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Using state-level data for the U.S. housing market over the period of 1975:Q1-2012:Q2, we show that the consumption-wealth ratios derived from aggregate wealth (cay) and disaggregate (i.e. financial and housing) wealth (cday) are strong predictors of real housing returns (and their volatility). Additionally, we find that, barring the extreme ends of their respective conditional distributions, such effect is stronger for housing return volatility than housing returns. All in all, our findings show that state-level regressions can recover a large degree of heterogeneity that country-level exercises typically ignore. Such heterogeneity is prominent not only in terms of consumption smoothing behavior, but also with regard to housing return predictability.

Fiscal rules are typically seen as government constraints. Yet, the extent to which they are substituted or complemented by market discipline (especially, during financial stress) remains unexplored. Using data for 71 countries over the period 1985–2015, we estimate an “augmented” fiscal reaction function to assess the impact of both fiscal and market discipline. We find that different market signals influence fiscal policy, but fiscal discipline depends on market incentives. In the EU and the OECD, market signals complement fiscal rules. These are less effective in the EMU and non-OECD countries that are “debt intolerant”. Yet, there are unintended consequences: (i) neither output and debt stabilisation, nor fiscal rules affect the fiscal stance in the absence of financial crises; and (ii) financial stress makes fiscal discipline a destabilising factor, while central bank actions almost dismiss it. Finally, market (fiscal) discipline effects are (not) persistent and stronger (more uncertain) for the EMU.

In this paper, we provide a forensic perspective of the determinants of banks' CDS spreads. Using data for 118 banks of 30 countries over the period 2004-2011, we find that banks' default risk typically reflects: (i) the quality of the banks’ balance sheet; (ii) liquidity of banks’ assets; (iii) how profitable banks’ operations are; (iv) the banks’ leverage ratios; and (v) how stringent/lenient regulatory capital ratios are. Considering a series of indicators of the financial structure of the banking system, our results reveal that: (i) higher concentration of the banking sector, stronger presence of foreign banks and a deterioration of the health of the banking sector lead to higher banks' CDS spreads; and (ii) the availability of alternative means of finance does not significantly influence banks' default risk. We also show that periods of high inflation, low GDP growth and stock market crashes are prone to an intensification of tensions in the banking system, but financial reforms (especially, in the field of banking supervision and privatizations) can mitigate them. Moreover, the timing, the duration and the composition of fiscal consolidation programs have a significant impact on banks' CDS spreads, and, in particular, expenditure-driven consolidation episodes are associated with a rise in banks' default risk. Finally, we highlight that although the financial crisis of 2008-2009 was a global event, higher quality of economic and legal institutions (and, therefore, in the regulatory framework) could have dampened the rise in bank' CDS spreads.

The goal of this paper is to assess time-variation in asset returns while considering the whole conditional distribution. We use a quantile regression framework and quarterly data for the U.S., and show that the probabilistic distribution of expectations about future stock returns changes in response to variation in commonly used explanatory variables. Moreover, our results support the idea that lower quantiles are less stable than upper quantiles, thus, suggesting that asset pricing models are particularly accurate in capturing the expectations that less risk-averse agents have about future returns.

The existing literature has typically focused on bank-level characteristics to uncover the main drivers of bank CDS spreads. In this paper, we use data for 58 banks from 15 countries over the period 2004–2011 to assess whether country-level factors also explain variations in bank CDS spreads. In particular, we focus on financial structure indicators (namely, financial stability, depth, access and efficiency) and country risks (i.e. economic, financial and political rating risks) to explain why some banks experience higher levels of credit risk relative to others across countries. We find that while country-level financial instability is associated with higher credit risk; bank-level profitability, liquidity and improved asset quality are linked with lower credit risk. In addition, although country-level financial depth (as an indicator of credit bubble) contributes to higher CDS spreads, house price appreciation tends to dampen credit risk.

We use a nonparametric causality-in-quantiles test to compare the predictive ability of the consumption-wealth ratio ( cay) and the Markov Switching version ( cay MS ) for excess and real stock and housing returns and their volatility. Our results reveal strong evidence of nonlinearity and regime changes in the relationship between asset returns and cay or cay MS , which corroborates the relevance of this econometric framework. Moreover, both cay or cay MS are found to predict only excess stock returns over its entire conditional distribution, with the latter being a strong predictor only at certain quantiles. As for the housing market, these two consumption-wealth ratios only predict the volatility of real housing returns, with cay MS outperforming cay over the majority of the conditional distribution.

