate this model implication in the data. Click here.

Research Feature - June 2023

Inflation persistence, noisy information and the Phillips curve
José-Elías Gallegos

Abstract. A vast literature has documented that US inflation persistence has fallen in recent decades, but this finding is difficult to explain in monetary models. Using survey data on inflation expectations, I document a positive co-movement between ex-ante average forecast errors and forecast revisions (suggesting forecast sluggishness) from 1968 to 1984, but no co-movement afterward. I extend the New Keynesian setting to include noisy and dispersed information about the aggregate state and show that inflation is more persistent in periods of greater forecast sluggishness. My results suggest that changes in firm forecasting behavior explain around 90% of the fall in inflation persistence since the mid-1980s. I also find that the changes in the dynamics of the Phillips curve can be explained by the change in information frictions. After controlling for changes in information frictions, I estimate only a modest decline in the slope. I find that a more significant factor in the dynamics of the Phillips curve is the shift towards greater forward-lookingness and less backward-lookingness. Finally, I find evidence of forecast underrevision in the post-COVID period, which explains the increase in the persistence of current inflation. Click here.

Research Feature - May 2023

Credit line runs and bank risk management: evidence from the disclosure of stress test results 
José E. Gutiérrez and Luis Fernández Lafuerza

Abstract. As noted in recent literature, firms can run on credit lines due to fear of future credit restrictions. We exploit the 2011 stress test supervised by the European Banking Authority (EBA) and the Spanish Central Credit Register to explore: 1) the occurrence and magnitude of these runs after the release of negative stress test results; and 2) banks’ behaviour before and after the release of this information. We find that, following the release of the results, firms drew down approximately 10 pp more available funds from lines granted by banks that had a worse performance in the stress test. Moreover, before the release date, poorer performing banks were more likely to reduce the size of credit lines, while those with more significant balances of undrawn credit lines were more likely to cut term lending. Click here.

Research Feature - April 2023

Do Renewables Create Local Jobs?
Natalia Fabra, Aitor Lacuesta, Eduardo
Gutiérrez and Roberto Ramos

Abstract. 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. Click here.

Research Feature - March 2023

Could Spain be less different? Exploring the effects of macroprudential policy on the house price cycle
Adrián Carro

Abstract. Employing an agent-based model of the Spanish housing market, this paper explores the main drivers behind the large amplitude of the Spanish house price cycle —as compared to most other European countries—, as well as the scope for macroprudential policy to reduce this amplitude. First, we exploit the availability of a previous calibration to the UK, characterised by a smaller house price cycle, to show the prominent role played by the distributions of various mortgage risk metrics: loan-to-value, loan-to-income and debt-service-to-income ratios. Second, we use the model to calibrate both a hard loan-to-value and a soft loan-to-income limit to smooth the Spanish house price cycle and match the amplitude of the UK equivalent. Finally, we characterise the effects of these calibrated policies over the different phases of the cycle, finding both instruments to reduce credit and price growth during the expansionary phase as well as to reduce their decline during the contractionary phase. Moreover, both instruments lead to a compositional shift in lending: the loan-to-value policy from first-time buyers to buy-to-let investors and the loan-to-income policy from both first-time buyers and home movers to buy-to-let investors. Click here.

Research Feature - February 2023

Using Newspapers for Textual Indicators: Which and How Many?
Erik Andrés-Escayola, Corinna Ghirelli, Luis Molina, Javier J. Pérez and Elena Vidal

Abstract. This paper investigates the role that two key methodological choices play in the construction of textual indicators: the selection of local versus foreign newspapers and the breadth of the press coverage (i.e. the number of newspapers considered). The literature is almost silent about the robustness of the results with respect to these choices. We use as a case study the well-known economic policy uncertainty (EPU) index, taking as examples six Latin American countries and Spain. We develop EPU measures based on press with different levels of proximity, i.e. local versus foreign, and corroborate that they deliver broadly similar narratives and economic responses in a Bayesian vector autoregressive framework. Then, we show that constructing EPU indexes based on only one newspaper yields biased responses. This suggests that it is important to maximize the breadth of press coverage when building text-based indicators. That is, the larger the press coverage, the better. Click here.

Enrique Moral-Benito, winner of the SERIEs Award 2022

The SERIEs Award 2022 of the Asociación Española de Economía (AEE) has been awarded to Enrique Moral-Benito for his paper “Growing by learning: firm-level evidence on the size-productivity nexus,” SERIEs, vol. 9, issue 1, March 2018. The Award, established in 2014, is given every two years to an outstanding research contribution published in SERIEs over the past four years. The selection of the awarded article is based on the scientific excellence and it is carried out by a committee of three researchers appointed by the Executive Commission of the AEE. For more information, click here.

ECB's Sintra Young Economist Prize 2023

The ECB has launched a new edition of the Young Economist Prize as part of the ECB Forum on Central Banking. PhD students in the areas of economics or finance are welcome to submit their papers by 13 February for the chance to win €10,000 and present their research to top policymakers and academics at the ECB Forum in Central Banking, which will take place in Sintra, Portugal on 26 June - 28 June 2023. For more information, click here.