Fernando C. Ballabriga

Demand rationing and capital constraints in the Spanish economy: 1964-88

Abstract We adopt a disequilibrium approach to specify and estimate a structural model for the Spanish economy centred around the labour and production sectors. Our results suggest that the predominant regimes in the late 1960s and early 1970s were repressed inflation and capital constraints; it was a period with record growth rates and low unemployment. Demand constraints appear in the late 1970s and become dominant in the early 1980s. Capital constraints again become binding from 1986 on, a period of extraordinary recovery and lowering of unemployment. An estimated measure of structural unemployment suggests that more than a third of Spanish jobless are in this category.

Euro Zone Crisis: Diagnosis and Likely Solutions

This brief provides a short guiding tour to the Euro zone crisis. It looks at the current situation, the context in which the zone has to deal with such a situation, the way we got here, and the possible way out. The latter outlines a set of minimum steps required to make the euro sustainable.

The Distributive Impact of Monetary Policy: Evidence from the UK

This paper evaluates the distributive effect of monetary policy in the case of the UK. The income inequality measure represents the whole income distribution. Different income inequality data sources and sample periods are considered. The monetary policy shock is identified by using recursive, sign restrictions, and high frequency methods. The results indicate that contractionary monetary policy decreases income inequality. This effect is also explored through the different distribution channels of monetary policy. In this respect, our results suggest that the stronger negative effect of contractionary monetary policy on business and financial income than on labor earnings leads to the overall reduction of income inequality. This evaluation of the distributive impact of monetary policy can be useful for the development of macroeconomic policies designed to reduce income inequality.

Specialization, Risk Sharing and the Euro

Under the prospect of productive specialization, the degree of potential success of the euro since its inception was seen as closely linked to the development of effective risk-sharing mechanisms across EU members. Without shared fiscal resources, financial integration was expected to play a leading role in this respect. This paper documents the failure in fulfilling this expectation: Along with an analysis of the evolution of specialization and risk-sharing, we present evidence supporting the claim that progress in financial integration has not been conducive to income risk-sharing across euro area members, while it might have favoured a specialization split between countries with low-medium and high technology productive structures. As a result, monetary union members face higher income fluctuation risk without enhanced insurance protection. Additionally, evidence suggests a differential impact of the specialization split on sector productivity, contributing to making the monetary union a club of non equals.