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- 60%, -4% and 6%, a tale of thresholds for EU fiscal and current account developmentsPublication . Afonso, António; Coelho, José CarlosWe study the relationship between the budget balance and the current account balance for European Union (EU) countries, using quarterly data from 1995 to 2020. Through the use of panel Granger causality tests and a panel SUR model, we conclude that the relationship is bi-directional for the EU panel as a whole. Furthermore, we find that in Eurozone countries, before 2010, for those countries with an average current account balance-to- GDP ratio outside the range of -4 to 6%, and also in countries whose average debt-to- GDP ratio is greater than 60%, the impact of the budget balance on the current account balance is greater. Conversely, in non-Eurozone countries, after 2010, in countries with a current account balance-to-GDP ratio of -4 to 6%, and also in countries with an average debt-to-GDP ratio of less than 60%, the impact of the fiscal balance on the current account balance is less relevant.
- Accumulation of capital, production functions and models of economic growthPublication . Amaral, João Ferreira doThis paper is about the possible interdependence of the assumptions related to the properties of the process of accumulation of capital and the properties of the production function as they are used in models of economic growth. The case of a semi-bounded substitution production function exemplifies this kind of interdependence and the consequent restrictions that may condition economic growth.
- Accuracy of european stock target pricesPublication . Almeida, Joana; Gaspar, Raquel M.Equity researches are conducted by professionals, who also provide buy/hold/sell recommenda- tions to investors. Nowadays, target prices determined by nancial analysts are publicly available to investors, who may decide to use them for investment purposes. Studying the accuracy of such analysts' forecasts is, thus, of paramount importance. Based upon empirical data on 50 of the biggest (larger capitalisation) European stocks over a 15{year period, from 2004 to 2019 and using a panel data approach, this is the rst study looking at overall accuracy in European stock markets. We nd that Bloomberg's 12-month consensus target prices have no predictive over future market prices. Panel results are robust to company xed e ects and sub-period analysis. These results are in line with the (mostly US-based) evidence in the literature. Extending common practice, we perform a comparative accuracy analysis, comparing the accu- racy of target prices with that of simple capitalisations of current prices. It turns out target prices are not better in forecasting, than simple capitalisations. More interestingly, by analysing also the relationship between both measures { target prices and capitalised prices { we nd evidence that capitalised prices partially explain how target prices are determined. Even when considering individual regressions, accuracy is still very low, but varies considerably across stocks.
- Agent-based modeling and the sociology of money : a framework for the study of coordination and pluralityPublication . Ferraciolli, Eduardo; Araújo, TanyaThe institution of money can be seen as a foundational social mechanism providing communities with the ability to quantify the results of economic processes and collectively regulate independent activities of production and trade – money can be said, indeed, to constitute the micro-macro link in economics. As such, investigations of money’s role in the economy can be fruitfully combined with the tools of social simulation. This paper revisits some of the main positions taken in the contested landscape of monetary theory, evaluating how they might serve as a foundation for the development of a new generation of conceptual and empirical agent-based models.We start out by presenting a comparative review of the way different intellectual traditions in mainstream economics, heterodox economics, and economic sociology attempt to specify the nature of money as an institution and clarify its role in the economy. We extract the key "concepts of money" that each approach emphasizes, paying especially close attention to the contrast between the sociology of money and the microfoundations-related traditions in economics (focusing on "money is memory" models, search-theory and mechanism design). We then review the current literature applying agent-based modeling to questions surrounding the nature of money, assessing some of the main contributions from the perspectives of generative epistemology and of the key concepts identified above. We conclude by indicating different research directions in which we believe agent-based models, in combination with the sociology of money, still have the potential to provide new answers to old questions in monetary theory: by clarifying convergence processes related to money of account, by illustrating the formation of economic structure through symbolic mediation, by constructing tools for analyses of intersubjectivity and coordination, or by providing formal generalization to the social-monetary patterns that are currently being revealed in the wealth of empirical data originating from digital complementary currencies and new histories of money.
- An ‘Eiopean’ tool to project post retirement income in portuguese defined contribution pension schemesPublication . Pinheiro, Frederico; Simões, Onofre AlvesAgeing of the populations is leading to reforms in Social Security systems with a negative impact on post retirement income. One way to minimize this is to reinforce the role of complementary pension schemes, and pension projections can be an important tool to assist workers in making their decisions on saving for retirement. The topic has been discussed by the European Union (EU) and the European Insurance and Occupational Pensions Authority (EIOPA). This work focuses on a tool for making pension projections in the scope of occupational defined contribution pension schemes, based on EIOPA’s guidance. We aim to study the potential performance of different investment strategies using an Economic Scenario Generator framework and evaluate the impact on the retirement income that such investment strategies produce, under different assumptions. The model underlying the tool takes in three main risk factors: the financial market risk, which includes uncertainty over returns on investments, inflation and interest rates; the labor risk, originated from uncertainty over real wage growth paths; the demographic risk, as a result of the increasing life expectancy.
