Applied Econometrics and International Development Vol (2011)

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1 Applid Economtrics and Intrnational Dvlopmnt Vol (2011) EAL EXCHANGE ATE, FOEIGN TADE AND EAL OUTPUT GOWTH: THE CASE OF SPAIN, HSING, Yu * GUISAN, M.C. Abstract W analyz th volution of th xchang rat with Dollar, ral output and forign trad balanc in Spain, during th priod W prsnt th stimation of n conomtric modl that rlatd output growth and ral xchang rat with othr variabls. Applying th montary policy raction function and mploying th dummy variabl tchniqu, this papr finds that ral GDP and th xpctd ral ffctiv xchang rat (EE) xhibit a J-shapd rlationship. Thus, rcnt apprciation of th uro, for th priod , would work in favor of Spain, providd that conomic policis support a positiv volution of industrial production, xports and othr main variabls. Othr findings of this modl ar that a highr ral stock pric, a highr ral uro intrst rat, and a lowr xpctd inflation rat would rais ral output for Spain whras dficitfinancd govrnmnt spnding has a littl ngativ impact on ral output. W also analyz th ffct of forign trad balanc of Spain on th volution of th xchang rat and conomic growth, having into account th important positiv rol of industrial production to guarant conomic dvlopmnt in this country. Finally w prsnt som rcommndations in ordr to gt a fast rcovry of Spain aftr th conomic crisis of th priod Kywords: Montary Policy action Function, MPF, Uncovrd Intrst Parity, UIP, xpctd ral dprciation or apprciation, govrnmnt dficit, world intrst rat, xpctd inflation, Spanish output growth , Forign Trad and Dvlopmnt, al xchang rat Euro/Dollar, EE, JEL Classification: E52, F31, F41 1. Introduction cnt apprciation of th Euro, for th priod has ld to rnwd intrst in its impact on output in th EU mmbr countris including Spain. al apprciation of th uro would rduc xports, incras imports, and caus nt xports and aggrgat xpnditurs to dclin. On th othr hand, ral apprciation of th uro would rduc import prics, lowr inflation, may caus th cntral bank to rduc th ral intrst rat, and stimulat houshold consumption and businss invstmnts. Hnc, whthr th rcnt ral apprciation of th uro or possibl ral dprciation of th uro in th futur would rduc or incras ral output for Spain nds to b addrssd furthr. Th rcnt global financial crisis has hurt Spain s conomic and businss activitis. According to th forcast of Spain s conomy in 2009 mad by th * Yu Hsing, Ph.D., Profssor of Economics, Dpartmnt of Managmnt & Businss Administration, Collg of Businss, Southastrn Louisiana Univrsity, Hammond, Louisiana 70402, U.S.A. yhsing@slu.du, Maria-Carmn Guisan, Ph.D., Profssor of Economtrics, Faculty of Economics and Businss, Univrsity of Santiago of Compostla, Spain, mcarmn.guisan@usc.s.

