Open Access
The timing and intensity of social distancing to flatten the COVID-19 curve: the case of Spain
(MDPI, 2020) Casares Polo, Miguel; Khan, Hashmat; Ekonomia; Institute for Advanced Research in Business and Economics - INARBE; Economía
The continued spread of COVID-19 suggests a significant possibility of reimposing the lockdowns and stricter social distancing similar to the early phase of pandemic control. We present a dynamic model to quantify the impact of isolation for the contagion curves. The model is calibrated to the COVID-19 outbreak in Spain to study the effects of the isolation enforcement following the declaration of the state of alarm (14 March 2020). The simulations indicate that both the timing and the intensity of the isolation enforcement are crucial for the COVID-19 spread. For example, a 4-day earlier intervention for social distancing would have reduced the number of COVID-19 infected people by 67%. The model also informs us that the isolation enforcement does not delay the peak day of the epidemic but slows down its end. When relaxing social distancing, a reduction of the contagion probability (with the generalization of preventive actions, such as face mask wearing and hands sanitizing) is needed to overcome the effect of a rise in the number of interpersonal encounters. We report a threshold level for the contagion pace to avoid a second COVID-19 outbreak in Spain.
Open Access
Wage setting actors, sticky wages, and optimal monetary policy
(2007) Casares Polo, Miguel; Economía; Ekonomia
Following Erceg et al. (2000), sticky wages are generally modelled assuming that households set wage contracts à la Calvo (1983). This paper compares that sticky-wage model with one where wage contracts are set by firms, assuming flexible prices in any case. The key variable for wage dynamics moves from the marginal rate of substitution (households set wages) to the marginal product of labor (firms set wages). Optimal monetary policy in both cases fully stabilizes wage inflation and the output gap after technology or preference innovations. However, nominal shocks make the assumption on who set wages relevant for optimal monetary policy.
Open Access
Did US business dynamism recover in the 2010s?
(2021) Aguilera Bravo, Asier; Casares Polo, Miguel; Khan, Hashmat; Ekonomia; Institute for Advanced Research in Business and Economics - INARBE; Economía
We provide evidence that both firm and establishment entry rates in the US have been increasing over the past decade, seemingly ending the secular decline observed over previous decades. However, the job-size of new businesses relative to incumbents has decreased substantially. Controlling for these opposite trends reveals that the size-adjusted entry rate continues to decline.
Open Access
Long run analysis in alternative optimizing monetary models
(2001) Casares Polo, Miguel; Economía; Ekonomia
This paper explores the transmission channel from monetary variables to real variables in the steady-rate equilibria of various neoclassical optimizing models with money. The existence of superneutrality is rejected for the four models at hand: time-cost transactions approach, output-cost transactions approach, money in the utility function model, and cash-in-advance model. However, the real effects of high rates of inflation are not large: output, consumption, and investment slightly fall with higher inflation rates. In addition, the welfare cost of inflation is calculated for annual rates of inflation ranging from 0% to 50%. Three of the models (all but the cash-in-advance model) agree on the following result: a 10% rate of inflation creates a permanent welfare cost equal to 0.3% of GPD per year.
Open Access
Sticky prices, sticky wages, and also unemployment
(2008) Casares Polo, Miguel; Economía; Ekonomia
This paper shows a New Keynesian model where wages are set at the value that matches household's labor supply with firm's labor demand. Subsequently, wage stickiness brings industry-level unemployment fluctuations. After aggregation, the rate of wage inflation is negatively related to unemployment, as in the original Phillips (1958) curve, with an additional term that provides forward-looking dynamics. The supply-side of the model can be captured with dynamic expressions equivalent to those obtained in Erceg, Henderson, and Levin (2000), though with different slope coefficients. Impulse-response functions from a technology shock illustrate the interactions between sticky prices, sticky wages and unemployment.
