In an increasingly data-rich environment, the use of factor models for forecasting purposes has gained prominence in the literature and among practitioners. Herein, we assess the forecasting behaviour of factor models to predict several GDP components and investigate the performance of a bottom-up approach to forecast GDP growth in Portugal, which was one of the hardest hit economies during the latest economic and financial crisis. We find supporting evidence of the usefulness of factor models and noteworthy forecasting gains when conducting a bottom-approach drawing on the main aggregates of GDP.
This article reports the findings of a survey conducted in 2014/2015 on a sample of Portuguese firms with the main purpose of identifying the major shocks faced by firms during the recent crisis and detecting their response in terms of wage-setting, price setting and labour force composition. Firms’ difficulties in being repaid by their customers and the decline of demand were reported as the two most important factors affecting firms negatively during the crisis. The impact of these two shocks was particularly felt in very small firms, in sectors such as construction, energy or trade and in firms that sell mostly to domestic markets. Reducing employment was the main instrument to accommodate negative shocks, in particular through the freeze or reduction of new hires, non-renewal of temporary contracts at expiration or individual dismissals. An increasing number of firms also froze the base wages of their workers and reduce their prices. (JEL: J23, J30, J50)
This article presents a trend-cycle decomposition of Portuguese Gross Domestic Product and unemployment over 2008–2012. Results show that product and labour markets were primarily marked by low frequency movements in the trend component, and less so by cyclical factors. Economic policy should therefore not neglect the structural properties of these markets, resting solely centered around standard business cycle objectives. Okun’s law—the negative correlation between the output and unemployment gaps—remained empirically relevant, but not without noteworthy trend instability. All results are based on a semi-structural model with rational expectations, tailored for a small economy integrated in a credible monetary union. (JEL: C51, E32, F45)
This article describes a tool to assess the creditworthiness of the Portuguese non-financial firms. In its design, the main goal is to find factors explaining the probability that any given firm will have a significant default episode vis-à-vis the banking system during the following year. Using information from the central credit register for period 2002–2015 and a comprehensive balance sheet data set for period 2005–2014, we develop a method to select explanatory variables and then estimate binary response models for ten strata of firms, defined in terms of size and sector of activity. We use this methodology for the classification of firms in terms of one-year probability of default consistent with typical values of existing credit rating systems, in particular the one used within the Eurosystem. We provide a brief characterisation of the Portuguese non-financial sector in terms of probabilities of default and transition between credit rating classes. (JEL: C25, G24, G32)
In Portugal, over the last two decades, the proportion of women among employed workers increased from 35 to 45 percent. This evolution was accompanied by a sharp fall in the gender wage gap from 32 to 20 percent. The improvement in the wage outcome of the women, however, is fully accounted by the catching up of their skills in comparison to males, after two decades of human capital investments. By 2013 women already possess observable characteristics that enhance productivity identical to their male counterparts. This means that gender discrimination remained roughly constant over the 1991-2013 period. In this study, we investigate the sources of the wage gender gap and conclude that sorting among firms and job-titles can explain about two fifths of the wage gender gap. (JEL: J16, J24, J31, J71) “Um dos aspectos da desigualdade é a singularidade isto é, não o ser este homem mais, neste ou naquele característico, que outros homens, mas o ser tão-somente diferente dele.” “Os espíritos altamente analíticos vêem quase só defeitos: quanto mais forte a lente mais imperfeita se mostra a cousa observada.”
Recent empirical studies documented that the level of resource misallocation in the service sector is significantly higher than in the manufacturing sector. In this article, we try to understand to what extent the documented differences are due to methodological reasons or reflect structural differences between the two sectors. Our results suggest that about 50 percent of the original estimated differences can be attributed to methodological choices, while the other 50 percent can be attributed to differences in the characteristics of the two sectors. We also conclude that higher output-price rigidity and labour adjustment costs, together with higher informality in the service sector, account for the remaining differences of allocative efficiency between the two sectors. (JEL: D24, O11, O41, O47)
After a decade releasing the monthly coincident indicators of Banco de Portugal, this article revisits the main features of these indicators which play an important role in the conjunctural assessment of the Portuguese economy. In particular, it is analyzed its behavior as underlying measures of the evolution of the corresponding macroeconomic aggregates as well as their real-time behavior in monitoring economic developments. (JEL: C10, E32)
This article studies the co-movement between large daily revisions of shortand longterm inflation expectations using copulas. The main findings are: first, the co-movement between unusually large changes in shortand long-term inflation expectations increased markedly since mid-2012, which implies that long-term inflation expectations might not be, in a precise sense, well-anchored. Second, this co-movement measure is quite noisy. Finally, the result is shown not to be an artifact of the methodology or of the specific data used in the analysis. (JEL: C14, C46, G12)
Legislation is in favor of the worker or employee, against the merchant and the industrial, and against the consumer, and it is assumed that this employee or worker never will bear the effects of that legislation. Production is limited with restrictions on restrictions on hours and working conditions... Laws of this kind are responsible for much of the industrial and trade crises which the whole world is grappling today
Despite recent reforms, labour market segmentation is still a marked feature of several European countries. This work empirically analyses transitions out of temporary contracts, by means of a discrete duration model, with a particular focus on human capital features, labour market protection and their interaction. Transitions to open-ended contracts with the same or with a new employer are considered separately, as well as transitions to joblessness, based on data for ten European countries taken from the European Community Household Panel. Firm-training significantly increases the likelihood of transitioning to an open-ended contract with the same employer, but not in countries with more segmented labor markets. In these countries, instead, educational attainment and labour market flexibility are more important determinants of transitions to open-ended contracts. Interestingly, in these countries, firm training actually mitigates the positive (and significant) impact of labor market flexibility on the likelihood of transitioning to an openended contract with the same employer. (JEL: E24, J24, J41)