2 Hsing, Y., Guisan, M.C. al Exchang at, Trad and Output Growth in Spain Intrnational Montary Fund, ral GDP, final domstic dmand, privat consumr xpnditur, and th currnt account ar xpctd to dclin 3.5%, 6.3%, 5.1%, and 6.0%, rspctivly. It is significant to xamin th rols of th xpctd ral ffctiv xchang rat and othr major macroconomic variabls in dtrmining output fluctuations for Spain. Th papr has svral focuss. First, th papr incorporats th montary policy raction function in th formulation of th modl. It is appropriat as th cntral bank dtrmins its short-trm intrst rat basd on an inflation targting of lss than 2%. Scond, th papr tsts whthr th xpctd ral ffctiv xchang rat and ral output may xhibit diffrnt rlationships during diffrnt tim priods. If th rlationship changs, th dummy variabl tchniqu will b mployd to tst if th intrcpt and/or th slop cofficint of th xpctd ral ffctiv xchang rat may hav changd. Third, comparativ static analysis will b applid in ordr to dtrmin th possibl rspons of quilibrium ral GDP to a chang in on of th xognous variabls including th xpctd ral ffctiv xchang rat. Camarro and Tamarit (2001) analyz th ral xchang rat of th Spanish currncy during th priod (Psta) in rlation to 9 of its Europan partnrs, using panl cointgration tsts and comparing svral structural modls tstd in th litratur. Thy conclud: To summariz th main mpirical rsults, from modls 1, 4 and 5, w can driv that both supply and dmand variabls hav bn important in th volution of th psta during th priod studid. Howvr, whn combind, th spcification including th ral intrst rat difrntial sms to bmor supportd by th data than th on containing th di rnc in public xpnditur. Morovr, in th cas of Spain, th two dmand factors (contractionary montary policy and xpansionary fiscal policy) appar to lad to an incras of ral intrst rats and to an apprciation of th currncy. Thr ar svral major studis xamining th impact of currncy dprciation or dvaluation on output. Krugman and Taylor (1978) stat that on of th conditions for currncy dvaluation to hav a contractionary impact is if xports ar initially lss than imports. Edwards (1986), Upadhyaya (1999), Bahmani-Oskoo, Chomsisngpht, and Kandil (2002) and Christopoulos (2004) find that currncy dvaluation or dprciation could hav a contractionary, an xpansionary, or no ffct dpnding upon th countris or tim priods in mpirical work. Chou and Chao (2001) and Bahmani-Oskoo and Kutan (2008) indicat that dprciation or dvaluation is inffctiv or has littl impact in th long run. Studis rporting dprciation or dvaluation is xpansionary includ Gylfason and Schmid (1983) xcpt for th U.K. and Brazail, Gylfason and isagr (1984) for dvlopd countris, and Bahmani-Oskoo and h (1997). On th othr hand, studis showing that dprciation or dvaluation is contractionary includ Gylfason and isagr (1984) for LDCs, ogrs and Wang (1995), Morno (1999), Kamin and ogrs (2000), Chou and Chao (2001) in th short run, and Bahmani-Oskoo and Mitza (2006) for 24 non-oecd countris. Ths prvious studis hav mad significant contributions to th undrstanding of th subjct. Ths findings suggst that th impact of ral dprciation could b xpansionary, contractionary or nutral and dpnds on th country, tim priod, th formulation of a modl, and th mthodology mployd in mpirical work. To th author s bst knowldg, fw of th prvious studis hav focusd on th hypothsis that 48

