Financial intermediation and credit spreads

This dissertation presents the numerical solution of the model developed in Correia, I., F. De Fiore, P. Teles, O. Tristani (2012). In this framework, financial intermediation takes place with private intermediaries facing endogenously determined balance sheet constraints. I compute the approximate solution of the problem of a Ramsey planner in response to several exogenous shocks. The response to these shocks under optimal policy isolates the financial sector from the rest of the economy so that the financing cost of firms does not increase and allocations are not distorted. Furthermore, I show that for a given price level on impact there is always a nominal interest rate path that satisfies the financial constraint and replicates the first best allocations. In this framework, indeterminacy in price level leads to multiple solutions for the optimal nominal interest rate policy

Introducing an Austrian backpack in Spain

We would like to thank Javier Díaz-Giménez who has made this project possible, the editor and two referees for detailed comments that greatly improved the paper. This research started as part of the ADEMU project, “A Dynamic Economic and Monetary Union”. ADEMU was funded by the European Union’s Horizon 2020 Programme under grant agreement N. 649396 (ADEMU).In an overlapping generations economy with incomplete insurance markets, the introduction of an employment fund—akin to the one introduced in Austria in 2003, also known as ‘Austrian backpack’—can enhance production efficiency and social welfare. It complements the two classical systems of public insurance: pay-as-you-go (PAYG) pensions and unemployment insurance (UI).We showthis in a calibrated dynamic general equilibrium model with heterogeneous agents of the Spanish economy in 2018. A ‘backpack’ (BP) employment fund is an individual (across jobs) transferable fund, which earns a market interest rate as a return and is financed with a payroll tax (a BP tax). The worker can use the fund while unemployed or retired. Upon retirement, backpack savings can be converted into an (actuarially fair) retirement pension. To complement the existing PAYG pension and UI systems with a welfare maximizing 6% BP tax would raise welfare by 0.96% of average consumption at the new steady state, if we model Spain as an open economy. As a closed economy, there are important general equilibrium effects, and as a result, the social value of introducing the backpack is substantially greater: 16.14%, with a BP tax of 18%. In both economies, the annuity retirement option is an important component of the welfare gains.European Union’s Horizon 2020 Programme under grant agreement N. 649396 (ADEMU

On the design of a European Unemployment Insurance System

We study the welfare effects of both existing and counter-factual European unemployment insurance (UI) policies using a rich multi-country dynamic general equilibrium model with labour market frictions. The model successfully replicates several salient features of European labour markets, in particular the cross-country differences in the flows between employment, unemployment and inactivity, as a result of labour market and UI policy differences across euro area countries. We find that mechanisms like the recently introduced instrument for temporary support to mitigate unemployment risks in an emergency (SURE), which allows national governments to borrow at low interest rates to cover expenditures on unemployment risk, yield sizeable welfare gains. Furthermore, we find that, in spite of the calibrated heterogeneity across euro area countries, there is a common direction in which they can improve their UI policies; in particular, a harmonized benefit system that features a one-time payment of around three quarters of income upon separation is welfare improving in all euro area countries relative to the status quo

PISCIS: multiple autonomous underwater vehicles for environmental and oceanographic field studies

In this paper we describe the envisaged utilization of autonomous underwater vehicles (AUVs) underthe PISCIS project. The aim of the project is to develop an integrated system for underwater datacollection, particularly suited for environmental and oceanographic field studies. The UnderwaterSystems and Technology Lab (LSTS) at the University of Porto accumulated wide experience in thedevelopment and operation of small-size underwater robotic vehicles. Built upon this experience, thePISCIS project will be focused on the development of new technologies and methodologies tobroaden the range of addressable operational scenarios

Introducing an Austrian backpack in Spain

In an overlapping generations economy with incomplete insurance markets, the introduction of an employment fund (akin to the one introduced in Austria in 2003, also known as 'Austrian backpack') can enhance production effciency and social welfare, if it complements, and in part substitutes, the two classical systems of public insurance: pay-as-you-go pensions and unemployment insurance (UI). We show this in a calibrated dynamic general equilibrium model with heterogeneous agents of the Spanish economy (2014). A 'backpack' (BP) employment fund is an individual (across jobs) transferable fund, which earns the economy interest rate as a return and is financed with a small payroll tax (a BP tax). The worker can use the fund if he or she becomes unemployed or retires. To complement the existing Spanish pension and UI systems with a 2% BP tax would be preferred to the status quo by more than 90% of the households of the calibrated economy, a percentage that can be higher with a more substantial BP (i.e. higher BP tax). Our model also provides a framework where other reforms (e.g. a partial, or complete, substitution of current unsustainable pension systems) can be quantitatively assessed.The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396

