Ramón María-Dolores

Are monetary-policy reaction functions asymmetric?: The role of nonlinearity in the Phillips curve

Abstract This paper investigates the implications of a nonlinear Phillips curve for the derivation of optimal monetary policy rules. Combined with a quadratic loss function, the optimal policy is also nonlinear, with the policy-maker increasing interest rates by a larger amount when inflation or output are above target than the amount it will reduce them when they are below target. Specifically, the main prediction of our model is that such a source of nonlinearity leads to the inclusion of the interaction between expected inflation and the output gap in an otherwise linear Taylor rule. We find empirical support for this type of asymmetries in the interest rate-setting behaviour of four European central banks but none for the US Fed.

The relationship between height and economic development in Spain, 1850-1958 §

We investigate the relationship between height and some economic-development indicators in modern Spain by means of a recently constructed times series of data on conscripts. We estimate a Vector Autoregressive Equilibrium Correction Model (VECqM) to quantify the height and GDP per capita response to various living-standard indicators. We observe that conditions that perpetuate an elevated level of sickness and mortality and that raise the relative price of consumption goods tend to impede human growth, as reflected in a decline in average adult height, whereas factors that promote the purchase of health services and that help to open up the economy to international trade and ideas have tended to have an opposite effect from the 1850s onward. Our results also indicate that neither the level of per capita GDP nor its growth rate has a unidirectional relation to various measures of living standards, chiefly adult stature. Instead, our findings suggest that there may be behavioral factors (e.g., emphasis on health services), political factors (e.g., degree of openness), and economic factors (e.g., relative consumer costs to GDP deflator) whose affects may have been influenced the level of GDP, over the sample period.

Tax Morale in Spain: A Study into Some of Its Principal Determinants

In this paper, the role of certain determinant factors of tax morale in Spain will be analyzed through information provided by the Survey into Tax Morale in Spain, which had a remit that covered the entirety of the national territory. To this end, discrete choice models have been employed, and a particular relevance of a number of categorical variables, as well as some macroeconomic variables have been observed. The relevant role that socioeconomic variables play, such as the age and gender of each interviewee, is prominent and observable, as is the importance of other factors - such as that of the interviewees having presented their income tax return or their belief that immigrants have to make contributions - in positively indicating the interviewees level of tax morale. It is also observed that, in regions with a higher GDP per capita, a lower rate of unemployment or the greater strength of the construction sector, the level of tax morale is considerably lower than the mean.

State Asymmetries in the Effects of Monetary- Policy Shocks on Output: Some New Evidence for the Euro-area

Abstract In this chapter, we provide some empirical evidence on whether the effects of monetary policy shocks on real output growth in the Euro-area depend upon the phase of the business cycle that the economy was undergoing (the so-called state asymmetries). To do so, we follow a two-step procedure: (i) first, we derive short-term interest rate shocks from a Taylor rule, which accounts for a nonlinearity in the interest-rate setting behaviour of the central bank, and (ii) next, we apply a multivariate version of Hamilton Econometrica, vol. 57, pp. 357–384 (1989)s Markov Switching methodology to allow for different effects of interest-rate shocks on real output growth in periods of high and low growth. Our findings provide some support for the presence of this type of asymmetries, whereby interest rate shocks have larger effects in recessions than in expansions.

On the Informational Role of Term Structure in the U.S. Monetary Policy Rule

This paper uses a structural approach based on the indirect inference principle to estimate a standard version of the new Keynesian monetary (NKM) model augmented with term structure using both revised and real-time data. The estimation results show that the term spread and policy inertia are both important determinants of the US estimated monetary policy rule whereas the persistence of shocks plays a small but significant role when revised and real-time data of output and inflation are both considered. More importantly, the relative importance of term spread and persistent shocks in the policy rule and the shock transmission mechanism drastically change when it is taken into account that real-time data are not well behaved.

Exchange Rate Pass-Through in Central and East European Countries: Do Inflation and Openness Matter?

This paper studies the degree of exchange rate pass-through to the prices of imports in eleven new member states (NMSs) of the European Union and one candidate country, Turkey, analyzing some of its structural determinants. This analysis is based on a vector autoregressive (VAR) model that partly includes the distribution chain of prices (import prices and consumer prices). I observe how the size and speed of the pass-through decrease along the distribution chain. Exchange rate pass-through is larger for these developing countries than that derived in previous studies of the United States and euro area. I also find evidence for Taylors (2001) hypothesis of a positive relation between the degree of the exchange rate pass-through and inflation, observing less inflation and long-run exchange pass-through in inflation targeting countries, such as Hungary, Poland, and the Czech Republic. The relation between exchange rate pass-through and openness is unclear. Finally, I analyze exchange rate pass-through by industry, comparing results in the manufacturing and energy sectors and finding evidence of a larger response in energy than in manufacturing.

The New Member States and the Process towards EMU

The authors apply two complementary empirical criteria to eight new member states (NMSs) of the European Union to assess how ready they are to adopt the euro. As a first step, they recover demand and supply shocks and calculate the social losses implied by the two relevant exchange rate regimes: flexible rates and currency board. As a second step, the authors calculate the real exchange rates variability that these countries are currently experiencing and compare it to that of three Mediterranean countries during a similar period before they joined the EMU. The combination of the results of both tests shows that Estonia and Slovenia are the only countries that seem ready to adopt the euro within the shortest period of time foreseen by the Maastricht criteria; that is, after the two mandatory years in the ERM2. The rest of the countries will probably still need some exchange rate flexibility to absorb external shocks in the coming years.