With a bang, not a whimper: Pricking Germany's "stock market bubble" in 1927 and the slide into depression

In May 1927, the German central bank intervenedindirectly to reduce lending to equity investors.The crash that followed ended the only stockmarket boom during Germany s relative stabilization 1924-28. This paper examines thefactors that lead to the intervention as well asits consequences. We argue that genuine concernabout the exuberant level of the stock market,in addition to worries about an inflow offoreign funds, tipped the scales in favour ofintervention. The evidence strongly suggeststhat the German central bank under HjalmarSchacht was wrong to be concerned aboutstockprices-there was no bubble. Also, theReichsbank was mistaken in its belief thata fall in the market would reduce theimportance of short-term foreign borrowing,and help to ease conditions in the money market.The misguided intervention had important realeffects. Investment suffered, helping to tipGermany into depression.

The 'new political economy': Two recent books

This paper reviews two recent books on Political Economy by Allan Drazen and Torsten Persson and Guido Tabellini. It discusses some problems of the recent Political Economy literature.

Regional industrialisation without national growth: The Catalan industrialization and the growth of Spanish economy (1830-1861)

This paper has two main objectives. First, it provides a stylised descriptionof the Catalan industrial path of the period 1830-1861. Second, it reviewsthe evolution of the Catalan industry in the Spanish context and, thus, canserve to describe the relative importance of the Catalan industrialexperience. Consequently, it is mainly devoted to computing and analysing thegrowth rates of Catalan industries during the early phase of industrialisation.The results show that Catalonia experienced a true process ofindustrialisation during the period 1830 to 1861, but that its contributionin rapid increase in Spanish GDP was relatively small.

A structural model of Australia as a small open economy

This paper sets up and estimates a structuralmodel of Australia as a small open economyusing Bayesian techniques. Unlike other recentstudies, the paper shows that a small microfoundedmodel can capture the open economydimensions quite well. Specifically, the modelattributes a substantial fraction of the volatilityof domestic output and inflation to foreigndisturbances, close to what is suggested by unrestrictedVAR studies. The paper also investigatesthe effects of various exogenous shockson the Australian economy.

Oil and economy in Mexico, 1900-1930s

This brief essay reviews the macro framework of oil and economy in Mexicoin the early days of the oil industry, from 1900 to 1938. The first sectiondisplays the figures of production at the world level and shows how Mexicobecome a major oil producer in the 1920s. The second section look at theMexican economy of the first third of the century followed by a thirdsection on the importance of the oil sector in terms of trade and fiscalincome. The last section reviews the literature and the outlooks of thecontemporaries over the development of the oil industry in the early partof the 20th century. The paper will be of use for those producing in depthanalyses of the Mexican oil industry in this period.

A medium-scale open economy model of Australia

We estimate an open economy dynamic stochastic general equilibrium (DSGE)model of Australia with a number of shocks, frictions and rigidities, matching alarge number of observable time series. We find that both foreign and domesticshocks are important drivers of the Australian business cycle.We also find that theinitial impact on inflation of an increase in demand for Australian commoditiesis negative, due to an improvement in the real exchange rate, though there is apersistent positive effect on inflation that dominates at longer horizons.

Monetary policy and exchange rate volatility in a small open economy

We lay out a small open economy version of the Calvo sticky price model, and show how the equilibrium dynamics can be reduced to simple representation in domestic inflation and the output gap. We use the resulting framework to analyze the macroeconomic implications of three alternative rule-based policy regimes for the small open economy: domestic inflation and CPI-based Taylor rules, and an exchange rate peg. We show that a key difference amongthese regimes lies in the relative amount of exchange rate volatility that they entail. We also discuss a special case for which domestic inflation targeting constitutes the optimal policy, and where a simple second order approximation to the utility of the representative consumer can be derived and used to evaluate the welfare losses associated with the suboptimal rules.

The political economy of employment protection

This paper develops a model of job creation and job destruction in agrowing economy with embodied technical progress, that we use toanalyze the political support for employment protection legislationssuch as the ones that are observed in most European countries.We analyze the possibility of Condorcet cycles due to the fact thatworkers about to become unemployed prefer both an increase and areduction in firing costs over the status quo. Despite this problem, we show the existence of local, and sometimes global majority winners.In voting in favour of employment protection, incumbent employeestrade off lower living standards (because employment protectionmaintains workers in less productive activities) against longer job duration. We show that the gains from, and consequently the politicalsupport for employment protection (as defined by maximunjob tenure) are larger, the lower the rate of creative destruction and the largerthe worker's bargaining power. Numerical simulations suggest a hump-shaped response of firing costs to these variables, as well as negative impact of exogeneous turnover on employment protection.

