• Antonio Montilla
Ricard Murillo Gili
• Jordi Singla
• Tiago Belejo Correia
• José Ramón Díez
• Clàudia Canals
• Nuria Bustamante
Sergio Díaz
• Adrià Morron Salmeron
• Javier García Arenas
Alberto Graziano
Eduard Llorens i Jimeno
Màxim Ventura Bolet
• Javier García Arenas
• José Ramón Díez
• Oriol Aspachs
• Eduard Llorens i Jimeno
Javier García Arenas
Màxim Ventura Bolet
• Javier García Arenas
Eduard Llorens i Jimeno
Màxim Ventura Bolet
• Rita Sánchez Soliva
• Clàudia Canals
• Luís Pinheiro de Matos
• José Ramón Díez
• Oriol Aspachs
• Alberto Graziano
Josep Mestres Domènech
• Màxim Ventura Bolet
• Clàudia Canals
José Ramón Díez
• Antonio Montilla
• Javier García Arenas
Ricard Murillo Gili
• Javier García Arenas
• Enric Fernández
• Paula Gonçalves
Daniel Belo
Teresa Gil Pinheiro
• Oriol Aspachs
Àlex Ruiz
• Pablo Pastor y Camarasa
Clàudia Canals
Javier García Arenas
Eduard Llorens i Jimeno
• Álvaro Leandro
Eduard Llorens i Jimeno
• Daniel Belo
• Javier García Arenas
• Clàudia Canals
• Oriol Aspachs
• Oriol Aspachs
• Javier García Arenas
• Oriol Carreras Baquer
• Oriol Aspachs
• Teresa Gil Pinheiro
• ## Evolución de la desigualdad en tiempo real y efectividad del estado del bienestar para amortiguar el impacto de la crisis

España
spanish

Oriol Aspachs (CaixaBank Research), Ruben Durante (ICREA-UPF, IPEG y Barcelona GSE), Alberto Graziano (CaixaBank Research), Josep Mestres (CaixaBank Research), Jose G. Montalvo (UPF, IPEG y Barcelona GSE) y Marta Reynal-Querol (ICREA-UPF, IPEG y Barcelona GSE).

Oriol Aspachs
Alberto Graziano
Josep Mestres Domènech
España
COVID-19
• Álvaro Leandro
• Clàudia Canals
Oriol Carreras Baquer
• Clàudia Canals
Oriol Carreras Baquer
• Clàudia Canals
Oriol Carreras Baquer
• Vânia Duarte
• Clàudia Canals
• Oriol Aspachs
• Javier García Arenas
• Oriol Aspachs
• Javier Ibáñez de Aldecoa Fuster
Eduard Llorens i Jimeno
• Javier García Arenas
• Oriol Aspachs
Ruben Durante
Alberto Graziano
Josep Mestres Domènech
Jose G. Montalvo
Marta Reynal-Querol
• Oriol Aspachs
Ruben Durante
Alberto Graziano
Josep Mestres Domènech
Jose G. Montalvo
Marta Reynal-Querol
• Enric Fernández
• Oriol Aspachs
Ruben Durante
Alberto Graziano
Josep Mestres Domènech
Jose G. Montalvo
Marta Reynal-Querol
• Luís Pinheiro de Matos
Ricard Murillo Gili
• Adrià Morron Salmeron
• Àlex Ruiz
• Javier Ibáñez de Aldecoa Fuster
Eduard Llorens i Jimeno
• Álvaro Leandro
• Oriol Carreras Baquer
Javier García Arenas
• ## A green, social and digital recovery

catalanspanish

14 Sep 2022

## The exposure of consumer goods in Spain to international agricultural commodity prices

Several authors
14 Sep 2022

## The gas cap in Spain under examination

14 Sep 2022

At this point in the pandemic, no-one is in any doubt that the economic scenario largely depends on how the health situation will develop. After a period of relative normality during the summer, a large number of European countries have had to step up restrictions on people’s movements and business activity. The economic impact of this second wave is considerable, although clearly less than the effect of the strict lockdowns imposed in Q2. This situation has worsened the economic outlook for the beginning of 2021, although the outlook for the spring is more promising with hopes being placed on the availability of a COVID-19 vaccine and other measures to help strengthen the health strategy (such as the low-cost, rapid testing of large numbers of the population).

