اصول سیاست پولی واحد و داخلی کلان : شواهدی از اسپانیا
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|27467||2012||19 صفحه PDF||سفارش دهید||محاسبه نشده|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Policy Modeling, Volume 34, Issue 1, January–February 2012, Pages 16–34
We model pre-euro Spanish monetary policy and use our findings to assess the compatibility of the interest rates set by the ECB since 1999 with Spanish macro-fundamentals. We find that in the 1990s Spain implemented successfully a monetary strategy tailored to its own domestic fundamentals; and by abolishing it to join the euro she has paid a cost in the form of a sub-optimal monetary policy. Our findings suggest that the present turmoil in the market for Spanish government bonds is symptomatic of the risks involved in participating in a monetary union highlighted by the theory of optimum currency areas. We argue in favour of structural reforms increasing Spanish competitiveness, and a cautious approach with respect to the timing of further EMU enlargement.
In recent months the eurozone has been experiencing a major sovereign debt crisis. Starting from Greece in late 2009 this has since spread to other periphery EMU countries raising doubts about EMU's sustainability and prompting calls for a major overhaul of its institutional framework. Arghyrou and Tsoukalas (2011) offer a first theoretical treatment of the crisis attributing it to a background of deteriorating macro-fundamentals and shifting market expectations. Arghyrou and Kontonikas (2011) tested that model's empirical validity finding strong supporting evidence. Their findings are consistent with those of other recent studies showing that since 2007 markets have been imposing significantly heavier penalties on macro and fiscal imbalances (see e.g., Attinasi et al., 2009 and Barrios et al., 2009). These studies focus on the second aspect of the EMU crisis, i.e., changes in markets’ pricing behaviour. By contrast, the crisis’ original underlying factor, i.e., accumulated macro-imbalances, has received much less attention. This is rather surprising for two reasons: first, because it is precisely such macro-imbalances that were highlighted by the Theory of Optimum Currency Areas (TOCA) as the primary threat to the sustainability of a monetary union. Second, because well before the onset of the EMU crisis economic research had highlighted growing intra-EMU imbalances (Arghyrou and Chortareas, 2008, Campa and Mínguez, 2006 and European Central Bank, 2003) and divergence between the single monetary policy (SMP) and national fiscal policies (Hugh Hallett & Lewis, 2008). Therefore, it was possible to infer that the risks highlighted by the TOCA were in place. Without estimates of monetary-policy incompatibility the theoretical debate on the optimal SMP was largely taking place within an empirical vacuum and systemic EMU-specific risks were underestimated. Two studies testing the compatibility of the SMP with national macro-fundamental are those by Hayo and Hofmann (2006) on Germany and Arghyrou (2009) on Greece. The latter finds that the interest rates set by the ECB were lower than those compatible with Greek fundamentals by a factor ranging between 2 and 3. In light of subsequent events, it can now be plausibly argued that the estimated size of monetary policy incompatibility was a valid proxy for accumulated macro-imbalances and a valid lead indicator for the crisis subsequently hitting the market for Greek government bonds. In this paper we address the question of monetary-policy incompatibility for the largest of the EMU-periphery economies, Spain. Being the EMU's fourth largest economy producing 12% of the EMU's total output, Spain was always regarded to have enough bargaining power to exercise potentially significant leverage on the ECB on her own and by leading coalitions of countries sharing its asymmetries against the EMU average (see e.g., Di Bartolomeo, Engwerda, Plasmans, & van Aarle, 2006). Following the Greek crisis, the significance of Spain has increased further. According to ECB data, Spain's share in total outstanding long-term EMU sovereign debt is 9%, as opposed to Greece's 5% and Portugal's 2%. Furthermore, the total foreign-bank exposure to Spanish investments was estimated by the Bank of International Settlements in September 2009 at 781 billion US Dollars, as opposed to 167 billion in Greece and 134 billion in Portugal (see also Darvas, Pisani-Ferry, & Sapir, 2011). These have prompted observers to comment that the comparison between a Greek and Spanish debt crisis is analogous to the one between the collapses of Bear Stearns and Lehman Brothers. Therefore, research on risks idiosyncratic to Spain is both timely and of general interest. The question of monetary-policy compatibility had been raised for Spain before her accession to the EMU in 1999 (see Gali, 1998). At the time there was plenty of room for optimism as the 1990s had seen a significant improvement in Spanish macroeconomic performance reflected in all leading macro-indicators (see Fig. 1). During 2009–2007 Spain continued outgrowing the EMU's average, however, its overall macroeconomic outlook deteriorated. Most notably, Spanish inflation relative to the EMU increased causing real effective exchange appreciation and negative real interest rates. These were followed by a record current account deficit and very significant price increases in the Spanish real estate market. The source of these adverse developments is debatable. One possibility is Balassa (1964)–Samuelson (1964) effects caused by high Spanish