Does immigration affect the Phillips curve? Some evidence for Spain

The Phillips curve has flattened in Spain over 1995?2006: Unemployment has fallen by 15 percentage points, with roughly constant inflation. This change has been much more pronounced than elsewhere. We argue that this stems from the immigration boom in Spain over this period. We show that the New Keynesian Phillips curve is shifted by immigration if natives? and immigrants? labor supply elasticities and bargaining power differ. Estimation of this curve for Spain indicates that the fall in unemployment since 1995 would have led to an annual increase in inflation of 2.5 percentage points if it had not been largely offset by immigration.Publicad

Liquidity, term spreads and monetary policy

We propose a model that delivers endogenous variations in term spreads driven primarily by banks' portfolio decision and their appetite to bear the risk of maturity transformation. We first show that fluctuations of the future profitability of banks' portfolios affect their ability to cover for any liquidity shortage and hence influence the premium they require to carry maturity risk. During a boom, profitability is increasing and thus spreads are low, while during a recession profitability is decreasing and spreads are high, in accordance with the cyclical properties of term spreads in the data. Second, we use the model to look at monetary policy and show that allowing banks to sell long-term assets to the central bank after a liquidity shock leads to a sharp decrease in long-term rates and term spreads. Such interventions have significant impact on long-term investment, decreasing the amplitude of output responses after a liquidity shock. The short-term rate does not need to be decreased as much and inflation turns out to be much higher than if no QE interventions were implemented. Finally, we provide macro and micro-econometric evidence for the U.S. confirming the importance of expected financial business profitability in the determination of term spread fluctuations

Parsimony and omitted factors: the airline model and the Census X-11 assumptions

El tipo de modelo Arima para el que el metodo de ajuste estacional X-11 es adecuado se ha identificado como (1-L)(1-L12)Xt=G(L)at, (CX), en donde G(L) es de orden 26. En este documento se aproxima el modelo CX mediante un modelo Arima (1,1,2)(0,1,1), con raices complejas en el factor MA regular y se demuestra que tal modelo tiene un factor de estabilidad -mayor potencia espectral en frecuencias bajas- que no esta presente en el "modelo de lineas aereas" propuesto por Box y Jenkins

The credibility of central bank announcements

In this paper, we present a monetary policy game in which the central bank has a private forecast of supply and demand shocks. The public needs to form its inflationary expectations and can make use of central bank announcements. However, because of the credibility problem that the central bank faces, the public will not believe a precise announcement. By extending the arrangement proposed by Garfinkel and Oh (1995) to a model that includes private information about both demand and supply shocks, we investigate the feasibility of making imprecise credible announcements concerning the rate of inflation. Klassifikation:E52;E5

Understanding the effects of government spending on consumption

Recent evidence on the effect of government spending shocks on consumption cannot be easily reconciled with existing optimizing business cycle models. We extend the standard New Keynesian model to allow for the presence of rule-of-thumb (non-Ricardian) consumers. We show how the interaction of the latter with sticky prices and deficit financing can account for the existing evidence on the effects of government spending. JEL Klassifikation: E32, E62

International Trade Policy towards Monopoly and Oligopoly

This paper highlights the importance of product differentiation and endogenous R&D in determining the optimal R&D policy, in a model where investment in cost reducing R&D is committed before firms compete in a differentiated-goods third-country export market. R&D is always taxed in oligopolies for high degrees of product differentiation. For lower degrees of product differentiation the duopoly is subsidized or the government remains inactive. In contrast, the monopoly is always subsidized. The government with a duopoly may be active or inactive depending on the degree of product differentiation. Thus, we may observe a reversal in the sign of the optimal R&D policy if the degree of product differentiation changes or, alternatively, if there is a change in the number of firms. Similar qualitative results hold if trade policy uses output subsidies, instead of R&D promotion

