Adam Brzezinski, Yao Chen, Nuno Palma, Felix Ward, 14 November 2019

During the early 16th to 19th centuries, Spain received large amounts of monetary silver from its colonies in America. Vagaries of the sea thus affected Spain’s money supply. This column investigates the effects of money supply shocks on the economy using the case of maritime disasters in the Spanish Empire. It finds that a one-percentage-point reduction in the money growth rate caused a 1.3% drop in real output that persisted for several years. Analysing monetary transmission channels, it shows that price rigidities and credit frictions account for most of this non-neutrality result.

Eric Golson, 11 November 2019

Neutrality has long been viewed as impartiality in war. This column, part of the Vox debate on World War II, asserts that neutral states in the war were realist in approaching their defence to ensure their survival. Neutrals such as Portugal, Spain, Sweden, and Switzerland maintained independence by offering economic concessions to the belligerents to make up for their relative military weakness. Economic concessions took the form of merchandise trade, services, labour, and capital flows. Depending on their position and the changing fortunes of war, neutral countries could also extract concessions from the belligerents, if their situation permitted.

Mitu Gulati, Ugo Panizza, Mark Weidemaier, Grace Willingham, 18 May 2019

One way for a government to reassure investors of its willingness to repay is to give them a priority claim to state assets. It remains to be seen, however, whether such commitments are viewed as credible by market participants. This column investigates how markets responded to two such commitments. A commitment by the government of Spain did not affect yield spreads, while one by the government of Puerto Rico did. This may be because, as a sub sovereign, Puerto Rico faced higher constraints on its ability to renege. 

Cheng Chen, Claudia Steinwender, 30 April 2019

Firms around the world are facing increased import competition, especially from low-wage countries like China, but the effect on the productivity of impacted firms remains unclear. Using data from Spain, this column studies how firms under different types of management respond to an increase in competition, and shows that less-productive firms that are both family owned and managed see the greatest improvement in productivity. Their managers care more about the long-term survival of their firm, prompting additional effort when faced with an increased bankruptcy risk.

Miguel Almunia, Pol Antràs, David Lopez Rodriguez, Eduardo Morales, 04 February 2019

The recommendation that firms reduce unit and labour costs to gain international competitiveness in response to domestic economic crises is based on the assumption that domestic and foreign supply decisions are not linked at the firm level. This column shows that in a monetary union, exports can have a significant impact in mitigating domestic slumps through the ‘venting-out’ mechanism. By reducing their use of flexible inputs relative to fixed, firms can achieve a short-term decrease in marginal costs to gain competitiveness abroad. This explains how an economic crisis and an export boom can take place at the same time.

Luc Laeven, Peter McAdam, Alexander Popov, 10 December 2018

There are good arguments both in favour and against the idea that more labour market flexibility will deliver benefits to an economy during a downturn. This column presents novel evidence on this question, using data from Spain during the 2008–09 credit crunch. The results show that credit-constrained firms grow faster if they are subject to less strict firing and hiring restrictions, as long as they are technologically able to substitute labour for capital. The findings provide an argument in favour of more flexible labour laws.

Joan Costa-i-Font, 04 October 2018

Many European countries are revisiting how best to finance long-term care, balancing financial sustainability and the economic welfare of households. Using examples of Spain and Scotland, this paper demonstrates that an expansion of public funding for long-term care has an effect on caregiving choices, household finances, and hospital care. Unconditional or cash subsidies may entail a ‘caregiving moral hazard’, but both cash and care subsidies can bring savings to the health system by reducing the frequency and intensity of hospitalisation. 

Alberto Martin, Enrique Moral-Benito, Tom Schmitz, 11 September 2018

Housing bubbles may crowd out credit from other sectors, but they may also have a crowding-in effect by providing collateral to real estate-owning firms or generating attractive assets which banks can securitise and use to increase their credit supply. This column applies data from the Spanish housing bubble to a simple model of a closed economy to show that both effects were present. At first, the crowding-out effect dominated, but then crowding in occurred. This model can be applied to similar positive shocks in other sectors.

Laura Alfaro, Manuel García Santana, Enrique Moral-Benito, 04 July 2018

Propagation through buyer-seller interactions may amplify the aggregate impact of bank lending shocks on real activity. This column presents insights from estimating the direct and indirect effects of exogenous credit supply shocks in Spain between 2002 and 2013. Both direct and indirect effects of bank credit shocks had sizable effects on investment and output throughout the period. Trade credit extended by suppliers and price adjustments both appear to explain downstream propagation of financial shocks.