Open Access
A structural analysis of US entry and exit dynamics. Technical appendix
(2018) Casares Polo, Miguel; Khan, Hashmat; Poutineau, Jean-Christophe; Economía; Ekonomia
A. The optimizing programs of the model and other technical details (pages 1-7) B. Short-run and long-run equilibria in the DSGE model with endogenous entry and exit (pages 8-12) C. Average productivity (pages 13-15) D. Data and measurement equations (pages 16 and 17) E. The loglinearized equation for short-run fluctuations of critical productivity, zcr (pages 18 and 19) F. Aggregation (pages 20-24) G. The overall resources constraint (pages 25 and 26) H. Estimated shock decomposition for US data (pages 27-31) I. The sources of fluctuations in the Great Recession (pages 32-37)
Open Access
On financial frictions and firm market power
(Banco de España, 2019) Casares Polo, Miguel; Deidda, Luca; Galdón Sánchez, José Enrique; Economía; Ekonomia
Construimos un modelo de equilibrio general estático con empresas monopolísticamente competitivas que toman prestados fondos de bancos competitivos en una economía sujeta a restricciones financieras. Estas fricciones son debidas a la imposibilidad de verificar tanto los beneficios de las empresas como el esfuerzo de sus gestores. El poder de mercado tiene dos efectos contrapuestos. Por un lado, las empresas marcan sus precios por encima del coste marginal y la producción resultante es inferior a la que se obtendría en competencia perfecta. Por otro, debido al incremento en la rentabilidad de las empresas, el poder de mercado reduce el impacto de las fricciones financieras. El resultado de la interacción de estos dos efectos es ambiguo. Este trabajo muestra que, ceteris paribus, existe un nivel óptimo positivo de poder de mercado que maximiza el bienestar. Este nivel aumenta con el riesgo moral y disminuye con la eficiencia del proceso de liquidación de las empresas en caso de quiebra.
Open Access
Monopolistic competition, sticky prices, and the minimal mark-up in steady state
(2007) Casares Polo, Miguel; Economía; Ekonomia
This note reports the rate of inflation that minimizes the mark-up of prices over marginal costs in the steady-state solution of a monopolistic competition model with either Taylor (1980) or Calvo (1983) pricing. The minimal mark-up is always found at a positive and low rate of inflation for any sensible parameter calibration. Actually, the rate of inflation that minimizes the mark-up is very close to ratio between the real rate of discount and the Dixit-Stiglitz elasticity. This result is robust to altenative sticky-price specifications.
Open Access
On firm-level, industry-level, and aggregate employment fluctuations
(2013) Casares Polo, Miguel; Economía; Ekonomia
Employment fluctuations are examined, at different levels of aggregation, in a dynamic model that provides firm-specific hiring decisions due to search frictions and sticky pricing. The results indicate that firm-level employment dispersion rises with higher price stickiness and higher demand elasticity, whereas it falls with more convexity of search costs and with a higher labor supply elasticity. Industry-level employment is more volatile and less procyclical than aggregate employment, and a larger industry size reduces volatility and raises co-movement with output. The calibrated model is able to match the volatility, autocorrelation and cyclical correlation of US industry-level employment when incorporating firm-specific technology shocks.
Open Access
Why are labor markets in Spain and Germany so different?
(2016) Casares Polo, Miguel; Vázquez, Jesús; Economía; Ekonomia
The volatility of unemployment fluctuations has been about 3 times higher in Spain than in Germany over the recent business cycles (1996-2013). In contrast, fluctuations of the rate of wage inflation were significantly more volatile in Germany than in Spain. We estimate a New-Keynesian model and find several explanatory factors: wage rigidity has been higher in Spain, the labor force has been more elastic in Germany than in Spain, large and persistent shocks augmenting the labor force have been estimated for Spain whereas in Germany there have been substantial shocks reducing the intensity of hours per worker, and the ECB’s policy design brought monetary shocks with much greater influence to the Spanish unemployment.