Activity in Spain’s real estate market is recovering from its extraordinary slump during the first lockdown. In Q3 2020, house sales and new building permits recovered much of the ground lost, a positive trend we expect to consolidate in 2021. Moreover, the impact of the crisis on house prices has been relatively moderate so far, although we expect these will continue to adjust in the latter part of 2020 and the first half of 2021. In particular, CaixaBank Research’s new house price forecasting models at the level of province, based on large amounts of information (big data) and applying machine learning techniques, predict that house prices will fall in 7 out of 10 Spanish provinces in 2021 and grow very moderately in the rest.

However, it is important to remember that the economic impact of COVID-19 is huge and the effects of the pandemic on the sector will take time to disappear completely. The Recovery Plan for Europe, or Next Generation EU (NGEU), allocated a substantial sum of 750 billion euros, will be decisive in helping to boost the recovery. One of the EU’s main targets, which this recovery plan aims to support significantly, is the ecological transition to become climate-neutral by 2050. In the EU, buildings are responsible for emitting about 40% of the gases that cause global warming. The involvement and commitment of the construction industry is therefore essential to reduce greenhouse gas emissions to the agreed targets, while more energy-efficient «smart» buildings also support another of the Commission’s key targets: digital transition.

These European funds represent a unique opportunity to modernise Spain’s economy, which will receive around 72 billion euros in non-refundable transfers between 2021 and 2026, equivalent to 5.8% of its GDP in 2019. About 6% of the European NGEU funds will be aimed at renovating housing, tripling public investment in this area. In particular, the government plans to recondition 500,000 homes between 2021 and 2023. This target, if achieved, would be very positive for the sector but it is highly ambitious since it requires multiplying the current reconditioning rate by six in just three years.

In addition to renovations, another priority for housing policy over the coming years is the improvement of social housing. The severe economic and social impact of the COVID-19 crisis has highlighted the need to provide a large number of rented social housing to resolve the current shortage and be able to ensure the most vulnerable sections of the population have somewhere to live. Policies that should drive a green, social and digital recovery.

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Pre Titulo
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Área geográfica
• Laura Becerra
Clàudia Canals
Oriol Carreras Baquer
• Enric Fernández
• Oriol Aspachs
• Enric Fernández
• Oriol Aspachs
• Vânia Duarte
• Adrià Morron Salmeron
• Enric Fernández
• Oriol Aspachs
• Eduard Llorens i Jimeno
• Paulo Eduardo Carlos
• Luís Pinheiro de Matos
• Adrià Morron Salmeron
Javier García Arenas
• Oriol Aspachs
• Álvaro Leandro
Eduard Llorens i Jimeno
• Teresa Gil Pinheiro
• Eduard Llorens i Jimeno
• Javier García Arenas
Alberto Graziano
Josep Mestres Domènech
Eduard Llorens i Jimeno
• José Ramón Díez
• Oriol Aspachs
• Vânia Duarte
• Clàudia Canals
Antonio Montilla
• Luís Pinheiro de Matos
• José Ramón Díez
• Teresa Gil Pinheiro
• Sergio Díaz
• Javier García Arenas
• Oriol Aspachs
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# COVID-19 and inflation: a statistically significant impact

In recent years, European inflation has been stubbornly below the ECB’s desired rate, and since 2018 it has been slipping even further away. This weakness has intensified with the COVID-19 crisis. Will this weakness be temporary or permanent?

Content available in
December 15th, 2020

• The weakness of European inflation has intensified in recent months, reaching negative rates and all-time lows.
• This weakness is largely due to the impact of the COVID-19 crisis. Demand-side factors are largely to blame, but the effect of tax cuts in some countries is also playing an important role.
• Inflation will gain traction with the economic revival, although the scars from the COVID-19 crisis will likely result in a very gradual recovery.

In recent years, European inflation has been stubbornly below the ECB’s desired rate, and since 2018 it has been slipping even further away. This weakness has intensified with the COVID-19 crisis, and core inflation, which reflects underlying price trends, has lost almost 1 pp since January (in October it registered a record low of +0.2%). Will this weakness be temporary or permanent?

The sensitivity of prices to the COVID-19 pandemic

The COVID-19 pandemic can explain a large part of the recent inflation problems. To illustrate this, we will focus on core inflation and, following a methodology similar to that developed by the Federal Reserve Bank of San Francisco,1 we will identify both those components of the set of consumer goods that are «sensitive to COVID-19» and those that have experienced abnormally large price changes since the spring.2 On this basis, 68% of these goods and services in Spain and 51% in the euro area have proven to be sensitive to COVID-19. Some components have shown sensitivity to the pandemic due to them suffering significant price increases, such as in the case of electronic equipment or sporting goods. However, as the first two charts illustrate, most prices sensitive to the pandemic have pushed inflation down and indeed explain the bulk of its weakness in 2020.

