Beatriz de Blas

FDI in the Banking Sector

It is a well known quandry that when countries open their financial sectors, foreign-owned banks appear to bring superior efficiency to their host markets but also charge higher markups on borrowed funds than their domestically owned rivals, with unknown impacts on interest rates and welfare. Using heterogeneous, imperfectly competitive lenders, the model illustrates that FDI can cause markups (the net interest margins commonly used to proxy lending-to-deposit rate spreads) to increase at the same time efficiency gains and local competition keep the interest rates that banks charge borrowers from rising. Competition from arms-length foreign loans, however, both squeezes markups and lowers interest rates. We show that allowing foreign participation is not always a welfare-improving substitute for increasing competition and technical efficiency among domestic banks.

Can Financial Frictions Help Explain the Performance of the U.S. Fed

This paper analyzes the decreased volatility of U.S. macroeconomic variables starting in the 1980’s in a model where monetary policy is affected by financial frictions. The model is estimated for postwar U.S. data with a break in 1981:3, allowing for changes in the policy rule, shock processes and financial frictions across subsamples. There is some evidence that changed monetary policy is more important to explain inflation stabilization, while “good luck” helps explain the increased stability in output. However, the results are most consistent with a decline in shock variances which was reinforced by a decrease in financial frictions, making the economy less vulnerable to shocks.This paper analyzes the contribution of additional factors, apart from monetary policy, to the stabilization of the economy observed in the US since the 1980s. I estimate a limited participation model with financial frictions, allowing for changes in the interest rate rule, financial frictions, and shock processes. The results confirm the well-known differences in the interest rate rules between subsamples. However, when monitoring costs are considered, these differences are much smaller. A comparison of fit across several specifications finds that a decrease in financial frictions was more important than changed monetary policy or changed shock processes in stabilizing the economy. These results highlight the important differences in the effects of shocks and policies between limited participation and sticky price models.

Smoothing Shocks and Balancing Budgets in a Currency Union

We study simple fiscal rules for stabilizing the government debt level in response to asymmetric demand shocks in a country that belongs to a currency union. We compare debt stabilization through tax rate adjustments with debt stabilization through expenditure changes. While rapid and flexible adjustment of public expenditure might seem institutionally or informationally infeasible, we discuss one concrete way in which this might be implemented: setting salaries of public employees, and social transfers, in an alternative unit of account, and delegating the valuation of this numeraire to an independent fiscal authority. Using a sticky-price DSGE matching model of a small open economy in a currency union, we compare the business cycle implications of several different fiscal rules that all achieve the same reduction in the standard deviation of the public debt. In our simulations, compared with rules that adjust tax rates, a rule that stabilizes the budget by adjusting public salaries and transfers reduces fluctuations in consumption, employment, and private and public after-tax real wages, thus bringing the market economy closer to the social planner’s solution.

International Transmission of Medium-Term Technology Cycles: Evidence from Spain as a Recipient Country

Abstract This paper documents stylized facts of international medium-term business cycles by exploring the pattern of comovement between a catching-up economy, Spain, and each of the obvious candidate countries to technological leadership of the 1950-2010 period, the U.S., France, Germany, Italy and the U.K. A remarkable feature of the international medium-term business cycle is the strong, positive lead displayed by the U.S. cycles of technology and international relative prices over Spains macroeconomic aggregates. The corresponding evidence when the counterpart to Spain is a large European economy is weaker, particularly in the case of Europes medium-term technology cycles. The vehicles that facilitate the international transmission of U.S. medium-term cycles are based on both bilateral trade and FDI linkages. International medium-term business cycle models may need to incorporate mechanisms relying on both embodied technical change and international relative prices to explain the observed stylized features.

Portfolio choice and private information: A note

?Como la informacion privada afecta las decisiones de cartera de inversion? ?Que valor tiene ese tipo de informacion? Este trabajo estudia el impacto de la informacion privada en la cartera de inversiones y demostramos que no es tanto la cantidad de informacion privada, sino la calidad de esa informacion la variable crucial que da respuesta a estas preguntas. De hecho, las decisiones de cartera difieren entre agentes informados y no informados si la precision de la informacion es suficientemente alta. Los inversores con informacion privada de calidad invierten mas en carteras arriesgadas que los no informados, y a mayor precision de la informacion, mayor el porcentaje de riqueza en activos arriesgados. Igualmente, a mayor grado de aversion al riesgo, mayor el valor monetario de la informacion, pero la relacion es no?monotonica. Tambien demostramos que la informacion es beneficiosa si es de calidad. De hecho cuando las soluciones de cartera son interiores, el valor de la informacion viene afectado por variables como la varianza de la informacion y la probabilidad de tener un retorno alto, pero no por variables como riqueza, el tipo de interes libre riesgo y los retornos de los activos. A mas precisa es la informacion privada, mayor es el valor de esa informacion, y a mas alta es la probabilidad subjetiva inicial de tener unos retornos altos, menor es el valor de la informacion privada.

Límites de Deuda y Crecimiento Endógeno

Este articulo estudia las consecuencias sobre el crecimiento y el bienestar de diversas politicas fiscales con y sin limites a la deuda publica. En la economia modelo, el gasto publico puede tener dos papeles diferentes, bien como un factor en la funcion de produccion, o bien suministrando servicios directamente en la funcion de utilidad. Cuando hay limites a la deuda, mayores impuestos sobre la renta laboral tienen un efecto positivo sobre el crecimiento si el gasto publico es productivo. Lo contrario ocurre cuando es el capital privado el motor del crecimiento. Respecto al bienestar, reducir la deuda recurriendo a mayores impuestos conlleva un menor coste en bienestar que si se hace reduciendo el gasto publico cuando este es productivo.