A model of a small open economy integrated in a monetary union

This paper develops a model of a small open economy integrated in a monetary union, which is a nontrivial technical extension of the existing small open economy model. The model is used to study the monetary transmission mechanism in Portugal.     

Wage and Price Rigidity in a Monetary Union

We extend irrelevance results of sticky prices and fixed exchange rates to environments with sticky wages. Provided payroll taxes can be used with the same flexibility as monetary policy, then sticky wages are irrelevant for both optimal allocations and policies in response to shocks. This is the case also under fixed exchange rates or in a monetary union.     

Budget Forecast Deviations in Municipal Governments: Determinants and Implications

This paper analyses the determinants of municipalities’ budget forecast quality, showing opportunistic behaviour influenced by the electoral cycle. Incumbents overestimate revenue to spend more and underestimate expenditure in the quest for popularity and electoral support. Our results suggest that the budget forecast procedure should be made transparent and externally audited or monitored.     

On positional consumption and technological innovation: an agent-based model

Positional behaviour is arguably a source of social externalities. Remedies for this market failure are defended by some authors and rejected by others. One of the issues discussed is the role that the competition for positional goods may have in generating technological innovation. This article aims to contribute to the understanding of the dynamics of this process through the use of an agent-based model. Simulations show a plausible dynamics of the process of technological innovation as generated by consumption of positional nature. An interpretation of the results in the scope of the policy discussion in question is provided. The influence of key factors such as income inequality, the materialization of the Hirsch conjecture, and characteristics of the network of relative preferences, is analised. We also frame the potential interest of positional consumption and this model in particular in the context of the ongoing discussion among evolutionary economists on the behaviour of demand.     

The legacy of European Capitals of Culture to the “smartness” of cities: The case of Guimarães 2012

The objective of the paper is to examine the extent to which the legacy of European Capitals of Culture (ECOC) increases the “smartness” of cities. A qualitative approach based on semi-structured interviews and desk research was used to assess the impact on the smart city's dimensions hypothesized by Giffinger et al. (2007 Giffinger, R., Fertner, C., Kramar, H., Kalasek, R., Pichler-Milanovic, N., &; Meijers, E. (2007). Smart cities—Ranking of European medium-sized cities (Report). Vienna University of Technology Retrieved November 25, 2015, from http://www.smart-cities.eu/download/smart_cities_final_report.pdf [Google Scholar]). The research revealed that this kind of mega-event reinforces the smartness of the city in which it is hosted in terms of attributes such as living, economy, people and environment. No significant legacy is observed with respect to the mobility dimension.     

The electoral budget cycle on municipal waste collection expenditure

This article analyses the determinants of municipal waste collection expenditure, specifically the effects of electoral cycles on municipal waste collection expenditure. We use a database with information on Spanish municipalities with more than 1000 inhabitants for the period 2002–2011. Our results reveal that incumbents adopt an opportunistic behaviour, increasing spending on waste in the preelection year and reducing it in the election and post-election years. Therefore, we confirm an electoral budget cycle on waste collection expenditures in Spain. Additionally, we find that the levels of income, unemployment and upper-level governments’ transfers have a positive impact on waste collection spending. Finally, population density, level of urbanization, average age of the population of the municipality and less fragmented governments negatively influence waste collection spending.     

Non‐Fulfilment of Debt Limits in Spanish Municipalities

In decentralised European Monetary Union members such as Austria, Belgium, Finland, Germany and Spain, the Stability and Growth Pact can only be implemented if there is close fiscal coordination among government tiers. Thus, limits on subcentral governments' debt are essential in this coordination. This paper analyses which political and socio‐economic factors influence compliance with debt limits. We use a database with information on Spanish municipalities with at least 1,000 inhabitants for 2001–08. Our results indicate that the non‐financial surplus limit is the requirement that is most commonly breached, followed by the net operating balance requisite. Population has a positive and significant impact on failure to comply with debt limits. In addition, we show a positive relationship between income level and global limit compliance. Finally, it can be stated that municipalities appear to manipulate debt with electoral purposes.     

Sequential Equilibrium and Competition in a Diamond–Dybvig Banking Model

Within the framework of a Diamond–Dybvig model [J. Polit. Econ.91(1983), 401–419], but with explicitly modelling the autarky choice during the planning period, we demonstrate that a mixed strategy bank run equilibrium that does not rely on sunspots may coexist with the sunspot run equilibrium previously studied in the literature. In a version of the model with multiple banks, there exist sequential equilibria that imply positive profits. However, the zero-profit contract in which runs never occur can be supported as the unique equilibrium outcome if the agents play pure strategies only and their beliefs are restricted to be consistennt with a forward induction argument.Journal of Economic LiteratureClassification Numbers: C72, G21