Joan Monras, Javier Vázquez-Grenno, Ferran Elias, 15 May 2018

Studies have shown that granting work permits helps immigrants settle and integrate into host economies, but we know relatively little about how host economies are affected by the mass legalisation of immigrant workers. This column uses one of the largest and most unexpected legalisations in the world – by the Zapatero government in Spain – to show how legalisation can increase public revenues, but can also have distributive consequences for other workers in the economy.

Alexandra D'Onofrio, 07 March 2018

Weak bank lending and low corporate investment have plagued Europe since the Global Crisis. In this video, Alexandra D'Onofrio investigates whether there is a link between high debt before the Crisis and low investment during it, based on firms' choices about their financial structures. These findings can help  create institutional frameworks that help firms strengthen their finances and protect themselves from similar vulnerabilities in the future. This video was recorded at the RELTIF book launch held in London in January 2018.

Paolo Manasse, Dimitris Katsikas, 01 February 2018

The basic ingredients of the policy prescriptions in response to the euro area debt crisis were quite similar across Southern Europe. This column explores the economic, political, and institutional factors that differentially affected the success of these prescriptions from country to country. Policy timing and sequencing, the balance between fiscal consolidation and structural reforms, and external constraints all play crucial roles. Future reform programmes should be calibrated to the distinct economic, social, and political features of targeted countries.

Manuel Bagues, Pamela Campa, 09 September 2017

Several countries in the EU have adopted gender quotas that regulate the composition of electoral lists in an attempt to address the underrepresentation of women in political institutions. This column examines the effect of the introduction of gender quotas in local elections in Spain. While the quotas have increased the number of women elected, they have not significantly increased the probability of women reaching leadership positions, or the type of policies that are implemented. At the same time, fears that quotas would decrease the quality of politicians have not been realised.

Stéphane Bonhomme, Laura Hospido, 04 September 2017

The link between the rise in unemployment and the housing market in the US during the Great Recession is well documented. This column shows that in the case of Spain, the rise and fall in demand for construction workers following developments within the housing market had a big impact earnings inequality as well as employment. While there has been no apparent trend in the recent evolution of earnings inequality in Spain, countercyclical fluctuations have been substantial, with the construction sector playing a key role in this.

Samuel Bentolila, Jose Ignacio García Pérez, Marcel Jansen, 09 March 2017

Long-term unemployment is one of the most persistent consequences of the Great Recession, particularly in Spain, where external factors were compounded by domestic problems. This column analyses the mechanisms that worked to create such widespread and persistent long-term unemployment. To improve the prospects of the long-term unemployed, Spain should step up its efforts to implement effective active labour market policies.

Leandro de la Escosura, 21 December 2016

A new set of historical national accounts for Spain constructs estimates of output and expenditure from 1850 onwards, which means we can estimate the evolution of GDP per capita and labour productivity during this period. This column argues that the data demonstrates that GDP per capita captures long-run trends in welfare in Spain, but not short and medium run trends.

Luis Garicano, 07 December 2016

A recent Vox eBook examined the potential issues facing various EU members when it comes to negotiating with the UK over Brexit. This column, taken from the eBook, examines Spain's negotiating position, including the possible stumbling block of Gibraltar.

Elisa Gamberoni, Katerina Gradeva, Sebastian Weber, 03 December 2016

Employment subsidies have been widely used in OECD countries to counteract the recent job crisis, but their effectiveness is difficult to assess. This column summarises the findings of a recent study analysing a 2012 Spanish employment subsidy given to firms with fewer than 50 employees that make use of a new type of permanent contract. Consistent with other country studies, it fails to find robust evidence for increased employment growth due to the subsidy scheme.

Ramon Xifré, 29 August 2016

Spain implemented a host of structural reforms following the Global Crisis. But questions remain about whether the current economic condition is due to the reforms or to ‘automatic’ adjustment in public and private sectors. This column sheds light on these questions by examining changes in a set of economic indicators following the introduction of the reforms. Five stylised facts are presented that suggest limitations of the reforms. Much of the current climate appears to reflect inherent limitations of the Spanish economy.

Manuel García Santana, Josep Pijoan-Mas, Enrique Moral-Benito, Roberto Ramos, 23 May 2016

Spain enjoyed substantial growth in the decade prior to the Global Crisis, despite declining aggregate productivity. Recent research blames the poor productivity on different forms of a ‘financial resource curse’. This column argues that resource misallocation was particularly severe due to corruption and crony capitalism. This suggests future growth will require serious political reforms. 

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