3 Applid Economtrics and Intrnational Dvlopmnt Vol (2011) th impact of th ral xchang rat on ral output may b nonlinar and vary with th output lvl or th stag of conomic dvlopmnt. 2. Exchang at, Forign Trad Balanc and ral GDP in Spain Graph 1 shows th volution of th xchang rat (E) and Purchasing Powr Parity (PPP) in Spain for th priod As Guisan (2009 b) indicats, thr is usually a trnd of E in Spain and othr OECD countris to rgrss to th corrsponding PPP, although with important dparturs from that trnd in som yars. In th cas of Spain, th largst diffrncs of E rspct to PPP ar found during yars 1985 and Graph 1. Exchang rat and PPP Euro/Dollar in Spain, Exchang at Euro/Dollar Purchasing Powr Parity Euro/Dolar Sourc: Elaboratd from OECD National Accounts Statistics, convrting th old local currncy of Pstas into Euros for yars bfor th official chang of currncy. Graph 2 shows th incrasing dficit of forign trad in Spain for th priod , which has waknd th intrnational position of Spain at th cost of financing conomic growth of that priod with incrasing dpndnc on forign lnding. In comparison with th USA, th volution of Imports pr capita in Spain has vry alik, what should not b a problm in Spanish Exports would show a mor balancd volution with Imports, but it has not bn th cas as sn in Graph 3. An important qustion to xplain th diffrncs btwn th bttr conomic prformanc of th USA in comparison with Spain is that ral Valu-Addd of Industry pr capita is much highr in th Unitd Stats and has not incrasd in Spain for th priod du to wrong conomic policis. Th main problm of conomic policis in Spain is not th lack of good conomic advisrs but th lack of bridgs among conomic rsarchrs, conomic advisrs and policy makrs. 49

4 Hsing, Y., Guisan, M.C. al Exchang at, Trad and Output Growth in Spain Graph 2. al Imports and Exports pr capita in Spain Imports pr capita at 2000 prics 5 4 Exports pr capita at 2000 prics Graph 3. Evolution of ral Valu-Addd of Industry and Imports in Spain and th USA (thousand Dollars at 2000 prics and xchang rats) 7 VA of Industry pr capita in USA 6 Imports pr capita in th USA 5 4 Imports pr capita in Spain 3 VA of Industry pr capita in Spain A Modl of Gross Domstic Product and al Effctiv Exchang at (EE) Suppos that aggrgat spnding is dtrmind by ral output, th domstic ral intrst rat, govrnmnt spnding, govrnmnt tax rvnus, th ral financial stock pric, and th ral ffctiv xchang rat, that th ral policy intrst rat is affctd by th inflation rat, ral output, th ral xchang rat, and th world ral intrst rat, that th ral ffctiv xchang rat is influncd by th domstic ral intrst rat, th world ral intrst rat, and th xpctd ral ffctiv xchang rat, and that th inflation rat is affctd by th xpctd inflation rat, th output gap, and th ral ffctiv xchang rat. Applying and xtnding Taylor (1993, 1995), omr (2000, 2006), Svnsson (2000), and othr prvious studis, w can xprss th opn-conomy IS function, th montary policy raction function, uncovrd intrst parity, and th augmntd aggrgat supply function as: 50

5 Applid Economtrics and Intrnational Dvlopmnt Vol (2011) whr Y G T A Y F( Y,, G, T, A, ) (1) G(, Y,, ) (2) H (,, ) (3) 1 ) 2 * ( Y Y = ral GDP in Spain, = th domstic ral intrst rat, = govrnmnt spnding, = govrnmnt tax rvnus, = th ral stock pric, = th ral ffctiv xchang rat, (An incras mans ral apprciation of own currncy.) = th inflation rat, = th world ral intrst rat, = th xpctd ral ffctiv xchang rat, = th xpctd inflation rat, * Y = potntial output for Spain, and, = paramtrs. 