Vitor Gaspar - Academia.edu (original) (raw)

Papers by Vitor Gaspar

SSRN Electronic Journal, 2006

* We are grateful to José Marin, Abel Mateus, participants at the I Lisbon Conference on Competit... more * We are grateful to José Marin, Abel Mateus, participants at the I Lisbon Conference on Competition Law and Economics, and at an ECB seminar, and an anonymous referee for helpful comments and suggestions. The opinions expressed herein are those of the authors and do not necessarily reflect those of the ECB, Banco de Portugal or the Eurosystem.

IMF Working Papers, 2017

This paper provides evidence of fiscal procyclicality, excessive deficits, distorted budget compo... more This paper provides evidence of fiscal procyclicality, excessive deficits, distorted budget composition and poor compliance with fiscal rules in the euro area. Our analysis relies on real-time data for 19 countries participating in the euro area over 1999-2015. We look for, but do not find, conclusive evidence of bias in procedures in relation to country size. The paper also briefly reviews the literature on political economy factors and policy biases, and offers some reflections on the euro area architecture.

Monetary policy strategy in Portugal has been presented in recent years as pursuing the final goa... more Monetary policy strategy in Portugal has been presented in recent years as pursuing the final goal of price stability through an exchange rate stability target. This paper argues that a central bank committed to the goal of price stability − meaning low inflation in the medium/long run − can successfully control average inflation in the economy drawing up a strategy that involves an intermediate monetary target (exchange rate or money). Arguments in favour of the use of an intermediate monetary target in terms of communication strategy are briefly discussed.

Challenges in Central Banking

We thank Rossana Merola for excellent research assistance. The views expressed in this paper are ... more We thank Rossana Merola for excellent research assistance. The views expressed in this paper are solely our own and do not reflect those of the European Central Bank, the Banco de Portugal or the Eurosystem's.

Ban co de Por tu gal / Eco no mic bulle tin / De cem ber 1997 27 Articles * The opi nions of this... more Ban co de Por tu gal / Eco no mic bulle tin / De cem ber 1997 27 Articles * The opi nions of this pa per re pre sent the views of the authors, they are not ne ces sa rily tho se of the Ban co de Por tu gal. The authors would like to thank Oli vi er Blan chard, Isa bel Horta Cor reia, José An to nio Fer rei ra Ma cha do, Car los Ro ba lo Marques and Mi guel St. Aubyn for comments on a pre li mi nary versi on of this pa per. The re mai ning er rors are the authors' respon si bi lity. ** Eco no mic Re search De partment and In ter na ti o nal Re la tions De partment. (1) Also the Be ve rid ge cur ve-which re la tes wa ves with unemployment-has re mai ned sta ble. (2) The pre sent pa per is also re la ted to cur rent re sear ches by Marques and Bo tas (1997).

In this paper, we use the Furfine (1999) statistical procedure to identify Money market operation... more In this paper, we use the Furfine (1999) statistical procedure to identify Money market operations from Payments Systems data. Given the availability of an alternative data set, recording money market operations we could confirm the accuracy of the method. We examine evidence on integration of the Money market in the euro area. We ask, “how do Portuguese banks participate in the market for daily funds?” and look for a possible hierarchical structure in the market. We find strong evidence of integration and mixed evidence on hierarchical structure. JEL Classification: E52, E58.

Portuguese banks in the euro area market for daily funds

Handbook of Monetary Economics, 2010

This chapter investigates the implications of adaptive learning in the private sector's formation... more This chapter investigates the implications of adaptive learning in the private sector's formation of inflation expectations for the conduct of monetary policy. We analyze the determinants of optimal monetary policy in the standard New Keynesian model, when the central bank minimizes an explicit loss function and has full information about the structure of the economy, including the precise mechanism generating private sector's expectations. The focus on optimal policy allows us to investigate how and to what extent a change in the assumption of how agents form their inflation expectations affects the principles of optimal monetary policy. It also provides a benchmark to evaluate simple policy rules. We find that departures from rational expectations increase the potential for instability in the economy, thereby strengthening the importance of managing (anchoring) inflation expectations. We also find that the simple commitment rule under rational expectations is robust when expectations are formed in line with adaptive learning.

International Journal of Finance & Economics, 2001

Contents Non-technical summary 1 Introduction 2 The "learning period". The first three weeks of E... more Contents Non-technical summary 1 Introduction 2 The "learning period". The first three weeks of EMU 3 How predictable are money market interest rates within reserve maintenance periods? 12 3.1 Measuring the impact of monetary policy decisions of the ECB on money market rates 3.2 Have money markets anticipated interest rate decisions within reserve maintenance periods: some insight of further intuition 4 Conclusion References

Advances in Economic Analysis & Policy, 2001

Intuitively, the observed "home bias" in individual portfolios plausibly explains the i... more Intuitively, the observed "home bias" in individual portfolios plausibly explains the international capital immobility reported by Feldstein and Horioka (1980) as well as the survival of taxes on capital income. These intuitions are examined in a model where consumers prefer to consume domestically produced goods. The results show that international capital immobility is indeed present in the model: extra domestic savings generate extra investment primarily in the home country. When monetary policy focuses on exchange rate stabilization random domestic prices cause individuals to heavily invest in domestic equity as a hedge against price fluctuations. However our findings show that the specialization of equity portfolios does not necessarily facilitate the taxation of capital income. While random equity returns do facilitate taxes on equity income, as shown in Gordon and Varian (1989) and Huizinga and Nielsen (1997), random consumer prices appear to undermine taxes on capi...