• 1. See A.H. Shapiro (2020). «Monitoring the inflationary effects of COVID-19». FRBSF Economic Letters.
• 2. Specifically, a component $$\;i$$ is sensitive to the COVID-19 pandemic if the parameter $$\beta_1$$ of the equation $$\pi_{t,i}\;=\;\beta_{0,i}\;+\;\beta_{1,i}\;\ast\;COVID_t\;\;+\;u_{t,i}$$ significantly differs from 0. $$\pi_{t,i}$$ is the year-on-year change in the price of the component $$i$$, $$COVID_t$$ is a dummy variable which takes a value of 1 starting from March 2020 and 0 in all other cases, and $$u_{t,i}$$ is the error term.
Among the effects of the COVID-19 pandemic, demand-side factors predominate

One of the particularities of the pandemic is that it is affecting prices in very different ways: it has led to a fall in both demand and supply (as well as generating price measurement problems). However, economic intuition helps us to distinguish between one factor and the other: when the shock is on the demand side, prices and quantities tend to move in the same direction, whilst if the shock is related to supply, they move in opposite directions. Thus, the fall in aggregate inflation registered in recent months (in parallel with a fall in economic activity) suggests that the demand-side disinflationary forces have outweighed the reduction in supply. The analysis of the components suggests a similar conclusion. We illustrate this for the case of Spain, where we separate the components between those that have suffered a shock in demand, those that have suffered a shock in supply, and the rest (for which the shock is of an ambiguous nature).3 As the third chart shows, some supply-side forces have driven up prices, but overall they have been moderate and have been offset by the disinflationary pressure of the demand-side shock.

• 3. Since we do not have sufficiently detailed data on quantities, we base our illustration on the exercise conducted by Shapiro (2020) for the US, where the necessary level of detail is known. Specifically, if the price of a component moves in the same direction in Spain and the US, we apply the movement of the quantities observed in the US to the case of Spain. Thus, we identify shocks in demand (prices and quantities move in the same direction), in supply (movements in opposite directions) and others (non-significant movements in quantities and/or prices). For instance, in a case where there is no significant change in quantities, there may be a combination of shocks acting in opposite directions. On the other hand, if there are no significant changes in prices but there are in quantities, this would indicate simultaneous shocks in the same direction.
Euro area: VAT also plays a role

Another factor must be added for the euro area as a whole: the VAT reduction. To address the economic crisis caused by the COVID-19 pandemic, some countries such as Germany, Belgium and Austria included a reduction in VAT in their fiscal stimulus packages. In Germany, for instance, the federal government reduced this tax from 19% to 16% for most products, and from 7% to 5% for many others, between July and December 2020. Since a VAT reduction has a direct impact on the purchase price, it could explain some of the fall in inflation. In fact, Eurostat publishes an inflation series in which it maintains taxes constant and which suggests that core inflation in 2020 would have been 0.7 pps higher without the VAT effect.

If the VAT reduction has such a significant impact, it could have tainted our estimates: could it be the case that the pandemic-sensitive components we have identified are only so because of the impact of VAT? This may be partly true, but not in most cases: 65% of the components that we initially identified as being sensitive to the COVID-19 pandemic remain so if we correct for the impact of taxes (the remaining 35% cease to be sensitive).4

• 4. Although they remain «sensitive to COVID-19», these components exhibit more moderate price fluctuations after correcting for the effect of the VAT reduction.

Therefore, when the VAT reduction is reversed in the coming months, inflation will bounce back. Nevertheless, the sensitivity of many of its components suggests that, beyond the statistical effect of taxes, inflation will continue to show weakness as long as the pandemic continues to restrict economic activity. It is therefore the economic recovery that will help inflation to return to pre-pandemic levels. That said, faced with the prospect that the revival of economic activity could take a long time to be completed, it appears likely that the ECB will still have work to do over the coming quarters to steer inflation towards its target (below, but close to, 2%).

Tags

14 Sep 2022

## The exposure of consumer goods in Spain to international agricultural commodity prices

Several authors
14 Sep 2022

14 Sep 2022