1 2 Solving for four ndognous variabls Y,,, and simultanously, w can xprss quilibrium ral GDP as: * Y Y (, G, T, A,, ;,, ). (5) Th Jacobian for th ndognous variabls is givn by: J (1 F G Y ) H F G Y F G Y H G (1 F ) [ 2 H (1 FY ) 1F 1H F ] 0. W xpct that th sign of ( Y / G Y ) / T or Y / A is positiv. Th ffct of apprciation of th xpctd ral ffctiv xchang rat on quilibrium ral GDP is uncrtain bcaus th ngativ impact of dcrasd nt xports may b lss or gratr than th positiv impacts of a lowr inflation rat and a lowr ral intrst rat du to montary asing: Y / H ( F F G 2F G ) / J or 0. (7) Th ffct of a highr world ral intrst rat on quilibrium ral GDP is uncrtain as th first trm in th parnthsis in (8) is positiv whras th rmaining trms in th parnthsis in (8) ar ngativ: Y / ( H F G F H F Y G 2H FG ) / J or 0. H F G A highr xpctd inflation rat would caus quilibrium ral GDP to dclin partly bcaus th cntral bank would rais th ral intrst rat to contain inflation and partly bcaus a highr ral intrst rat would caus ral apprciation and rduc nt xports: Y (4) (6) (8)

6 Hsing, Y., Guisan, M.C. al Exchang at, Trad and Output Growth in Spain Y / ( H F G F G ) / J 0. (9) 3. Empirical sults Th sourc of th data cam from th Intrnational Financial Statistics (IFS), which is publishd by th Intrnational Montary Fund. al GDP is masurd in billion uros. Th ral ffctiv xchang rat is th wightd ral xchang rat with major trading partnrs basd on th rlativ consumr pric indx. Th xpctd ral ffctiv xchang rat is th laggd ral ffctiv xchang rat. Th ratio of govrnmnt dficit to GDP is slctd to rprsnt fiscal policy. Th shar pric indx is dividd by th consumr pric indx to driv th ral stock pric indx. Th world ral intrst rat is rprsntd by th rfinancing intrst rat of th Europan Cntral Bank (ECB) minus th inflation rat in th EU. Th inflation rat is th prcnt chang in th consumr pric indx in Spain. Th xpctd inflation rat is th laggd inflation rat. Excpt for th dummy variabl, th ratio of govrnmnt dficit to GDP, and th xpctd inflation rat with zro and ngativ valus, all othr variabls ar masurd in th log scal. Aftr calculating th inflation rat and taking lags, th sampl rangs from 1999.Q Q3. Th data for govrnmnt dficit aftr 2008.Q3 ar not availabl at th tim of writing th papr. Th ADF tst shows that variabls hav unit roots in th lvl form and ar stationary in th first-diffrnc form. According to th Johansn tst, th maximum ignvalu statistic is gratr than th critical valu, suggsting that ths variabls hav a long-trm stabl rlationship. Th vctor-rror corrction modl is not applid du to a rlativly small sampl siz in th study. Th rlationship btwn and ral GDP is prsntd in Graph 4. Graph 4. Scattr diagram btwn th xpctd ral ffctiv xchang rat and ral GDP for Spain, to Expctd ral ffctiv xchang rat al GDP 52

7 Applid Economtrics and Intrnational Dvlopmnt Vol (2011) It sms that th rlationship is nonlinar and xhibits a J-shap. In othr words, thy hav a ngativ rlationship during 1999.Q Q1 and a positiv rlationship during 2001.Q Q3. Th thrshold ral GDP in 2002.Q3 is billion uros. Thrfor, a dummy variabl is gnratd with a valu of 0 during 1999.Q Q1 and 1 othrwis. An intractiv dummy variabl is also gnratd to tst whthr th slop cofficint of th ral ffctiv xchang rat may hav changd. Estimatd paramtrs, standard rrors, t-statistics, and othr rlatd information ar prsntd in Tabl 1. Tabl 1. Estimatd rgrssion of ral GDP for Spain: Th dpndnt variabl is log(y) Variabl Cofficint Std. Error t-statistic Prob. C DUM log( ) DUM x log( ) DY log(a) log( ) Adj. -squard Akaik info critrion Schwarz critrion F-statistic Sampl 1999.Q Q3 MAPE Nots: DY is th ratio of govrnmnt dficit to GDP. MAPE is th man absolut prcnt rror. Bcaus a rducd form quation is stimatd, ndognity would not pos a concrn. Th Nwy-Wst mthod is applid in ordr to corrct for autocorrlation and htroskdasticity simultanously whn thir forms ar unknown. As shown, 98.7% of th bhavior