growth rates. This argument, however, is rather unconvincing given the post-1999 low growth of Spanish productivity and record current account deficits which cannot be explained only by the income catch-up process (see Arghyrou and Chortareas, 2008 and Rogers, 2007). A second possibility is credibility gains caused by Spain's accession to the EMU (see Giavazzi & Spaventa, 1990). This effect may have been in operation over the past decade. However, if it were the main force driving developments since 1999 the predicted medium-term reversion to a more sustainable equilibrium should have now been observed. Instead, Spain's current account continued to deteriorate and Spanish real interest rates did not convergence to the EMU average (see Arghyrou, Gregoriou, & Kontonikas, 2009). Finally, a third explanation, based on studies such as Campa and Mínguez (2006) and Honohan and Lane (2003), is that Spain's post-1999 macro-performance reflects asymmetries in external trade links, financial structures and real rigidities causing heterogeneous transmission of the SMP to the Spanish economy relative to the EMU average. In other words, Spain's post-1999 macro-imbalances may be due to incompatibility between the SMP and Spain's macro-fundamentals.This hypothesis has been adopted by numerous observers (e.g., Malo de Molina, 2006) yet it has not been put to the test. It is precisely this hypothesis we aim to test in this paper. We do so following a three-stage approach. First, we model Spanish monetary policy prior to euro-accession accounting, for the first time to the best of our knowledge, for endogenous structural breaks. Second, we forecast the interest rates the Bank of Spain (BOS) would have set after 1999 under a hypothetical regime of monetary independence. Finally, we use the difference between our forecasts and the actual ECB rates as a measure of compatibility between the SMP and Spanish fundamentals. Our main findings can be summarised as follows. First, during 1980–1998 Spanish monetary policy experienced three regime changes increasing the weight of inflation in the BOS's operating policy rules. Second, during the last regime of Spanish monetary independence (1991–1998), the policy of the BOS was inflation-averse and, despite its strong link to the German Mark, still influenced by domestic fundamentals. This flexible monetary policy regime was overall successful as it contributed towards lower inflation and high growth rates for the Spanish economy. Third, assuming a hypothetical monetary regime characterized by the policy preferences of the 1990s and given the values of Spanish macro-fundamentals recorded during 1999–2007, the BOS would have set interest rates twice as high as those set by the ECB. We conclude that Spain's accession to the EMU has come at the cost of a too relaxed for Spain's economic requirements SMP. Combined with Spain's limited progress in promoting structural reforms, this contributed to the creation of unsustainable macro-imbalances, rendering the Spanish economy vulnerable to the adverse changes in international economic conditions of the past three years and putting in place the necessary background for the pressure markets currently apply on Spanish sovereign bonds. To reduce the incompatibility problem and its associated risks, we argue in favour of structural reforms bringing the Spanish business cycle more in sync with those of core EMU countries.
نتیجه گیری انگلیسی
In this paper we provided a detailed econometric description of Spanish monetary policy during the pre-euro period; and estimated the extent of post-euro incompatibility between the single monetary policy (SMP) and post-euro Spanish macro-fundamentals. We find that over the period 1980–1990 Spanish monetary policy experienced three structural breaks pushing the Bank of Spain (BOS) towards a higher degree of inflation-aversion. In the 1990s the BOS followed an inflation-averse monetary policy tailored to Spain's requirements and delivering successful monetary management. Finally, we find that the interest rates set by the ECB over the period 1999–2007 were exceedingly low compared to the Spanish target interest rates. This implies that Spain's accession to the euro may have come at the cost of a SMP incompatible with Spanish fundamentals. With regards to the causes of incompatibility there are three potential sources: ECB policy, Spanish internal policy and the eurozone's institutional set-up. As far as the former is concerned, given its institutional mandate to pursue price stability for the EMU as a whole, there is little the ECB could have done to specifically target Spanish-specific, or indeed any other periphery-country, macro-fundamentals (see Stark, 2011). There is also no evidence suggesting that the ECB has followed an over-expansionary monetary policy for the EMU as a whole. If anything, existing studies (e.g., Heinemann & Huefner, 2004) suggest that during the early EMU years the ECB, in an effort to establish its inflation-aversion credentials, may have followed a monetary policy more tilted towards the needs of countries with higher inflation rates such as Spain rather than countries with negative output gap values such as Germany. Finally, as in the context of the EMU responsibility for banking supervision rests with national authorities, the ECB could have done little to prevent the growing exposure of Spanish banks to the booming real estate sector. Overall, there is no convincing argument that the primary source of Spain's incompatibility problem lies with the ECB policy. Moving on to the role of Spanish authorities, during