Gabriel Pino

Regional inflation dynamics using space-time models

This paper provides empirical evidence of the role of spatial factors on the determination of inflation dynamics for a representative set of tradable commodities in Chile. We present a simple model that explains inflation divergence across regions in a monetary union with similar preferences as a consequence of the geographical allocation of producers in the different regions. Our results indicate that spatial allocation together with transport costs are important determinants of regional inflation while macroeconomic common factors do not play an important role in this process. Existing literature had obtained the opposite result for Europe and the reasons for that difference warrant further investigation. Moreover, we find that geographical distance seems to be a more appropriate measure of neighbourhood than the adjacency of regions.

Forecasting Spanish Inflation Using the Maximum Disaggregation Level by Sectors and Geographical Areas

This article evaluates different strategies for forecasting Spanish inflation using information from price series for fifty-seven products and eighteen regions in Spain. We consider vector equilibrium correction (VeqCM) models that include cointegration relationships between Spanish prices and prices in the regions of Valencia, Andalusia, Madrid, Catalonia, and the Basque Country. This approach is consistent with economic intuition and is shown to be of tangible importance after suitable econometric evaluation. It is found that sectoral disaggregate models are useful for forecasting inflation in the five largest Spanish regions. Moreover, aggregate inflation forecasts in Spain can be significantly improved by aggregating projections from different sectors and geographical areas and by considering cointegration relationships between regional and national prices. However, in spite of the existence of long-run relationships between sectoral and national prices, they include deterministic components that are not consistent with the law of one price.

Geographical disaggregation of sectoral inflation. Econometric modelling of the Euro area and Spanish economies

ABSTRACT This article studies the performance of different modelling strategies for 969 and 600 monthly price indexes disaggregated by sectors and geographical areas in Spain, regions and in the Euro Area 12 (EA12) countries. We also provide, by means of spatial bi-dimensional vector equilibrium correction models for all pairs of prices between neighbours, a description of spatial cointegration restrictions that could be useful for understanding price setting within an economy. We study the relevance of the regional disaggregation by using the proposed models to forecast the corresponding headline inflation and testing whether it is more accurate than alternative forecasts based on aggregated models. The results for Spain show that this is the case. Country disaggregation forecasts are also reliable for the EA12, but only because derived headline inflation forecasting is not significantly worse than alternative forecasts. The models in this article can be used for competitive analysis and other macro and regional analysis.

Analysis of wage flexibility across the Euro Area: evidence from the process of convergence of the labour income share ratio

This article analyses wage flexibility as a factor in the unemployment rate across 12 Euro Area countries. We use extensive evidence pertaining to the countercyclical behaviour of the labour income share ratio to estimate its equilibrium value in the long run. This measure is calculated using a hybrid New Keynesian Phillips curve. Additionally, by using spatial econometrics, we can incorporate into the study the interdependence in the inflation among the countries. As a result, we identify countries that might see an improvement in their employment rates by improving their wage flexibility. We also identify countries with high unemployment that is not a consequence of a lack of wage flexibility.

An investigation of the effects of exchange rate volatility on exports in East Asia

ABSTRACT This study investigates the effects of the exchange rate volatility on the export flows of Indonesia, Malaysia, Republic of Korea, Singapore, Thailand, and the Philippines during 1974–2011. Towards this goal a trade weighted real effective (rather than the bilateral) exchange rate and three different measures of volatility, i.e. obtained from an ARCH model, a GARCH model and a moving-average standard deviation measure are used in this study. Specifically, the export flows between six Asian countries and the rest of the world are investigated rather than focusing on trade with only one country. Our findings reveal that the exchange rate volatility has a significant impact on export flows in the short run as well as in the long run for all the countries in the sample. The impact in the long run is predominantly negative with the exception of Singapore, but in the short run the impact varies across countries. Moreover, our results are robust to the alternative measures of volatility used and most of the findings in the long run and short run are also robust to the crisis period.