of ral GDP can b xplaind by th svn right-hand sid variabls. Excpt for th cofficint of govrnmnt dficit ratio, all othr cofficints ar significant at th 1% or 5% lvl. al GDP is positivly associatd with th intractiv dummy variabl DUM x log ( ), th ral stock pric, and th ral rfinanc rat st by th Europan Cntral Bank and ngativly influncd by th intrcpt dummy variabl, th xpctd ral ffctiv xchang rat, and th xpctd inflation rat. Th cofficint of is stimatd to b during 1999.Q Q1 and (= ) during 2001.Q Q3. Svral diffrnt vrsions ar tstd. Whn th intrcpt and intractiv dummy variabls ar not includd in th stimatd rgrssion, th adjustd 2 is stimatd to b 0.938, and th cofficint of th xpctd ral xchang rat is positiv and significant at th 1% lvl. Howvr, th cofficint of th ral stock pric bcoms ngativ and insignificant at th 10% lvl. This rsult may b mislading as possibl diffrnt intrcpts and/or slops ar not tstd. If th ratio of govrnmnt dficit to GDP is rplacd by ral govrnmnt dficit, its cofficint is ngativ and insignificant at th 10% lvl. Whn th ECB s ral rfinancing rat is rplacd by th U.S. ral fdral 53

8 Hsing, Y., Guisan, M.C. al Exchang at, Trad and Output Growth in Spain funds rat, its cofficint is positiv but insignificant at th 10% lvl. Whn th xpctd inflation rat is rprsntd by th avrag inflation rat of past four quartrs, its cofficint is ngativ but insignificant at th 10% lvl. To sav spac, ths rsults ar not printd hr and will b mad availabl upon rqust. 4. Forign trad balanc and EE in Spain and othr Euro Countris Accordingly to Guisan (2009 b), w find that thr ar important rlationships btwn th forign trad balanc and th ral ffctiv xchang rat of Spain. Th following conomtric modl rlating EE to th volution of forign trad shows a significant and positiv ffct of th xplanatory variabl and a high goodnss of fit in th thr Euro countris whr it was stimatd, for in Spain, Grmany and Franc: EE t = f(ee t-1, D(Z t ), D(ZU t )) Whr Z is th ratio of Exports/Imports for th Euro country and ZU is th sam ratio for th Unitd Stats. Th stimatd cofficints ar positiv for D(Z) and ngativ for D(ZU), and th goodnss of fit is vry high. Th modl indicats that financial movmnts rlatd to th forign trad balanc contribut to th volution of ral xchang rats. Graph 5 shows th volution of th Exchang at Euro/Dollar in Spain for th priod , togthr with th ratio Exports/Imports in Spain. Graph 5. Forign trad and Exchang at in Spain Exports/Imports ratio in Spain Exchang at Spain/USA: Euros pr on $ 54

9 Applid Economtrics and Intrnational Dvlopmnt Vol (2011) Th consquncs of apprciation of th Euro-Dollar ral xchang rat in Spain implis incras of Imports and dcras of Exports in th nxt yar what has contributd to incrasing forign trad dficit for th priod 2001 to Economic policis of Spain in that priod wr xpansionary, basd on th growing building and srvics sctors without nough dvlopmnt of industrial production, which ld to aggravating forign trad dficits and to a high dgr of dpndnc on forign crdit. Th nw circumstancs of yar 2008, with incrasing oil prics and with rstrictions on forign crdit, hav ld to th Spanish conomic crisis of yars Economic policis of yars 2008 to 2010 hav focusd on diminishing forign trad dficit, but unfortunatly whr not addrssd to a highr incras in xports in comparison with imports (which would b th right policy to favour at th sam tim conomic dvlopmnt and quilibrium in trad balanc) but instad thy ld to a highr diminution in imports in comparison with xports (which only contributd to diminish disquilibrium in trad balanc but did not favour conomic dvlopmnt). This has happnd bcaus conomic policis did not tak into account th positiv ffct of imports on conomic growth (incras in ral GDP) and dvlopmnt (incras in ral output and incom pr capita) from th supply sid, providd that th trad dficit is undr control, and it is not too larg, as sn in Guisan (2006) and othr studis. 