Securitization and asset prices

During the 15 years prior to the global financial crisis the volume of securitized assets transacted in the US has grown substantially, reflecting a change in the nature of the financial intermediation process. Together with increased securitization, financial entities, who participate more heavily in the asset-backed security (ABS) market and hold a diversified portfolio of assets, have also become more relevant. As a result, the volume of securitization, although traditionally associated with credit markets, influences the outcomes of other asset markets. We investigate the link between securitization and asset prices and show that increases in the growth rate of the volume of ABS issuance lead to a decline in both the bond and equity premia. We then build a model of bank portfolio choice where the creation of synthetic securities may occur. The pooling and tranching of credit assets relaxes both the funding and the risk constraints financial entities face allowing them to increase balance sheet holdings. This increase in asset demand depresses the compensation for undertaking risk in the economy, confirming our empirical results. We show that financial intermediation is linked with asset prices through this portfolio mechanism, whose strength depends on the volume of deals in the securitization market

Corporate governance and corporate ownership: The investment behaviour of Japanese institutional investor

In this paper, we investigate the investment behaviour of institutional investors in terms of their shareholdings in 2,938 companies listed on the Tokyo and Osaka Stock Exchanges at the end of June 2002. By doing so, we provide one of the first detailed empirical analyses of the involvement of institutional investors in the ownership structure of Japanese listed firms. At the same time, we compare this aspect of Japanese corporate governance with the shareholdings of banks in the same group of firms. Our results show that the equity investments of financial investors – institutional investors and banks – in Japanese listed companies at the end of June 2002 were predominantly in the high-tech manufacturing, traditional manufacturing and communications industries. All financial investors combined held more than 60% of the equity capital of the firms listed on the Tokyo and Osaka Stock Exchanges, with banks being the largest group of these financial investors. Further analysis shows that on average most financial investors were minority shareholders, holding up to 3% of a firm’s total shares. Domestic financial investors tended to have higher levels of ownership than foreign institutions, and small and minority shareholdings were more common among foreign financial investors than among domestic banks and institutional investors. Finally, the average shareholdings of six large Japanese financial groups in Japanese listed companies were considerable, representing an average ownership level of 3.3% of a firm’s stock. However, they were not as high as to exert a significant degree of corporate control. All in all, we conclude that as of end-June 2002, banks continued to be important shareholders of Japanese listed firms, owing around 34% of the market capitalisation of all listed firms on the Tokyo and Osaka Stock Exchanges. At the same time, institutional investors, predominantly investment firms and insurance companies, were important shareholders as well, accounting for around 27% of total market capitalisation. Moreover, we found that foreign investment funds were very important shareholders of Japanese listed firms, which confirms the general perception that foreign ownership of Japan’s corporate sector has become a rather crucial characteristic of the system of corporate governance in Japa

Estructura impositiva y capacidad recaudatoria en España: un análisis comparado con la UE

En este documento se presenta una descripción de la capacidad recaudatoria y la estructura tributaria del sistema fiscal español en comparación con las economías de la Unión Europea. España destaca por presentar un peso de los ingresos tributarios sobre PIB relativamente reducido en relación con la media de la UE27. Esta menor recaudación relativa se debe esencialmente a la imposición indirecta (IVA, impuestos especiales y medioambientales). De hecho, España tiene el menor peso en imposición sobre el consumo de todos los países de la UE27. En cuanto a la imposición sobre el trabajo, la recaudación en porcentaje del PIB en España es similar a la media de la UE27. Sin embargo, el peso de las cotizaciones sociales sobre PIB es superior, en particular las que recaen sobre las empresas. Por su parte, los ingresos derivados de la imposición sobre el capital son también más elevados en el caso español, en particular los relativos a la tributación sobre la riqueza

Spanish unemployment and inflation persistence : ares there phillips trade-offs?

This paper studies the joint dynamic behaviour of inflation and unemployment in Spain during the period 1964-1995. In particular, we analyze the implication of hysteresis and high inflation persistence for inference regarding Phillips trade-offs and sacrifice ratios in the Spanish economy, in response to a demand shock. To do so we use a Structural V AR approach with several identification outlines which give rise to different interpretations of the joint unemploymentinflation dynamics. When using a bivariate VAR we cannot reject the existent of a permanent output loss of half a percentage point for each percentage point of permanent disinflation. However, when the V AR is augmented in order to disentagle monetary from non-monetary shocks, within the demand class, the evidence favours a transitory trade-off with a cumulative output loss of about six percentage points of GDP