Portuguese Economic Journal, 2004, Volume 3, Nº 1
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- A note on conspicuous leisure, animal spirits and endogenous cyclesPublication . Weder, MarkThis paper investigates general equilibrium effects of conspicuous leisure. It finds that leisure externalities reduce the degree of other market im- perfections needed to generate indeterminacy or sunspot equilibria – endogneous cycles become empirically more plausible. Sunspot equilibria are possible with a downward-sloping labor demand schedule. The economic reasoning behind the result is that with conspicuous-externalities, labor is drawn more easily in and out of leisure to help fulfill agents’ expectations.
- A general equilibrium framework for the affine class of term structure modelsPublication . Nunes, João Pedro VidalThe Duffie and Kan (1996) model, which can be considered as the most general affine term structure formulation, was originally specified in terms of risk- adjusted stochastic processes for its state variables. The goal of the present paper is to derive a Duffie and Kan (1996) model’ specification under the physical probability measure that is compatible with the formulation given by the authors under the equivalent martingale (“money market account”) measure. For that purpose, the Duffie and Kan (1996) model will be fitted into a general equilibrium monetary framework. The resulting analytical solution for the vector of factor’ risk premiums enables the econometric estimation of the model’ parameters using a “time-series” or a “panel-data” approach, and nests, as special cases, several other specifications already proposed in the literature.
- Institutions and economic growth in Portugal : a quantitative explorationPublication . Tavares, JoséThis paper presents a broad diagnostic of the level of institutional development in Portugal in the legal, corporate governance and financial systems. A comparative assessment suggests that Portuguese institutions are less developed than their European Union and EastAsian counterparts, more developed than Greek institutions and on a level similar to that of Spanish institutions.We use data for a wide cross-section of countries since 1960 and correlate indicators of institutional development with the long-term average growth rate, identifying issues where reform is likely to significantly affect economic growth. We construct three new indices that measure the potential of institutional reform – the impact of reform on growth, the required reform effort and the efficiency of reform index – by taking into consideration the institutional “distance” between Portugal and the European Union. These indices measure, respectively, which reforms have the most payoff in terms of growth, which are “less costly” to undertake and which deliver the most growth per required effort. Our results strongly suggest that in a large number of issues, institutional reform may translate into substantially higher rates of economic growth. Of the ten most promising reforms, six are in the legal area, irrespective of which of the indices is considered. Whereas legal reform is promising at the aggregate and the microeconomic levels, in the financial sector aggregate indicators offer the wider scope for productive reform, while in the corporate governance area it is indices at the micro level that hold the most promise. These results support the view that a comprehensive reform effort is likely to deliver higher rates of growth in Portugal, allowing faster real convergence with the rest of the European Union.