Monday, 4 February 2013

The pace of internal devaluation in Portugal

Beware, this is wonkish.
How long does it take for the competitive disinflation, also known as the internal devaluation, to occur in Portugal? The question is relevant for it is the market based mechanism to adjust to external imbalances within the euro. Here is an attempt to estimate the pace and the required adjustment. Starting the projection from the fourth quarter of 2011(when the unemployment rate was at 14.1 percent) I project an increase of the unemployment rate between 4 and 6 percentage points and an improvement of the real exchange rate of approximatively 5 percentage points, both in 20 quarters. Obviously shocks will happens and policies will be taken and the actual path will be different (as they have been in 2012). Nevertheless the forecasts can be interpreted as a counterfactual path in the absence of new shocks and policies and therefore should be of some guidance in designing policies aimed at rebalancing the external adjustment.


  1. I project really? how boy? the D.S.T.General Equilibrium?

    Here is an attempt at the Rule of Debt, the Golden and Silver Mean Mean and with Asymmetrical balances all over.
    It maybe too well balanced with the debt horizon in the middle but lacks the fear factor, the saudade factor and the swiss knife factor

    the loss of competitiveness and the deterioration of the trade balance leads to an
    increase in unemployment,
    • the increase in unemployment pushes the growth rate of nominal wages down,
    • the decrease in wage inflation is transmitted to final prices inflation,
    • the decrease in final prices inflation lead to an improvement in competitiveness,
    • the improvement in competitiveness rebalances the trade balance and the current
    • the increase in exports.... decreases significativamente? the unemployment rate.....só se abrirmos minas e estufas de pepinos pelo país fora
    The rest of the paper is concern is is....

    Ultimately an increase in unemployment improves competitiveness
    which in turn will decrease unemployment sei não parece mal
    olha esta aqui:

    The increase in unemployment improves competitiveness, and this would (e mesmo would é muito assertivo) could ficava melhor mas tu lá sabes ó Francisco Franco caudillo ekonomic, well could improve labour market outcomes or incomes ou só comes und bebes, and reduce the risk of a further rise in the level of structural unemployment, porque admitamos numa populaça envelhecida o desemprego estrutural tá pra ficar

  2. a 7000 milhões de viventes e sem um francisco franco que os civilize à espadeirada

    é duma imbecilidade atroz ou atrás projectar o que quer que for

    eu cá peodejecto ou piodejecto que o projecto de tempestade sub-polar contribua muito menos para abaixar a taxa de desemprego nos united states do que as duas precedentes

    tamém projecto que nem por isso o desemprego aumentará enormemente na classe bancária ou nos economistas e tostas mistas neste ano de 2013

    mas é uma projecção de probabilidade variável

    que o número de gatos pingados no desemprego será baixo

    isso é uma projecção fiável

  3. mas projecto que o número de postes neste b-log seguirá a sua tragédia descendente

    isso já é uma projecção

    tem como suporte uma tendência verificável


    nah? que pôrra han's solo

  4. Mas gostei mesmo deste must ora se substituisses firms by authors du b-log cada um com o seu campo de interesses

    ou como dizia o outro campos de cunha's

    Firms (Authors)must pay a social contribution in the form of a proportional
    tax (post ou poste ou peagem), tw,t , on their wage bill so that their real marginal cost deflated by home
    PPI is given by MCt = 1+tw,t
    PH,t . Finally each firm may reset its price with probability
    1−dp in any given period independently of the time elapsed since the last adjustment.

    claro claro contando obviamente com o efeito mosca na economia
    bom bou ber o irish ecu no mi....mi no patrón mi no...