Jorge Miguel Andraz

Public highway spending and state spillovers in the USA

The empirical results reported in this paper suggest that only about 20% of the aggregate effects of public investment in highways in the US are captured by the direct effects on each state output of public investment in the state itself. The remaining 80% correspond to the spillover effects from public investment in highways in other states. This result may provide an answer to the paradox in the literature that the findings of large effects at the aggregate level have not been matched at the regional level. This is because regional analysis has typically ignored the possible existence of spillover effects.

On the Impact of Public Investment On the Performance of U.S. Industries

ARTICLE PUBLIC F NANCE REVIEW Pereira, Andraz / THE IMPACT OF PUBLIC INVESTMENT This article uses a vector auto-regressive/error correction mechanism (VAR/ECM) approach to evaluate empirically the disaggregated effects of public capital formation on private sector performance at the industry level. The authors estimate for the U.S. economy and for 12 industries covering the whole spectrum of economic activity in the United States. Empirical results at the aggregate level indicate that public investment affects positively private inputs and private output. Empirical results at the industry level suggest that public investment tends to shift the sectoral composition of employment toward construction and transportation and the composition of private investment toward manufacturing, public utilities, and communications. Furthermore, public investment tends to shift the composition of private output toward construction, durable manufacturing, transportation, and wholesale trade. Accordingly, the empirical results suggest that public investment seems to be a powerful instrument to enhance long-term private sector performance but that it does so in a way that is rather unbalanced across industries.

What causes economic growth in Portugal: exports or inward FDI?

Purpose - The purpose of this paper is to analyze possible causal relationships between exports, inward foreign investment and economic growth in Portugal and identify their direction. Design/methodology/approach - The paper uses a three-stage procedure based on unit root, cointegration and causality tests applied to annual data from 1977 to 2004. Findings - The paper reveals that exports and FDI foster growth in the long-run while in the short-run there is a bi-directional causal relationship between FDI and growth and a univariate causal relationship running from FDI to exports. FDI is viewed as a major determinant of economic growth, both directly and indirectly, via exports for both long and short-run cases. Practical implications - The results provide important corollaries in terms of policy implications and their relevance is far from being parochial. Some lessons in terms of domestic policies can be drawn by many countries that are now becoming EU members with economic structures and problems similar to those presented by the Portuguese economy in the 1980s. Originality/value - This paper is the first of its kind to analyze the role of both FDI and exports in the Portuguese economy during the 1977-2004 period, over which many efforts were developed in order to increase the external competition of the economy, in particular in the context of community structural frameworks. In order to reinforce the inflows of FDI, authorities should continue the progressive reduction of barriers to FDI and the reforms of the labour market which started in the early 2000s.

On the Economic and Fiscal Effects of Investments in Road Infrastructures in Portugal

The objective of this paper is to investigate the economic and fiscal impact of road infrastructure investment in Portugal, focusing on the effects for each administrative region of both local investments and investments in other regions. We estimate VAR models for the national economy as well as for each of the five regions, and using the associated impulse-response functions we find that investment in road infrastructures has been a powerful instrument to increase private investment, to create new permanent jobs and to promote long-term growth in all regions. More importantly, investment in road infrastructure, both at the aggregate level and for each one of the five regions, generates fiscal effects that largely exceed the initial investment itself. Accordingly, there is no trade-off in the long-term between the potentially positive economic effects and the potentially negative budgetary effects of such investments, i.e., both economic and budgetary effects are positive. As a corollary, policies that would reduce current road investment as a response to the current budgetary concerns will result in lower long-term growth as well as worse budgetary conditions in the future.