We investigate the interconnectedness between CPI inflation in the G7 countries and China and oil price inflation over the period 1987M6-2020M6. To this end, we employ the multivariate DECO-GARCH model and both time-domain and frequency-domain spillover methods to achieve the objectives. We find that there is a reasonably high degree of integration between the CPI inflation rates and the oil price inflation. This relationship is not only time-varying, but also has been rising over time and, remarkably so, during the oil crises and financial stress episodes. We also show that the oil price inflation is a crucial transmitter of spillovers to CPI inflation. The largest gross directional spillovers to other CPI inflation rates accrue to the US, followed by France, while the lowest accrue to China. Additionally, the oil price inflation influences the CPI inflation over the short- and medium-terms and, to a lesser extent, in the long-term. Finally, different measures of the oil price inflation are net transmitters of inflation spillovers that are strongly interconnected among themselves. They transmit strong spillovers to the US inflation, which, in turn, has a mild influence on the path of inflation in several of the countries under consideration.

We investigate the interconnectedness and spillovers between oil price inflation and CPI inflation in the G7 countries and China over the available period 1987M6-2020M6. To this end, we employ the multivariate DECO-GARCH model and both time-domain and frequency-domain spillover methods to achieve the objectives. We find that there is a reasonably high degree of integration between the oil price inflation and the CPI inflation rates in those countries. This relationship is not only time-varying, but also has been rising over time and, remarkably so, during oil crises and financial stress episodes. We also show that the oil price inflation is a crucial transmitter of spillovers to the CPI inflation of the countries under consideration, particularly to the US inflation, which, in turn, has a weak to mild influence on the paths of inflation of other countries. Additionally, the largest gross directional spillovers to other CPI inflation rates accrue to the US, while the lowest accrue to China. Finally, the oil price inflation influences the CPI inflation over the short-end of the business cycle, but much less so over the medium- to long-ends.

We assess the spillovers from the oil sector to the housing market cycle using quarterly data for 20 net oil-exporting and -importing industrial countries, and employing continuous- and discrete-time duration models. We do not uncover a statistically significant difference in the average duration of booms and normal times in the housing markets of those net oil-importers and net oil-exporters. Similarly, the degree of exposure to commodity price fluctuations does not seem to significantly affect the housing market cycle. However, we find that housing booms are shorter when oil prices increase than housing busts when oil prices decrease. We also show that the net oil-importers are more vulnerable to protracted housing slump episodes than the net-oil exporters., Compete 2020, Portugal 2020, Feder, FCT

We investigate the role of global factors in explaining the length of commodity price cycle phases, using a continuous-time Weibull duration model and data for a panel of 33 countries over the period 1980Q1-2015Q4. We find evidence of increasing (constant) positive duration dependence for commodity price booms and busts (normal time spells). Global macroeconomic conditions - in particular, inflation, economic policy uncertainty and monetary policy actions - significantly affect the duration of all commodity price cycle phases. Global environmental conditions also impact the duration of commodity price booms, with a rise in average temperature (rainfall) increasing (reducing) their length. A rise in the number of military conflicts around the globe is associated with shorter booms and busts. Finally, we find that a rise in oil prices is linked with longer booms and shorter busts.

Using a Structural VAR (SVAR) model, we examine the effects of the monetary policy of the United States on sectoral commodity prices (including the non-fuel commodity prices, food prices, beverage prices, prices of agricultural raw materials, prices of metals and prices of fuel (energy) commodities) and macroeconomic activity. The empirical evidence suggests that a U.S. monetary contraction leads to an immediate rise in the broad commodity price index, which possibly reflects an aggregation bias, greater expected inflation and speculation, high production costs or some overshooting due to overreactions. Then, the response erodes after six quarters as the positive interest rate shock vanishes and higher interest rates and liquidity drainage take traction. Despite this, the aggregate price response masks the existence of significant heterogeneity in the price responses of the different types of commodity sectors. More specifically, a positive interest rate shock leads to: (i) an initial pop in the price returns of the non-fuel commodities, which later reverses path and becomes negative (as in the case of the prices of agricultural raw materials); (ii) a positive and persistent rise in the volatile food prices; (iii) a fall in the beverage prices; and (iv) a persistent reduction in the prices of metals and the prices of energy prices. Our results also remain globally intact with respect to alternative specifications and identification schemes as well as to unconventional monetary policy effects. Similar results are also found when commodity futures prices are used. We conclude that policymakers should recognize the source of sector inflation before embarking on contractionary monetary policy. The design of core inflation targeting is also preferable to headline inflation targeting.

