In this article, we investigate the existence of infrequent shocks and the degree of persistence of unemployment in the US and Spain over the period 1976-2004. We first apply the minimum Lagrange Multiplier unit root test with up to two endogenous changes in level. The evidence gives support to the hysteresis hypothesis for Spain and to regime-wise stationarity for the US. The computation of median unbiased estimates of half-lives directly from the impulse-response function indicates a much higher degree of persistence of unemployment in Spain than in the US. Our results thus give an indication that aggregate demand policies may have different effects in these two countries.

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The current economic crisis has led several rich countries to experience severe fiscal deficits. Among other factors responsible for the situation, corruption is considered harmful to public finances and appears closely related to fiscal deficits. This paper opens a new avenue in addressing the effects of corruption on public deficits through fiscal decentralization. Focusing on a sample of 31 OECD countries over the period 1986-2010, we find that fiscal decentralization contributes to mitigating the perverse effects of corruption in public deficits. In addition, our findings indicate heterogeneity in the effect of fiscal decentralization, since it appears related to lower deficits in countries with higher levels of corruption, but not in less corrupt countries. Therefore, the results suggest that bringing the government closer to the people in relatively corrupt countries may lead to a more responsible fiscal management.

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This paper analyzes the relationship between inflation and relative price variability, in the direction of the latter, in two countries with very different inflationary experiences: Argentina and Spain. To address this objective, using disaggregated price indexes (the Wholesale Price Index for Argentina and the Consumer Price Index for Spain), we delimitate different inflationary regimes and compute a set of regressions for each country. Our results suggest evidence in favour of the non-neutrality of inflation (mostly in hyperinflation periods) and do not support either the menu costs or the signal extraction approaches. We also detect significant structural changes in the relationship depending on the inflationary regime.