Raising Markups to Survive: Small Spanish Firms during the Great Recession (159 KB)
Pilar Garcia-Perea, Aitor Lacuesta, Pau Roldan-Blanco
Markups and other measures of concentration have been on the rise in the United States in the last few decades, driven by the behavior of large and productive firms. We document that markups rose during the financial crisis in Spain, and that this increase was led by a behavioral response of small and unproductive firms: in response to a drop in sales, these firms were unable to increase their productive efficiency when average costs increased and, in order to escape a sharp decline in profit rates, they increase their markups to survive in the market.
Spanish non-financial corporations’ liquidity needs and solvency after the COVID-19 shock (185 KB)
Roberto Blanco, Sergio Mayordomo, Alvaro Menéndez and Maristela Mulino
The COVID-19 pandemic is exerting an unprecedented adverse impact on economic activity and, in particular, on firms’ income. This article presents the results of an exercise simulating Spanish non-financial corporations’ liquidity needs for the four quarters of this year. Liquidity needs, between April and December, might exceed €230 billion.
Keeping track of global trade in real time (146 KB)
Jaime Martínez-Martín and Elena Rusticelli
We build an innovative composite world trade-cycle index by means of a dynamic factor model for shortterm forecasts of world trade growth of both goods and (usually neglected) services. Trade indicators are selected using a multidimensional approach, including Bayesian model averaging techniques, dynamic correlations, and Granger non-causality tests in a linear vector autoregression framework. The dynamic factor model is extended to account for mixed frequencies, to deal with asynchronous data publication, and to include hard and survey data along with leading indicators. Nonlinearities are addressed with a Markov switching model. Pseudo-real-time empirical simulations suggest that: (i) the global trade index is a useful tool for tracking and forecasting world trade in real time; (ii) the model is able to infer global trade cycles very precisely and better than several competing alternatives; and (iii) global trade finance conditions seem to lead the trade cycle, a conclusion that is in line with the theoretical literature.
Hedger of last resort: Evidence from Brazilian FX interventions, local credit, and global financial cycles (227 KB)
Rodrigo Barbone Gonzalez, Dmitry Khametshin, José-Luis Peydró and Andrea Polo
Local central bank policies can attenuate spillovers from global financial cycles. This result is obtained by looking at the global shocks triggered by the US monetary policy and Brazilian interventions in foreign exchange (FX) derivatives. After the U.S. Federal Reserve Taper Tantrum, Brazilian banks with larger ex-ante reliance on foreign debt reduced credit supply. However, a large FX intervention program supplying derivatives against FX risks – hedger of last resort – halved the negative effects. Similar results hold in a larger panel dataset.
Previous studies have identified negative effects of macroprudential policy on GDP growth. This study uncovers that this is the result of using conditional mean models, and that important benefits of macroprudential policy are observed on the left-tail of the GDP growth distribution. This impact is highly dependent on the position in the financial cycle, the direction of the policy, the type of instrument, and the time elapsed since its implementation. This study provides a useful framework to assess the impact of macroprudential policy in terms of GDP growth and to identify the term-structure of specific types of instruments.
Real-time weakness of the global economy: a first assessment of the coronavirus crisis (605 KB)
Danilo Leiva-Leon, Gabriel Perez-Quiros and Eyno Rots
The Global Weakness Index (GWI) is a real-time measure of how weak the global economy is. We use this index to assess on the spot how the repercussions of the coronavirus (COVID-19) crisis are playing out. After the release of certain soft indicators on 2 March 2020 the GWI increased sharply – much faster than in the 2008 crisis. And at the time of writing it remains at a record high.