- An economic policy uncertainty index for PortugalPublication . Morão, HugoThis paper investigates the effects of policy uncertainty on major macroeconomic variables in Portugal, employing a Structural Vector Autoregression (SVAR) approach. I develop an Economic Policy Uncertainty (EPU) index utilizing data from over twenty news sources, which captures key moments such as elections, budget negotiations, and various crises. In response to a rise in policy uncertainty, firms delay projects, leading to a decline in industrial output and a rise in unemployment. Consumers, in turn, reduce their non-essential spending, resulting in a gradual decline in retail sales. On the financial side, rising policy uncertainty drives down equity prices and widens credit spreads, reflecting the concerns of investors and lenders.
- An empirical assessment of monetary policy channels on income and wealth disparitiesPublication . Alves, José; Silva, TomásOur paper aims at analysing the relation between monetary policy and its transmission channels on both income and wealth inequality for the Euro Area. We analysed three different channels identified by the literature (Income, Portfolio and Earnings Heterogeneity) that might explain how monetary policy decisions may affect wealth and income distribution. In this empirical research we also set up a fourth regression combining all our selected explanatory variables with the goal of studying the impact of the aforementioned channels combined. For income inequality we analysed four different measures, namely Gini of disposable income (GDI), Gini of market income (GMI), share of income held by the top 1% and the share of income of the top 10% of society. In what regards to wealth inequality due to lack of data we had to create an alternative measure that can both translate the unequal savings rate of the Euro Area countries and evaluate the pace of capital accumulation in order to shed a light on the gap between high-income and low-income household’s annual savings. So that our study could be conducted we developed an unbalanced panel data analysis for the Eurozone countries between 1999 and 2017. The results we reached led us to conclude that the increase in asset prices, mainly equity, seems to be relevant to explain an increase in income inequality. However, it seems that the positive impact that MP had on unemployment by reducing it, contributed to avoid a higher increase on income inequality in the Euro Area.
- An horizontal innovation growth model with endogenous time allocation and non-stable demographyPublication . Guerra, Manuel; Pereira, João; St. Aubyn, MiguelWe propose a decentralized endogenous growth model in order to study the transitional dynamics associated with the process of population aging in a small open economy. The model features endogenous time allocation and two growth engines: R&D and human capital accumulation. Per capita output growth is affected negatively by the difference in the rates of growth of labor force and of the total population in the period where the weight of the labor force decreases to a new and lower level. The biggest impact of aging on per capita output growth is during the period where labor force grows at a lower rate than the population unless it is compensated by some other effect. Under some assumptions, a decrease in the corporate tax improves growth.
- Are asset price data informative about news shocks? A DSGE perspectivePublication . Iskrev, NikolayStandard economic intuition suggests that asset prices are more sensitive to news than other economic aggregates. This has led many researchers to conclude that asset price data would be very useful for the estimation of business cycle models containing news shocks. This paper shows how to formally evaluate the information content of observed variables with respect to unobserved shocks in structural macroeconomic models. The proposed methodology is applied to two different real business cycle models with news shocks. The contribution of asset prices is found to be relatively small. The methodology is general and can be used to measure the informational importance of observables with respect to latent variables in DSGE models. Thus, it provides a framework for systematic treatment of such issues, which are usually discussed in an informal manner in the literature.
- Are external accounts sustainable in Portugal?Publication . Silva, JorgeThis study assesses the sustainability of the Portuguese external accounts during the period 1999-2014 and the role of the public sector. There was evidence of higher import content of the non-construction investment and private investment. Therefore, the high import content of the non-construction investment was an additional challenge because its increase did not create a strong positive multiplier effect on the Portuguese economy. Exports in volume were determined by the economic growth rate of the euro area, the share of the Portuguese nominal exports in the total exports of the euro area, unit labour costs of the private sector due to the compensation of employees and real productivity, the exchange rate and the terms of trade. There was no evidence of twin deficits. Additionally, there was a negative correlation between the internal and the external balance. Furthermore, we analysed the determinants of the liabilities related to the international investment position, decomposing the external funding and identifying their determinants.