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Recent Submissions

Target2 imbalances and the ECB’s asset purchase programme. An alternative account
(Savez Ekonomista Vojvodine, 2022) Febrero Paños, Eladio; Uxó, Jorge; Álvarez, Ignacio
The aim of this paper is to investigate the cause behind rising Target2 imbalances since early 2015, coinciding with the implementation of a quantitative easing program by the ECB. Two facts have captured our attention. Firstly, the official explanation of rising Target2 imbalances, offered by the ECB, is not convincing because it does not fit the empirical evidence available for Italy and Spain. Further, our alternative interpretation reveals that through quantitative easing, the ECB has helped to clean up banks’ balance sheets and has indirectly funded government spending. Secondly, those who spoke out against the risks of rising Target2 imbalances in 2011-2012, now remain silent on this issue, despite the fact that some of the presumed risks during the first wave of rising imbalances still hold. We interpret this silence as an implicit acceptance that the risks put forward in 2011-2012 are offset by reform fatigue and anti-euro sentiments in the Euro Zone.
Central Bank Digital Currencies: a proper reaction to private digital money?
(Edward Elgar, 2023-11) Cesaratto, Sergio; Febrero Paños, Eladio
The emergence of private digital currencies poses a threat to payment systems and monetary policy because they challenge all functions of money as we know them. In this paper, we focus mainly on the banking and monetary policy issues raised by stablecoins and Central Bank Digital Currencies (CBDCs). We begin by describing the current working of bank-centered payment systems. We next touch upon cryptoassets and focus on the domestic and international impact of stablecoins. We identify two problems with stablecoins: their role in the breakup of uniform currency, and as a source of financial instability due to the lack of a monetary backstop in the event of a run to withdraw funds in adverse situations. We then deal with the pros and cons of CBDCs, whether they are an adequate response to the challenges raised by stablecoins, their possible impact on monetary and banking policy, and some open economy issues. While we do not see major advantages in private digital currencies as a payment system or as an investment, we also do not find any robust motivation for the introduction of CBDCs beyond geopolitical reasons and the oversight of a technological area.
Internal devaluation in a wage-led economy: the case of Spain
(Oxford University Press, 2019-03) Álvarez, Ignacio; Uxó, Jorge; Febrero Paños, Eladio
The aim of this paper is to study the impact of wage devaluation policy on the recent recovery experienced by the Spanish economy. For this purpose, we use the theoretical distinction between wage-led and profit-led economies. We address, for the first time in the literature, an in-depth analysis of the Spanish economy using the Bhaduri-Marglin model. We find that the Spanish economy can be characterized as a wage-led economy: a fall in the wage share has a contractionary effect on GDP growth. Our results point to two important conclusions, when we use this model to assess the internal devaluation policy. First, we do not see an export-led recovery in Spain during past years, driven by recent supply-side reforms. And, second, a pro-labour distribution of income would reinforce economic growth: according to our calculations, internal devaluation policy detracted an average of 0.2 percentage points of annual economic growth during the period 2009–17.
Current Account Imbalances or Too Much Bank Debt as the Main Driver of Gross Capital Inflows? Spain During the Great Financial Crisis
(Taylor & Francis, 2019) Febrero Paños, Eladio; Álvarez , Ignacio; Uxó, Jorge
In contrast to the widespread view which posits that large current account deficits and net international debt were at the epicenter of the crisis in the Euro Zone, with diverging competitiveness playing a central role, this article points to the huge volume of bank credit that banks refinanced in international markets. With a focus on the Spanish economy, we ground our view in an analysis linking gross—not net—capital flows, bank credit, and gross external debt, which provides more adequate information about a country’s international financing patterns and its external exposure. The main conclusion of this article is that the principle driver of gross external debt in Spain was bank credit, with accumulated current account deficits accounting for less than 50 percent of gross external debt. Other consequences in keeping with this view are: the measures of economic policy required to sort out current account imbalances—particularly wage devaluation to improve competitiveness—may do more harm than good and they do not prevent the problem of too much bank credit from occurring again, and the residence of debt holders in the Euro Zone crisis is relevant for the understanding of the crisis as the result of a power imbalance.
Socioeconomic effects of pension spending: evidence from Spain
(Emerald Publishing Limited, 2020) Bermejo Patón, Fernando; Febrero Paños, Eladio; Fernandes Tomon Avelino, Andre
Purpose The purpose of this study is to provide broader understanding of the significant role that the pension system has in the Spanish economy by estimating the sectoral production, employment and income sustained by pensioners' consumption. Design/methodology/approach Based on input–output tables by the World Input–Output Database and consumption data from the Household Budget Survey by the Spanish Statistical Office, a demoeconomic model is applied to quantify the direct impacts, indirect impacts from interindustry links and induced impacts from income–consumption connections over a nine-year period (2006–2014). Then, the factors driving the evolution of total output, employment and value added during such period have been examined by using structural decomposition analysis. Findings The growing participation of consumption by pensioner households in final demand had proven crucial during the 2008 crisis to alleviate the negative trend in production and employment derived from the collapse in consumption suffered by the rest of households. Practical implications Determining the underlying factors driving changes in both employment and income during the 2008 crisis can be of interest in political decision-making on the sustainability of the Spanish pension system. Social implications The results of estimating both the employment and income supported by pensioners' consumption reveal the significant stabilizing effect of the public spending on pensions, particularly during the 2008 crisis. Originality/value The current Spanish approach of attaining the pension system sustainability by merely reducing social protection costs ignores the adverse consequences of a lower pensioners' demand. This paper addresses an alternative view in which pension spending is not considered a burden on economic growth but rather a means of improving the level of production and employment.