Stable sunspot equilibria in a cash-in-advance economy

We analyze a monetary model with flexible labor supply, cash-inadvance constraints and seigniorage-financed government deficits. If the intertemporal elasticity of substitution of labor is greater than one, there are two steady states, one determinate and the other indeterminate. If the elasticity is less than one, there is a unique steady state, which can be indeterminate. Only in the latter case do there exist sunspot equilibria that are stable under adaptive learning. A sufficient reduction in government purchases can in many cases eliminate the sunspot equilibria while raising consumption/labor taxes even enough to balance the budget may fail to achieve determinacy.

Which inflation to target? A small open economy with sticky wages indexed to past inflation

In a closed economy context there is common agreement on price inflation stabilization being one of the objects of monetary policy. Moving to an open economy context gives rise to the coexistence of two measures of inflation: domestic inflation (DI) and consumer price inflation (CPI). Which one of the two measures should be the target variable? This is the question addressed in this paper. In particular, I use a small open economy model to show that once sticky wages indexed to past CPI inflation are introduced, a complete inward looking monetary policy is no more optimal. I first, derive a loss function from a secondorder approximation of the utility function and then, I compute the fully optimalmonetary policy under commitment. Then, I use the optimal monetary policy as a benchmark to compare the performance of different monetary policy rules. The main result is that once a positive degree of indexation is introduced in the model the rule performing better (among the Taylor type rules considered) is the one targeting wage inflation and CPI inflation. Moreover this rule delivers results very close to the one obtained under the fully optimal monetary policy with commitment.

The geophysical electromagnetic prospecting in the spatial location of the travertine deposits of the Banyoles Depression (Girona)

The results of the application of the geophysical electromagnetic prospection methods in the resolution of the problems of the spatial location of the travertine quaternary formations of the Banyoles depression are presented

Industrial agglomerations and wage gradients: the Spanish economy in the interwar period

This paper gives new evidence on the relationship between integration and industrial agglomeration in the presence of scale economies, by testing directly one of the predictions that can be derived from Krugman (1991), that is, the existence of regional nominal wage gradients and its transformation following changes in trade regimes. Our case study analyzes the effects of the substitution of an open economy by a closed economy regime, exactly the opposite process studied by Hanson (1996, 1997). In Spain, during the interwar period, protectionist policies would have favored the loss of centrality of the coastal location (Barcelona) and the relative rise of central locations (such as Madrid). Our results indicate the existence of a wage gradient centered in Barcelona during the interwar period (1914-1930) and its weakening after 1925.

Socio-economic inequalities in reported depression in Spain : a decomposition approach

Recent evidence questions some conventional view on the existence of income-related inequalities in depression suggesting in turn that other determinants might be in place, such as activity status and educational attainment. Evidence of socio-economic inequalities is especially relevant in countries such as Spain that have a limited coverage of mental health care and are regionally heterogeneous. This paper aims at measuring and explaining the degree of socio-economic inequality in reported depression in Spain. We employ linear probability models to estimate the concentration index and its decomposition drawing from 2003 edition of the Spanish National Health Survey, the most recent representative health survey in Spain. Our findings point towards the existence of avoidable inequalities in the prevalence of reported depression. However, besides ¿pure income effects¿ explaining 37% of inequality, economic activity status (28%), education (15%) and demographics (15%) play also a key encompassing role. Although high income implies higher resources to invest and cure (mental) illness, environmental factors influencing in peoples perceived social status act as indirect path as explaining the prevalence of depression. Finally, we find evidence of a gender effect, gender social-economic inequality in income is mainly avoidable.

A comparison of the processes of institutionalisation of political economy in Spain and Italy (1860-1900)

[spa] El estudio de los procesos a través de los cuales la economía política se ha transformado en una disciplina académica es un área de creciente interés en la historia del pensamiento económico. Dicho estudio se ha abordado a través del análisis de la importancia de la economía política en un conjunto de instituciones, consideradas clave en la expansión de la economía en las sociedades occidentales en la segunda mitad del siglo XIX y primeras décadas del XX: universidades, sociedades económicas, publicaciones periódicas de contenido económico y los parlamentos nacionales. Este papel presenta una comparación entre los desarrollos del proceso de institutionalización de la economía política en España e Italia, a través del estudio de la presencia de esta disciplina en las instituciones mencionadas para el periodo 1860-1900. El objetivo es medir la posible existencia de una vía común en la institucionalización de la economía política en ambos países, como un primer paso hacia la elaboración de un modelo supranacional de institucionalización de la economía en este periodo.

Industrial agglomerations and wage gradients: the Spanish economy in the interwar period

This paper gives new evidence on the relationship between integration and industrial agglomeration in the presence of scale economies, by testing directly one of the predictions that can be derived from Krugman (1991), that is, the existence of regional nominal wage gradients and its transformation following changes in trade regimes. Our case study analyzes the effects of the substitution of an open economy by a closed economy regime, exactly the opposite process studied by Hanson (1996, 1997). In Spain, during the interwar period, protectionist policies would have favored the loss of centrality of the coastal location (Barcelona) and the relative rise of central locations (such as Madrid). Our results indicate the existence of a wage gradient centered in Barcelona during the interwar period (1914-1930) and its weakening after 1925.