Introducing an Austrian backpack in Spain

In an overlapping generations economy with incomplete insurance markets, the introduction of an employment fund (akin to the one introduced in Austria in 2003, also known as `Austrian backpack') can enhance production effciency and social welfare, if it complements, and in part substitutes, the two classical systems of public insurance: pay-as-you-go pensions and unemployment insurance (UI). We show this in a calibrated dynamic general equilibrium model with heterogeneous agents of the Spanish economy (2014). A `backpack' (BP) employment fund is an individual (across jobs) transferable fund, which earns the economy interest rate as a return and is financed with a small payroll tax (a BP tax). The worker can use the fund if he or she becomes unemployed or retires. To complement the existing Spanish pension and UI systems with a 2% BP tax would be preferred to the status quo by more than 90% of the households of the calibrated economy, a percentage that can be higher with a more substantial BP (i.e. higher BP tax). Our model also provides a framework where other reforms (e.g. a partial, or complete, substitution of current unsustainable pension systems) can be quantitatively assessed.The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396

On the design of a European unemployment insurance system

We assess the benefits of a potential European Unemployment Insurance System (EUIS) using a multi-country dynamic general equilibrium model with labour market frictions. Our calibration provides a novel diagnosis of the European labour markets, revealing the key parameters – in particular, job-separation and job-finding rates – that explain their different performance in terms of unemployment (or employment) and its persistence. We show that there are only small welfare gains from insuring against country-specific cyclical fluctuations in unemployment expenditures. However, we find that there are substantial gains from reforming currently suboptimal unemployment benefit systems. In spite of country differences, it is possible to unanimously agree on an EUIS with unlimited duration of eligibility, which eliminates the risk of not finding a job before the receipt of benefits ends, and a low replacement rate of 15%, which stabilizes incentives to work and save. We argue that such reforms are more effectively designed at the European level than at the national level because national governments do not take into account general equilibrium effects of their reforms on citizens in other countries. Concerns regarding the political feasibility of such a system are addressed through country-specific contribution payments that eliminate cross-country transfers. The resulting tax differences across countries may be the best statistic of their structural labour market differences, in terms of job creation and destruction, providing clear incentives for reform.The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396

Introducing an Austrian backpack in Spain

In an overlapping generations economy with incomplete insurance markets, the introduction of an employment fund (akin to the one introduced in Austria in 2003, also known as `Austrian backpack') can enhance production effciency and social welfare, if it complements, and in part substitutes, the two classical systems of public insurance: pay-as-you-go pensions and unemployment insurance (UI). We show this in a calibrated dynamic general equilibrium model with heterogeneous agents of the Spanish economy (2014). A `backpack' (BP) employment fund is an individual (across jobs) transferable fund, which earns the economy interest rate as a return and is financed with a small payroll tax (a BP tax). The worker can use the fund if he or she becomes unemployed or retires. To complement the existing Spanish pension and UI systems with a 2% BP tax would be preferred to the status quo by more than 90% of the households of the calibrated economy, a percentage that can be higher with a more substantial BP (i.e. higher BP tax). Our model also provides a framework where other reforms (e.g. a partial, or complete, substitution of current unsustainable pension systems) can be quantitatively assessed.The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396

Introducing an Austrian backpack in Spain

In an overlapping generations economy with incomplete insurance markets, the introduction of an employment fund (akin to the one introduced in Austria in 2003, also known as `Austrian backpack') can enhance production effciency and social welfare, if it complements, and in part substitutes, the two classical systems of public insurance: pay-as-you-go pensions and unemployment insurance (UI). We show this in a calibrated dynamic general equilibrium model with heterogeneous agents of the Spanish economy (2014). A `backpack' (BP) employment fund is an individual (across jobs) transferable fund, which earns the economy interest rate as a return and is financed with a small payroll tax (a BP tax). The worker can use the fund if he or she becomes unemployed or retires. To complement the existing Spanish pension and UI systems with a 2% BP tax would be preferred to the status quo by more than 90% of the households of the calibrated economy, a percentage that can be higher with a more substantial BP (i.e. higher BP tax). Our model also provides a framework where other reforms (e.g. a partial, or complete, substitution of current unsustainable pension systems) can be quantitatively assessed.The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396

On the design of a European unemployment insurance system

We assess the benefits of a potential European Unemployment Insurance System (EUIS) using a multi-country dynamic general equilibrium model with labour market frictions. Our calibration provides a novel diagnosis of the European labour markets, revealing the key parameters - in particular, job-separation and job-finding rates - that explain their different performance in terms of unemployment (or employment) and its persistence. We show that there are only small welfare gains from insuring against country-specific cyclical fluctuations in unemployment expenditures. However, we find that there are substantial gains from reforming currently suboptimal unemployment benefit systems. In spite of country differences, it is possible to unanimously agree on an EUIS with unlimited duration of eligibility, which eliminates the risk of not finding a job before the receipt of benefits ends, and a low replacement rate of 15%, which stabilizes incentives to work and save. We argue that such reforms are more effectively designed at the European level than at the national level because national governments do not take into account general equilibrium effects of their reforms on citizens in other countries. Concerns regarding the political feasibility of such a system are addressed through country-specific contribution payments that eliminate cross-country transfers. The resulting tax differences across countries may be the best statistic of their structural labour market differences, in terms of job creation and destruction, providing clear incentives for reform.The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396