Research Papers – Page 6 – Economics for Policy

De-leveraging through Fiscal Consolidation, the Case of Portugal

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This short introduction is centered on organizing thoughts at an abstract but simple level on the difficulties of reducing debt and on presenting data on debt in Portugal. Models where debt is contracted to leverage acquisition of assets have a long tradition in the history of economic thought1. J.S Mill, Alfred Marshall, Knut Wicskell, Irving Fischer, Hyman Minski, all have developed models where excessive leverage ultimately creates troubles to the real economy. (…)

External Rebalancing in the EMU, the Case of Portugal

Francesco Franco

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This paper presents the argument for a fiscal devaluation as a policy to adjust to external imbalances within the eurozone applied to the case of Portugal. From 1995 to 2010 Portugal has accumulated a negative international asset position of 110 percent of GDP. In a developed and aging economy the number is astonishing and any argument to consider it sustainable must have relied on extremely favorable growth forecasts. (…)

Efficiency and Equity Consequences of Decentralization in Health: An Economic Perspective

Susana Peralta

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Over the recent years, decentralization has been adopted in many health systems. The question however remains of whether local actors do better than the central government. We summarize the main insights from economic theory on the impact of decentralization and its empirical validation. (…)

Transfer Pricing Rules, OECD Guidelines, and Market Distortions

Susana Peralta

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We study the impact of transfer pricing rules on prices, firms’ organizational structure, and consumers’ utility in a two-country monopolistic competition model with source-based profit taxes. Firms can either be multinationals and serve the foreign market through a fully controlled affiliate, or be exporters and serve the foreign market by contracting with an independent distributor. (…)

Competing in Taxes and Investment under Fiscal Equalization

Susana Peralta

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The paper considers a model of federation with two heterogeneous regions that try to attract the capital by competing in capital income taxes and public investment that enhance the productivity of capital. Regions’ choices determine allocation of capital across the regions and their revenues under a tax sharing scheme. (…)

Currency Substitution and Money Demand in Euroland

Miguel Lebre Freitas

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This paper tests the stability of the demand for money in the euro-area in the context of an open economy. A sample consisting of quarterly data covering the 1982:2-1999:3 period is considered. The main finding is that the U.S. dollar long-term interest rate plays a significant role in the European money demand relationship. (…)

Portugal-EU Convergence Revisited: Evidence for the Period 1960-2003

Miguel Lebre Freitas

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This paper uses the stochastic approach to convergence to investigate whether real per capita GDP in Portugal has been converging to the EU15 average. The estimation accounts for conditional convergence, transitional dynamics and up to two structural breaks. (…)

Currency Substitution, Portfolio Diversification, and Money Demand

Miguel Lebre Freitas

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We extend the Thomas (1985) dynamic optimizing model of money demand currency substitution to the case in which the individual has restricted or no access foreign currency denominated bonds. In this case currency substitution decisions and a substitution decisions are not separable. (…)

Political Support for Tax Decentralization

Susana Peralta

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We present a spatial model of a city with two unequally productive jurisdictions. City residents bear a commuting cost to work in either of the two jurisdictions. Each jurisdiction must finance a public budget with a wage and a head tax. (…)