Spanish Football

The authors analyze the financial situation of the Spanish football industry. They first argue that a relevant analysis of the industry's financial results relies on a careful description of how historical and cultural factors have influenced its organization. Moreover, they stress the important relationship between the industry and television. The authors suggest that the situation of the Spanish football industry suffers from some structural weaknesses in its accounts. However, the situation seems less severe than in other major European football leagues, partly because local authorities in Spain have strong incentives to back football teams.Publicad

Trend Inflation, Taylor Principle and Indeterminacy

Even low levels of trend inflation substantially affect the dynamics of a basic new Keynesian DSGE model when monetary policy is conducted by a contemporaneous Taylor rule. Positive trend inflation shrinks the determinacy region. Neither the Taylor principle, which requires the inflation coefficient to be greater than one, nor the generalized Taylor principle, which requires that in the long run the nominal interest rate should be raised by more than the increase in inflation, is a sufficient condition for local determinacy of equilibrium. This finding holds for different types of Taylor rules, inertial policy rules and price indexation schemes. Therefore, re- gardless of the theoretical set up, the monetary literature on Taylor rules cannot disregard average inflation in both theoretical and empirical analysis.Sticky Prices, Taylor Rules and Trend Inflation

Optimal monetary policy under low trend inflation

In the monetary policy literature it is commonly assumed that trend inflation is zero, despite overwhelming evidence that zero inflation is neither empirically relevant nor a practical objective for central bank policy. We therefore extend the standard New Keynesian model to allow for positive trend inflation, showing that even low trend inflation has strong effects on optimal monetary policy and the dynamics of inflation, output, and interest rates. Under discretion, the efficient policy deteriorates and there is no guarantee of determinacy. Even with commitment, targeting non-zero trend inflation leads to substantial welfare losses. Our results serve as a warning against indiscriminate use of models assuming zero trend inflation.Optimal monetary policy, trend inflation

The long-run optimal degree of indexation in new Keynesian models with price staggering à la Calvo

This note shows that full price indexation is not optimal in the long-run, in the New Keynesian model under trend inflation and price staggering à la Calvo. Moreover, we show that more price stickiness may increase steady state welfare, if price indexation is partial.Indexation, Trend Inflation, New Keynesian model

Long-run Phillips Curve and Disinfation Dynamics: Calvo vs. Rotemberg Price Setting

There is widespread agreement that the two most widely used pricing assumptions in the New-Keynesian literature, i.e., Calvo and Rotemberg price-setting mechanisms, deliver equivalent dynamics. We show that, instead, they entail a very di¤erent dynamics of adjustment after a disin?ation, once non linear simulations are employed. In the Calvo model disin?ation implies output gains, while in the Rotemberg model a disin?ation experiment implies output losses. We show that this is due to the di¤erent wedges created by the nominal rigidities in the two models: between output and hours in the Calvo model, while between output and consumption in the Rotemberg model. More- over, unlike the Calvo model, in the Rotemberg model real wage rigidi- ties cause a signi?cant output slump along the adjustment path, thus restoring a dynamics in line both with the conventional wisdom and the empirical evidence.Disinfation, Sticky Prices, Nonlinearities

The Effectiveness of Government Debt for Demand Management: Sensitivity to Monetary Policy Rules

We construct a staggered-price dynamic general equilibrium model with overlapping generations based on uncertain lifetimes. Price stickiness plus lack of Ricardian Equivalence could be expected to make an increase in government debt, with associated changes in lumpsum taxation, effective in raising short-run output. However we find this is very sensitive to the monetary policy rule. A permanent increase in debt under a basic Taylor Rule does not raise output. To make debt effective we need either a temporary nominal interest rate peg; or inertia in the rule; or an exogenous money supply policy; or to make the debt increase temporary.staggered prices, overlapping generations, government debt, fiscal policy effectiveness, monetary policy rules

Trend Inflation and Firms Price-Setting: Rotemberg vs. Calvo

We compare two widely used pricing assumptions in the New-Keynesian literature: the Calvo and Rotemberg price-setting mechanisms. We show that, once trend in?ation is taken into account, the two models are very different. i) The long-run relationship between inflation and output is positive in the Rotemberg model and negative in the Calvo model. ii) The log-linearized NKPCs are very different and the dynamics of the two models differs even to a first order approximation. iii) Positive trend inflation enlarges the determinacy region in the Rotemberg model, while it shrinks the determinacy region in the Calvo model. iv) The responses of output and inflation to a positive technology shock are amplified by trend inflation in Calvo, while they are damped in Rotemberg. v) The two models imply a different non-linear adjustment after a disinflation.Firms Pricing, Trend Inflation, Determinacy, Disinflation.

Inflation persistence, Price Indexation and Optimal Simple Interest Rate Rules

We study the properties of the optimal nominal interest rate policy under different levels of price indexation. In our model indexation regulates the sources of inflation persistence. When indexation is zero, the inflation gap is purely forward- looking and inflation persistence depends only on the level of trend inflation, while full indexation makes the inflation gap persistent and it eliminates the effects of trend inflation. We show that in the former case the optimal policy is inertial and targets inflation stability while in the latter the optimal policy has no inertia and targets the real interest rate. We compare our results with empirical estimates of the FED's policy in the post-WWII era.Inflation Persistence, Taylor Rule, New Keynesian model, Indexation

Sacrifice ratio or welfare gain ratio? Disinflation in a DSGE monetary model

When taken to examine disinflation monetary policies, the current workhorse DSGE model of business cycle fluctuations successfully accounts for the main stylized facts in terms of recessionary effects and sacrifice ratio. We complement the transitional analysis of the short-run costs with a rigorous welfare evaluation and show that, despite the long-lasting economic downturn, disinflation entails non-zero overall welfare gains.disinflation, sacrifice ratio, non-linearities

Implementing Disinflations in a Medium-Scale Dynamic General Equilibrium Model: Money Supply vis-à-vis Interest Rate Rules

Successful disinflation episodes have been shown to involve a sustained period of output contraction. We revisit the largely debated issue on the costs of different speed and timing of disinflations when monetary policy is implemented either via a money supply rule (MSR) or an interest rate rule (IRR). In terms of transitional costs, cold-turkey IRR disinflations are less expensive than those under MSR, with theoretical sacrifice ratios averaging 1.0 and 2.8 respectively, and are accomplished more rapidly. Gradual and anticipated disinflations deliver further lower sacrifice ratios. From a welfare perspective, despite the temporary economic contraction, disinflations are welfare improving. More interestingly, the overall welfare gain from disinflation is not affected by the actual policy implementation: what really matters is the achievement of a permanent lower inflation rather than how this is practically accomplished.Disinflation, Sacrifice ratio, Nonlinearities