Japan has ambitious economic goals: 3 percent nominal growth; 2 percent inflation; and a primary ... more Japan has ambitious economic goals: 3 percent nominal growth; 2 percent inflation; and a primary budget surplus. Abenomics has employed the three arrows of monetary, fiscal and structural policies, but the goals remain out of reach. We propose that countercyclical measures be embedded in long-run frameworks that anchor expectations for inflation and public debt. In addition, we argue for an incomes policy to assist reflation. Model simulations suggest that, combined, these proposals would make headway towards the goals, with, on balance, a better chance of success than the more unconventional policy alternatives proposed by Krugman, Svensson, and Turner from a risk-return perspective. JEL Classification Numbers: E31; E39; E52; E62; E64

IMF Working Papers, 2016

and Charles Wyplosz for insightful discussions and their valuable suggestions. We also wish to th... more and Charles Wyplosz for insightful discussions and their valuable suggestions. We also wish to thank participants of a seminar held by the Eurosystem's MPC and participants of the NBER conference at Woodstock for their comments that helped improving an earlier draft of this paper. Last but not least we would like to express our gratitude to Aurelie Therace for her efficient help in preparing the final manuscript. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

In 2007 all ECB publications feature a motif taken from the €20 banknote. This paper can be downl... more In 2007 all ECB publications feature a motif taken from the €20 banknote. This paper can be downloaded without charge from

European Economics: Macroeconomics & Monetary Economics eJournal, 2007

In this paper we argue that, for a group of converging economies of the European Union, participa... more In this paper we argue that, for a group of converging economies of the European Union, participation in the euro area has been associated with easier access to financing by domestic economic agents. Easier access to financing was a significant impulse leading to a sharp increase in households' expenditures and a corresponding fall in the savings ratio. Increased expenditure was associated with current account deficits, a sharp fall in the net foreign asset position and an increase in the households' indebtedness. At the same time there was a sizeable increase in the real exchange rate. In this paper, we show that it is possible to obtain all these qualitative features of adjustment using a simple analytical model of intertemporal equilibrium. Specifically, we consider a simple endowment economy with traded and non-traded goods populated by Blanchard-Yaari households. We also argue that the consideration of external habit formation improves the model's ability to mimic s...

Public Economics eJournal, 2004

We show how in a Blanchard-Yaari, overlapping generations framework, perfect substitutability of ... more We show how in a Blanchard-Yaari, overlapping generations framework, perfect substitutability of government bonds in Monetary Union tempts governments to exploit the enlarged common pool of savings. In Nash equilibrium all governments increase their bond financed transfers to current generations (prosperity effect) at the expense of future generations (posterity effect). The resulting deficit bias occurs even if one assumes that before Monetary Union countries had eliminated their deficit bias by designing appropriate domestic institutions. The paper provides a rationale for an increased focus on fiscal discipline in Monetary Union, without the need to assume imperfect credibility of existing Treaty provisions or to refer to extreme situations involving sovereign default. We draw on existing empirical evidence to argue that the degree of government bond substitutability within the European Monetary Union is an order of magnitude larger than in the global economy.

In the paper, we provide a critical and selective survey of arguments relevant for the assessment... more In the paper, we provide a critical and selective survey of arguments relevant for the assessment of the case for price (level) stability. Using a standard hybrid new Keynesian model we identify two main arguments in favour of such regime. First, it helps overall macroeconomic stability by making expectations operate like automatic stabilizers. Second, under a price level stability regime, changes in the price level operates like an intertemporal adjustment mechanism, reducing the magnitude of required changes in interest rates. Such a property is particularly relevant as a means to alleviate the importance of the zero bound on nominal interest rates. We also review and discuss some frequently used arguments against price level stability. Finally, we found, using the Smets and Wouters (2003) model, which includes a wide variety of frictions, and is estimated for the euro area, that the price level is stationary under optimal policy under commitment. The results obtain when the quasi...

International Finance, 2003

The behaviour of the exchange rate under a floating exchange rate regime for a small open economy... more The behaviour of the exchange rate under a floating exchange rate regime for a small open economy with perfect capital mobility may appear like a managed float or even a firmer peg. We present a canonical new neo-classical synthesis open economy model where the central bank follows a strategy directed at maintaining price stability. It is shown that the behaviour of the exchange rate depends on the structure of the economy and on the nature of the relevant shocks. In the case of very open economies the exchange rate will look quasi-fixed in response to shocks stemming from the international capital markets. It is also shown that the joined endogeneity of the interest rate and the exchange rate has important implications for the empirical testing of uncovered interest rate parity. JEL Classification: E58, E63, F41

Computing in Economics and Finance, 2006

We consider optimal policy when private sector expectations are formed through adaptive learning.... more We consider optimal policy when private sector expectations are formed through adaptive learning. Earlier research has found that adaptive learning is consistent with empirical evidence on private sector expectations. In this paper, we consider the (admittedly) extreme case of sophisticated central banking, whereby the central bank has full knowledge about the structure of the economy. Our results confirm that the management of inflation expectations is crucial for the conduct of monetary policy. n particular, when the private sector perceives that inflation persistence is high, optimal policy responds strongly to lagged inflation and inflation shocks thereby stabilizing inflation and anchoring inflation expectations. For our parametrization it does so at no cost for output gap stability

Staff Discussion Notes

DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessari... more DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.