Money markets were severely impaired by the financial and sovereign debt crises. We investigate how the Portuguese part of the euro unsecured interbank money market was affected by the crises and how the ECB’s unconventional policy measures, in particular the fixed rate full allotment procedure, impacted the market. We adapt a widely used method in the economic literature to identify unsecured interbank loans – with maturities ranging from overnight to one-month – settled in TARGET payment system, in which at least one of the counterparties is a Portuguese bank. We find that the Portuguese unsecured money market was hit especially by the sovereign debt crisis. There was a significant reduction in market activity, both in the number of operations and in market turnover. Alongside, price dispersion increased and rates agreed upon loans became on average more expensive than the reference rate for the respective maturity. We also find that domestic loans were more expensive than loans traded with a foreign bank. Finally, by analyzing the impact of monetary policy measures taken during the crises’ periods, we find that the increased intermediation by the central bank contributed to a compression of spreads and a reduction in loan amounts. We observe that banks perceived as riskier began being penalized during the crisis. (JEL: E58, G21)
We describe the evolution of balance sheets of monetary financial institutions (MFI) in Portugal before, during, and after the sovereign debt crisis of the late 2000’s. We account for several dimensions of heterogeneity including size, type, and nationality. We find that the Portuguese MFI sector rapidly expanded and increased its leverage before and during the crisis until 2012, after which it started a long deleveraging process. Many of the major aggregates, such as lending and deposits, follow this pattern. We observe a steady rise of non-traditional banking activities on both sides of the balance sheet of domestic institutions. The crisis weakened the international integration of the Portuguese financial sector, as domestic banks became less exposed to international counterparties. Finally, the Eurosystem and the Portuguese government have become relevant sources of funding as a result of the recent unprecedented monetary and fiscal interventions in the domestic financial system.
Firms cash holdings distribution changed substantially from 1980 to 2013. We study the effects of this change in the formulation of monetary policy using a model with financial segmentation. We find that the interest rate channel of the transmission mechanism of monetary policy has become more powerful, as the impact of monetary policy over the real interest rate increased. Now, with the increase in firm cash holdings, the real interest rate takes 3.4 months more to return to its initial value after a shock to the nominal interest rate. (JEL: E40, E50, G12, G31)
Like in many other countries of continental Europe, in Portugal the instruments of collective regulation (IRC) constitute the main structural element of labour relations. Given that the Portuguese Constitution guarantees unions the monopoly of collective representation of workers in the bargaining process (Article 56), the various existing IRC are distinguished above all by how employers are represented in the negotiations. In Sector-level Collective Agreements (Contratos Coletivos de Trabalho, CCT), which up to 2011 were clearly dominant (about 60 per cent of agreements and 90 per cent of all covered workers), firms are represented through employers associations; in Multi-firm Collective Agreements (Acordos Coletivos de Trabalho, ACT), negotiations take place with a group of non-associated firms; finally in Firm-level Collective Agreements (Acordos de Empresa, AE) bargaining involves only a single employer.1 Except for the firm-level agreements, the remaining IRC are only binding for workers complying with the so-called double affiliation principle, i.e., workers that are simultaneously members of the subscribing union(s) and that are employed by firms that are members of one of the subscribing employer associations. In the Portuguese case, the combination of these two dimensions would determine a very small coverage of collective agreements due to low union and employer associations’ density rates. For instance, Portugal and Vilares (2013) report that only 11 per cent of private sector workers are unionized. In such a scenario, most workers would have their employment relationships determined by individual agreements negotiated directly with their respective employers. In this regard it is interesting to note that even
This article studies the evolution of the resort to civil justice in Portugal in the last two decades, particularly seeking to identify the main determinants of the litigation rate observed in the different regions, benefiting from a dataset with information by comarca. We conclude that the length of proceedings tends to reduce litigation and, therefore, there is evidence of rationing by waiting list in the access to justice. At the same time there is some evidence of demand inducement by lawyers. Socioeconomic characteristics as the illiteracy rate, purchasing power and the location of enterprises influence the level of litigation in the different regions of the country. Moreover there are significant spatial spillovers in the generation of litigation not only the characteristics of the comarca itself, but also those of the neighbouring ones, play a relevant role. (JEL: K41, R10)
In this paper, we use the concept of real convergence (considering the stationarity of per capita cross-country output differences) and present updated evidence on the persistence properties of output differential data, accounting for the potential occurrence of persistence changes. We focus on per capita output differences for 14 Eurozone countries over the period 1950-2015. Results suggest that the gap between the central and northwestern countries has been reduced through persistent convergence paths. However, the convergence path of the southern countries to the central and northern countries seems to have been interrupted. (JEL: C12, C22, O4)
The recovery of the Portuguese labor market is tenuous. Employment is 5.2 percent below the pre-crisis level; in Spain, it is only 1.3 percent below and, in Ireland, it already exceeds pre-crisis by 3.6 percent. The population loss, at levels similar to the 1960s, reduced the productive potential of the Portuguese economy. The lower oil prices and the devaluation of the euro alleviated the problem, but they are not structural growth factors. In this context, it is necessary to design a labor market regulation closer to the technological frontier. Standardize employment contracts and proper incentives in the unemployment insurance are two steps needed to promote steady growth. Growth based on the investment in the quality of labor matches. (JEL: J08, J41, J65)