Modelling and Forecasting the UK Tourism Growth Cycle in Algarve

Over the past three decades, Portugal has developed a strong economic dependence on tourism, which has several implications for the countrys overall economic development. Tourism is an activity that is interrelated strongly with the economic system since Portugal as a whole and specific regions in particular rely on the performance of tourism for their economic activity. Moreover, because economic cycles affect tourism development, it is highly vulnerable to economic fluctuations. Most tourists who visit Portugal are from the European Union, especially Western Europe. Statistics are based on the number of overnight stays in hotel accommodation and other similar establishments. In 2005, the main source markets were the UK (30.7%), Germany (16.5%), Spain (11.5%), the Netherlands (6.8%), France (4.7%), Ireland (3.6%) and Italy (3.1%). These values show that the UK has the greatest share of visitors to Algarve. The purpose of this paper is to propose a modelling approach that best fits the tourism flow pattern in order to support forecasting. The paper contributes to our understanding of the relationship between economic cycles and tourism flows to Portugal (Algarve) and explores the potential of applying the diffusion index model proposed by Stock and Watson (1999, 2002) for tourism demand forecasting.

Monitoring tourism flows and destination management: Empirical evidence for Portugal

Abstract We propose the use of a tool recently introduced by Gayer (2010), known as the “economic climate tracer”, to analyze and monitor the cyclical evolution of tourism source markets to Portugal. Considering the period 1987–2015, we evaluate how tourism to Portugal has been affected by economic cycles. This tool is useful as it clearly illustrates the evolutionary patterns of different markets, and allows us to identify close relationships with economic fluctuations. We found that German tourism plays a leading role, since its movements are followed with delays by tourism flows from other countries, and exhibits higher resilience to shocks. Also, domestic and Spanish tourism have both displayed less irregular behaviors than tourism from other source markets. On the contrary, tourism from the Netherlands and the UK, have displayed irregular patterns, which demonstrates the urgency to diversify tourism source markets to reduce the countrys vulnerability to external shocks and economic cycles.

Events that marked tourism in Portugal

This article uses outlier detection procedures to investigate events that may have had a pronounced effect on tourism in Portugal. Interestingly, we confirm the evidence that the effects on tourism are lagged in time. As a result, expected business volumes are only attained later than originally anticipated and arising difficulties affect tourism leading to possible destination rerouting.

Are the Portuguese Regions Converging to a Single Steady State

This paper is concerned with examining the economic performance of the Portuguese regions Nuts III. In particular, it seeks to present empirical evidence about the degree of convergence in their economic performance since 1990 when regions became the recipients of the European Community Structural Funds. Panel data regressions are estimated and the results suggest structural differences among regions leading to the existence of different steady state levels of income. Moreover, regions are converging to different steady states at an annual rate of 2.15%. As a corollary, results suggest that national policies, while contributing to improving the countrys living standards relative to the European average, might not have been able to achieve the economic cohesion of the country.

On the long-term macroeconomic effects of social spending in the United States

We estimate the long-term impact of changes in social security and social protection spending on economic performance in the United states. We estimate a VAR model relating GDP, unemployment rates, saving rates and social spending. Our results suggest that social spending has significant distortionary effects in the labour markets as measured by its long-term effects on the unemployment rate, which translate into a detrimental effect on long-term output, this despite a positive, albeit small, effect on the gross savings rate. There are important policy implications of these results. If one considers the systems as they are, any further expansion in their generosity would have detrimental long-term effects. These detrimental effects, however, are neither an indictment of social spending nor evidence against extension of benefits. What they highlight is the need to carefully consider the financing mechanisms currently used and the need to align benefits and contributions in the pension component of social security and the need to find a tax revenue mix that is less distortionary for the unfunded benefits.

Persistence Change in Tourism Data

The authors apply recently proposed persistence change tests to inbound tourism series in order to evaluate whether their properties have changed over time. By using quarterly series of the number of overnight stays in hotel accommodation and similar establishments in the Algarve, from 1987:01 to 2008:03, they gathered evidence of persistence change in all series. In particular, a change from I(1) to I(0) was detected for some countries, while for others the direction change was not clear-cut. These results have implications from a policy perspective and shed light on the generally accepted conviction that policy decision processes should not ignore the fact that, in general, tourism inbound series display mean reverting behaviour, being only temporarily affected by external shocks.