5. Summary and Conclusions This papr has xamind th impacts of xpctd ral dprciation or apprciation and changs in othr rlatd variabls on output fluctuations in Spain basd on a simultanous quation modl incorporating th opn-conomy IS function, th montary policy raction function, uncovrd intrst parity, and an augmntd aggrgat supply. al GDP is postulatd to b a function of th dummy variabl, th xpctd ral ffctiv xchang rat, th intractiv dummy variabl with th xpctd ral ffctiv xchang rat, th ratio of govrnmnt dficit to GDP, th ral stock pric, th ral rfinancing rat, and th xpctd inflation rat. A gnralizd last squars mthod is mployd in mpirical work to yild consistnt stimats for th covarianc and standard rrors. Thr is vidnc of a J-shapd rlationship btwn th xpctd ral ffctiv xchang rat and ral output, suggsting that xpctd ral dprciation would incras ral output up to 2001.Q1 whras xpctd ral apprciation would rais ral output aftr 2001.Q1. Bsids, a highr ral stock pric, a highr rfinancing rat, or a lowr xpctd inflation rat would hlp rais ral output. Thr ar svral implications. Th J-shapd rlationship btwn th xpctd ral ffctiv xchang rat and ral GDP suggsts that th rcnt trnd of ral apprciation of th uro against th U.S. dollar would work in favour of Spain du to its positiv impact on ral output. Expansionary fiscal policy may nd to b pursud with caution as dficit-financd govrnmnt spnding has littl ngativ impact on ral output. As th stock markt is rvrsing its downward trnd, th walth ffct and th balancsht ffct of a highr stock pric would incras houshold consumption and businss invstmnts. It would b dsirabl for th cntral bank to maintain transparncy and ffctiv communications in ordr to rduc inflationary xpctations. 55

10 Hsing, Y., Guisan, M.C. al Exchang at, Trad and Output Growth in Spain Thr may b aras for futur study. A quadratic function may b applid to dtrmin th turning point of ral GDP whn th rlationship btwn th xpctd ral ffctiv xchang rat and ral GDP changs from bing ngativ to bing positiv. If th data ar availabl, th ratio of govrnmnt dbt to GDP may b slctd to rprsnt fiscal policy. Th modl dvlopd in this papr may b considrd for othr countris to dtrmin whthr it may apply. Th xpctd inflation rat may b constructd in diffrnt mannrs. W hav also xamind som rlationships btwn forign trad, xchang rats and dvlopmnt. In this rgard, th main conclusion is that conomic policis in Spain should b addrssd to diminish forign trad dficits through th incras in xports but not through th diminution in imports. Accordingly with Guisan(2008) and othr studis, w find that th incras in industrial production pr inhabitant is of vital importanc in this rgard as Spain has a vry low valu of this variabl in comparison with th Unitd Stats and othr advancd conomis. Europan Economic policis should b addrssd to mak compatibl a positiv intrnational coopration with dvlopmnt countris and to avoid unfair comptition and discrimination against Europan manufacturrs which hav to compt in Europan markts with productions not subjctd to th sam taxs and social wlfar contributions. frncs Bahmani-Oskoo, M. (1998) Ar Dvaluations Contractionary in LDCs? Journal of Economic Dvlopmnt, 23, Bahmani-Oskoo, M., Chomsisngpht, S., and Kandil, M. (2002) Ar Dvaluations Contractionary in Asia? Journal of