We use the nonlinear autoregressive distributed lags (NARDL) model to analyse the asymmetric and nonlinear pass-through effects of changes in crude oil prices, natural gas prices, coal prices and electricity prices on the CO2 emission allowance prices. We find that: (i) the crude oil prices have a long-run negative and asymmetric effect on the CO2 allowance prices; (ii) the decreases in the coal prices have a stronger impact on the carbon prices in the short-run than the increases; (iii) the natural gas prices and electricity prices have a symmetric effect on the carbon prices, but this effect is negative for the former and positive for the latter. These findings are robust when using both monthly and daily data and when considering a bivariate and a multivariate models., COMPETE, QREN, FEDER, FCT

We assess the conditions under which exchange rate fluctuations are contractionary for firm-level investment. To address this question, we match firm-level balance sheet data with a large dataset of firm-level bonds for about 1,000 firms from 36 emerging market economies over the period 1998–2014. We augment a standard firm-level investment model to control for (country-specific) macroeconomic variables, and interact the effect of an exchange rate depreciation with several dimensions of bond composition, namely: 1) currency of issuance; 2) maturity structure of bonds; and 3) market of issuance. We find that, conditional on the amount of debt issued in foreign currency, an exchange rate depreciation can have a contractionary impact on a firm’s investment spending. We also find that the market of issuance and maturity structure, in particular, when coupled with foreign currency-denominated debt can influence this impact.

Endoscopy and small surgery can be performed with the support of small cameras. These cameras need to be minimal to reduce intrusion, require fast response and automatic illumination. The current work describes the world's smallest camera for endoscopy, NanEye, and the dynamic control algorithm for ROI developed for the illumination LED source coupled to the camera head that allows adjusting light, gain and exposure time. The obtained results show that it is capable of achieving correction speeds under 1 s while maintaining a static error below 3% relative to the total number of pixels of the image. The result of this work will allow the integration of high brightness LED sources of millimeter size on a very small camera enabling its use in endoscopic surgical robotic operations or minimal invasive surgery and NanEye is expected to be supplied at low prices for single time use.

We develop a novel empirical approach to assess the effect of discretionary fiscal policy on private spending consisting of three stages: 1) extract the discretionary component of fiscal policy by estimating a fiscal policy rule; 2) use the residuals of the first-stage regression to investigate the existence of crowding-in and/or crowding-out effects both in the short and the medium term; and 3) condition the response of private spending on a set of country characteristics. We find that an expansion in discretionary fiscal policy boosts growth in the short term, but is detrimental in the medium term. In addition, the empirical findings suggest that the effect of discretionary fiscal policy on private spending varies across regions and income groups, and depends on countries' economic characteristics such as the level of economic development, trade openness, government and country size.

This paper investigates empirically the relation between monetary policy and asset markets using quarterly data for the euro area. I find that a monetary policy contraction leads to a substantial fall in wealth. Nevertheless, while financial wealth effects are of short duration, housing wealth effects are very persistent. After a positive interest rate shock there is a flight towards assets that are less liquid and earn higher rates of return. Moreover, expected inflation seems to be the major source of fluctuations in nominal rates over long periods. Finally, the findings suggest that the money demand function is characterized by small output elasticity and large interest elasticity. By its turn, the estimated policy rule reveals that the monetary authority pays a special attention to developments in monetary aggregates and adopts a vigilant posture regarding financial markets.

Using a panel of annual data for 20 countries we show that synchronized fiscal consolidation (stimulus) programmes in different countries make their business cycles more closely linked, especially in the case of fiscal adjustments lasting 2 or 3 years. We also find: (i) little evidence of decoupling when an inflation targeting regime is unilaterally adopted; (ii) an increase in business cycle synchronization when countries fix their exchange rates and become members of a monetary union; (iii) a positive effect of bilateral trade on the synchronization of business cycles.