the first eight “euro-happy” years 1999–2007 the latter, largely assisted by tax proceeds from the booming real estate sector and low international interest rates, achieved a remarkable fiscal improvement. This, however, was not complemented by efficiency-enhancing microeconomic and labour market reforms to address long-standing distortions, a point made for all periphery EMU countries before the onset of the global financial crisis (see e.g., Nickel, 2006). As a result, the demand boom experienced by Spain, to which monetary policy incompatibility contributed significantly, was largely diverted to imports, excessive real estate investment and increased private indebtedness. These created conditions for a long and painful disinflation adjustment in the event of an adverse economic shock, as predicted before the global financial crisis (see e.g., Wolf, 2006). Overall, by not promoting microeconomic reforms improving falling competitiveness, Spanish authorities are partly responsible for the incompatibility problem identified and, by extension, the pressure markets currently apply on Spanish sovereign bonds. Finally, a major source of the current turmoil in Spain and other periphery EMU countries is a fundamental flaw in the Eurozone's institutional setup. For a monetary union with independent national fiscal policies to be internally stable two prerequisites must be in place: First, as the theory of optimum currency areas suggests, the union's members should not experience asymmetric shocks. Second, the union's institutional setup must be effective in terms of preventing moral hazard in fiscal policy. This can be achieved in two ways discussed by Beetsma and Giuliodori (2010). First, the SMP should be able to commit credibly to price stability, prompting national fiscal authorities to treat it as exogenous. Second, if the monetary authority cannot commit credibly, the union must possess credible fiscal rules preventing unsustainable debt dynamics causing debt monetization and fiscal bailouts undermining the union politically. It now becomes increasingly clear that the present EMU setup cannot guarantee these prerequisites. The original fault goes back to the Maastricht Treaty. This is widely believed not to have incorporated the basic insights of the theory of optimum currency areas (see Fourcans and Vranceanu, 2007 and Wyplosz, 2006), giving credence to the view that the euro is a mainly political project binding countries together with important economic and institutional asymmetries (see Rogoff, 2005). This fundamental weakness was not corrected by creating mechanisms ensuring effective pre-emptive fiscal monitoring and promoting convergence through structural reforms. By contrast, the violation of the provisions of the Stability and Growth Pact during the early EMU years by Germany and France fatally undermined its credibility as a guarantor of intra-EMU fiscal stability (Eichengreen, 2005). This, combined with access to a large pool of international savings at very low interest rates gave periphery EMU countries all the wrong incentives to avoid necessary structural and fiscal reform. The result was an increased real intra-EMU divergence, which was bound to be noticed and priced by markets as soon as the global economic outlook took a turn for the worse (see Arghyrou & Kontonikas, 2011). To avoid financial and fiscal meltdown the ECB and EMU countries were then respectively compelled to make interventions in the secondary market for periphery EMU bonds; and agree to fiscal bailout that were not envisaged by the initial EMU set-up. As a result the SMP was shown in practice not to be exogenous to national fiscal policies but vice versa; and the moral hazard problem to have been validated. In light of these developments, there is little doubt that the long-term credibility of the euro-project has been put at risk. To address this risk, and ensure the future stability of the EMU, steps towards two directions seem necessary: First, periphery EMU countries, including Spain, should pursue efficiency-enhancing reforms promoting flexibility and competition in the markets for goods, services and labour. Second, at the union level, the EMU must develop effective mechanisms of fiscal and general economic supervision. Recent proposals for a competitiveness pact move in the right direction, although the question of enforcing its provisions remains open. Second, the EMU must create a permanent mechanism of emergency financing able to deal effectively with crises similar to the present one. For this to be successful in stabilising expectations its rules and terms must be transparent and known ex-ante. Recent proposals for a European Stabilisation Mechanism allowing for an orderly default of EMU members, with the participation of the private sector, move towards providing governments and private investors the right incentives, helping to establish an institutional crisis-management framework leading to credible deterministic endgames. Finally, a note is due on the future enlargement of the EMU. The post-1999 experience of periphery EMU countries suggests that it might be preferable for the new EU countries to join the euro after having achieved a higher degree of real convergence than countries such as Greece, Portugal and Spain did before their own accession. Recent research suggests that such convergence is taking place (Boeri and Garibaldi, 2006 and Eickmeier and Breitung, 2006). Nevertheless, until it is consolidated, it might be optimal for all parties to adopt a cautious approach with respect to expanding the eurozone.