Post Kynsian Economics, 25, Bahmani-Oskoo, M. and Mitza, I. (2003) Ar Dvaluations Expansionary or Contractionary: A survy articl, Economic Issus, 8, Bahmani-Oskoo, M. and Mitza, I. (2006) Ar Dvaluations Contractionary? Evidnc from Panl Cointgration, Economic Issus, 11, Bahmani-Oskoo, M. and Kutan, A. M. (2008) Ar Dvaluations Contractionary in Emrging Economis of Eastrn Europ? Economic Chang and structuring, 41, Barro,. J. (1989) Th icardian Approach to Budgt Dficits, Journal of Economic Prspctivs, 3, Camarro, M., Tamarit, (2001). A panl cointgration approach to th stimation of th psta ral xchang rat Papr providd by FEDEA in its sris Working Paprs on Intrnational Economics and Financ with numbr Chou, W. L. and Chao, C. C. (2001) Ar Currncy Dvaluations Effctiv? A Panl Unit oot Tst, Economics Lttrs, 72, Christopoulos, D. K. (2004) Currncy Dvaluation and Output Growth: Nw Evidnc from Panl Data Analysis, Applid Economics Lttrs, 11,

11 Applid Economtrics and Intrnational Dvlopmnt Vol (2011) Edwards, S. (1986) Ar Dvaluations Contractionary?, Th viw of Economics and Statistics, 68, Guisan, M.C. (2008). Industry, Forign Trad and Dvlopmnt: Economtric Modls of Europ and North Amrica, , Intrnational Journal of Applid Economtrics and Quantitativ Studis, Vol Guisan, M.C. (2009 a). Govrnmnt Effctivnss, Education, Economic Dvlopmnt and Wll-Bing: Analysis of Europan Countris in Comparison with th Unitd Stats and Canada, , Applid Economtrisc and Intrnational Dvlopmnt, Vol.9-1. Guisan, M.C. (2009b). al Exchang at Euro-Dollar and Forign Trad Balanc: Analysis of Spain, Grmany and Franc In Comparison With Th USA Working Papr Economic Dvlopmnt, 100, on lin. 1 Gylfason, T. and isagr, O. (1984) Dos dvaluation improv th currnt account?, Europan Economic viw, 25, Gylfason, T. and Schmid, M. (1983) Dos dvaluation caus stagflation? Th Canadian Journal of Economics, 25, Kamin, Stv B. and ogrs, John H. (2000) Output and th al Exchang at in Dvloping Countris: An Application to Mxico, Journal of Dvlopmnt Economics, 61, Krugman, P. and Taylor, L. (1978) Contractionary ffcts of dvaluation, Journal of Intrnational Economics, 8, Kuttnr, K. N. and Mossr, P. C. (2002) Th montary transmission mchanism: som answrs and furthr qustions, Fdral srv Bank of Nw York Economic Policy viw, 8, Ministry of Industry of Spain (2010). Inform Mnsual d Comrcio Extrior (Monthly port of Forign Trad). 3 Morno,. (1999) Dprciation and cssions in East Asia, Fdral srv Bank of San Francisco Economic viw, 3, ogrs, J. H. and Wang, P. (1995) Output, Inflation and Stabilization in a Small Opn Economy: Evidnc from Mxico, Journal of Dvlopmnt Economics, 46, omr, D. (2000) Kynsian Macroconomics without th LM Curv, Journal of Economic Prspctivs, 14, omr, D. (2006) Advancd Macroconomics, 3 rd Hill/Irwin. dition, Nw York: McGraw- Svnsson, L. E. O. (2000) Opn-Economy Inflation Targting, Journal of Intrnational Economics, 50, Taylor, J. B. (1993) Discrtion vrsus Policy uls in Practic, Carngi-ochstr Confrnc Sris on Public Policy, 39, Taylor, J. B. (1999) A Historical Analysis of Montary Policy uls, In: Montary Policy uls; ; NBE Confrnc port sris. Chicago and London: Univrsity of Chicago Prss. 57

12 Hsing, Y., Guisan, M.C. al Exchang at, Trad and Output Growth in Spain Taylor, J.B. (1995) Th Montary Transmission Mchanism: An Empirical Framwork, Journal of Economic Prspctivs, Vol. 9, Th Economist (2009) Country Brifings:Spain 2 Upadhyaya, K. P. (1999) Currncy Dvaluation, Aggrgat Output, and th Long un: An Empirical Study, Economics Lttrs, 64, E6BD61/0/ComxMnsualInform.pdf Journal publishd by th EAAEDS: 58