In this paper, we assess the impact of fiscal policy discretion on economic activity in the short and medium-term. Using a panel of 132 countries from 1960 to 2008, we find that fiscal policy discretion provides a net stimulus to the economy in the short-run and crowding-in effects are amplified once crisis episodes are controlled for– in particular, banking crises - giving a great scope for fiscal policy stimulus packages. However, crowding-out effects take over in the long-run – especially, in the case of debt crises -, in line with the concerns about long-term debt sustainability.

The aim of this paper is to analyze the impact of government spending on the private sector, assessing the existence of crowding-out versus crowding-in effects. Using a panel of 145 countries from 1960 to 2007, the results suggest that government spending produces important crowding-out effects, by negatively affecting both private consumption and investment. Moreover, while the effects do not seem to depend on the different phases of economic cycle, they vary considerably among regions. The results are economically and statistically significant, and robust to several econometric techniques.

In the last twenty years Portugal struggled to keep public finances under control, notably in containing primary spending. We use a new quarterly dataset covering 1979:1-2007:4, and estimate a Bayesian Structural Autoregression model to analyze the macroeconomic effects of fiscal policy. The results show that positive government spending shocks, in general, have a negative effect on real GDP; lead to important "crowding-out" effects, by impacting negatively on private consumption and investment; and have a persistent and positive effect on the price level and the average cost of financing government debt. Positive government revenue shocks tend to have a negative impact on GDP; and lead to a fall in the price level. The evidence also shows the importance of explicitly considering the government debt dynamics in the model. Finally, a VAR counter-factual exercise confirms that unexpected positive government spending shocks lead to important "crowding-out" effects.

We use a new approach to assess long-term fiscal developments. By analyzing the time-varying behaviour of the two components of government spending and revenue - responsiveness and persistence - we are able to infer about the sources of fiscal behaviour. Drawing on quarterly data we estimate recursively these components within a system of government revenue and spending equations using a Three-Stage Least Square method. In this way we track fiscal developments, i.e. possible fiscal deteriorations and/or improvements for eight European Union countries plus the US. Results suggest that positions have not significantly changed for Finland, France, Germany, Spain, the United Kingdom and the US, whilst they have improved for Belgium, Italy, and the Netherlands.

In this work, I show, from the consumer's budget constraint, that the residuals of the trend relationship among consumption, financial wealth, housing wealth and labor income (summarized by the variable cday) should predict better U.K. quarterly stock market returns than a variable like cay from Lettau and Ludvigson (2001), which considers aggregate wealth instead.I show that the superior forecasting power of cday is due to: (i) its ability to track the changes in the composition of asset wealth; and (ii) the faster rate of convergence of the coefficients to the long-run equilibrium parameters.Unlike Lettau and Ludvigson (2001, 2004), the results suggest that, while financial wealth shocks are mainly transitory, fluctuations in housing wealth are very persistent. Governments and central banks should, therefore, pay special attention to the behavior of housing markets when defining macroeconomic policies.

Recent fluctuations of financial markets, especially, stock markets fluctuations, have revived the interest concerning the dynamics of real economic activity, namely, of private consumption. In this work, the role of stock market as a determinant of private consumption is analyzed, namely, by the consideration of wealth effects. It is also analyzed the potential differences of these effects originated by different categories of property of stocks (direct versus indirect property). Using a sample for the U. S. economy, in the period 1952:Q1 - 2001:Q4, several long-run relationships were estimated, suggesting that wealth effects associated to direct property are about 3.5 times superior to those associated to indirect property. Short-run dynamics is analyzed with the estimation of a single equation, suggesting that consumption contemporaneously answers to changes in income and in wealth and that the adjustment to long-run component is very slow, which constitutes an indicator that consumers gradually change their behaviors, possibly, due to habit formation. There is also evidence supporting the presence of the indirect channel of wealth effect.

In this paper, we apply some of the instruments of the regional economic analysis to the NUT III of the North Region in order to make a reflection about the dynamics of the productive structure of those territories in the period 1986-1998, using, fundamentally, the analysis of localization, specialization and diversification indicators, as well as the shift-share analysis. The analysis of the indicators shows a relative stability of the productive structure of those territories in that period. Using employment to analyze the dynamics of regional growth in a comparative perspective and taking the Continent as reference, the application of the shift-share model lead us to conclude that only the NUT of Grande Porto has negative values for the structural and regional effects, while the NUT of Douro, Alto Trais-os-Montes and Minho-Lima reveal positive values for those two components. The others NUT of the North Region have positive regional effects and negative structural effects.