Academic publications

In journals

  • The drivers of Bitcoin demand: A short and long-run analysis

    de la Horra, L. P., de la Fuente, G., Perote, J. (2019). The drivers of Bitcoin demand: A short and long-run analysis. International Review of Financial Analysis, 62, 21-34.  https://doi.org/10.1016/J.IRFA.2019.01.006.

    Since 2010, Bitcoin has shown high price volatility, spurring a debate regarding the underlying reasons that lead economic agents to demand it. This paper analyzes the demand for Bitcoin in order to determine whether it stems from Bitcoin’s utility as a medium of exchange, a speculative asset, or as a safe-haven commodity. We examine Bitcoin from a monetary-theory perspective and build a demand model that explores both the long-term and short-term relationships among variables. Our findings show that Bitcoin behaves as a speculative asset in the short term. In the long term, however, speculation does not seem to influence demand for Bitcoin. Instead, demand might be driven by expectations regarding Bitcoin’s future utility as a medium of exchange. [Continue reading: IRFA]

    • The demand for Divisia money in the United States: Evidence from the CFS Divisia M3 aggregate

      de la Fuente, G., de la Horra, L. P., Perote, J. (2019). The Demand for Divisia Money in the United States: Evidence from the CFS Divisia M3 Aggregate. Applied Economics Letters, 27(1), 41-45. http://dx.doi.org/10.1080/13504851.2019.1606403.

      In this paper, we analyse the demand for real money balances in the United States for the period 1990Q1–2017Q2 using a novel Divisia monetary aggregate developed by Barnett et al. (2013). Unlike simple-sum aggregates, Divisia aggregates take into account the different degrees of ‘moneyness’ of each monetary asset. In addition, Divisia aggregates have shown to be empirically superior to simple-sum aggregates, providing stable money demand functions for different periods and countries. In a first stage, we test for cointegration and estimate a long-run equilibrium model. In a second stage, we estimate an error correction model to study the short-run dynamics. Consistent with previous research, our findings show the existence of a stable money demand function, which suggests that monetary aggregates, when properly measured, can be useful tools in the conduct of monetary policy.[Continue reading: AEL]

    • Book chapters

      • Why the world needs more immigration

        de la Horra, L.P., “Why the World Needs More Immigration.” Migration & Immigration, vol. 359, Independence Educational Publishers, 2019, pp. 27–28.

        In his classic work, The Myth of the Rational Voter, Bryan Caplan identifies four systematic biases about economics held by the average citizen: make-work bias (an  inclination to overestimate the disadvantages of temporary job destruction due to productivity increases), anti-market bias (a tendency to overlook the benefits of the market as a coordination mechanism), pessimistic bias (an inclination to underestimate the present and future performance of the economy), and anti-foreign bias (a tendency to underestimate the economic benefits of interaction with foreigners)[Continue reading: Migration & Immigration]

      • Working papers

        • An ethical defense of cryptocurrencies

          Bagus, P., de la Horra, L.P. (2020). An ethical defense of cryptocurrencies. Working paper.

          The growing importance of the cryptocurrency phenomenon has raised concerns about the ethical implications of a hypothetical widespread use of these new forms of digital money. In this paper, we undertake an ethical assessment of cryptocurrencies drawing upon two specific ethical theories: private property ethics and utilitarianism. Particularly, we focus on three distinctive aspects. First, we examine the advantages and disadvantages of cryptocurrencies vis-à-vis central-bank fiat money. Second, we analyze cryptocurrencies as facilitators of tax evasion and the ethical implications arising therefrom. Finally, we explore the use of cryptocurrencies for nefarious consumption. We conclude that, were cryptocurrencies to become widespread media of exchange, government capacity to undertake monetary, fiscal, and drug policy would be undermined. We argue that this would be an ethically desirable outcome from both a private-property rights and a utilitarian perspective since it would force governments to reduce their size and scope in these three areas.

          • Monetary policy and corporate investment: a panel-data analysis of transmission mechanisms in contexts of high uncertainty

            de la Horra, L. P., Perote, J., de la Fuente, G. (2020). Monetary policy and corporate investment: a panel-data analysis of transmission mechanisms in contexts of high uncertainty. Working paper.

            This paper investigates the impact of monetary policy on firm-level investment in contexts of economic turmoil. Using a panel of US public firms for the period 2000-2018, we show that policy-rate-based transmission mechanisms are undermined when uncertainty spikes. Furthermore, we find evidence of the existence of asymmetries at the firm level. In line with real options theory, low-innovation firms as well as firms with higher levels of investment irreversibility, operational inflexibility, and market power tend to be less responsive to changes in monetary policy. The effectiveness of monetary policy thus depends on the ability of monetary authorities to reduce uncertainty via expectations-based monetary tools, whilst targeting those sectors more likely to be affected by monetary-policy shifts.

            • How does unconventional monetary policy affect corporate investment? A panel-VAR approach

              de la Horra, L. P., Perote, J., de la Fuente, G. (2020). How does unconventional monetary policy affect corporate investment? A panel-VAR approach. Working paper.

              In December 2008, the Federal Reserve reached the effective lower bound (ELB), forcing U.S. monetary authorities to resort to unconventional monetary-policy tools in order to stimulate the economy. This paper explores the impact of quantitative easing and forward guidance on corporate investment. Using a panel of U.S. firms, we find that unconventional monetary policy is asymmetric at the firm level. Firms with higher investment irreversibility, operating inflexibility as well as lower opportunity costs in terms of competitive advantages, are less responsive to monetary-policy shocks. Our results suggest that monetary policymakers should consider these asymmetric firm-level effects in order to enhance the effectiveness of monetary policy at the ELB.

              • Monetary policy and the correlation shift question

                de la Horra, L.P., Gabriel, A., Giménez Roche, G.A., Perote, J. (2020). Monetary policy and the correlation shift question. Working paper.

                Asset correlations have historically broken down during financial and economic crises. In this paper, we examine whether and to which extent monetary policy explains correlation shifts in the aftermath of a crisis. In order to do so, we estimate conditional correlations for several pair of assets over the period 1980-2019 using a dynamic conditional correlation model that allows for the impact of monetary policy. We show that asset correlations are significantly affected by both conventional and unconventional monetary policy. The dynamics of correlations are thus more accurately captured when including monetary policy as an explanatory variable in correlation models. Our results suggest that portfolio managers should factor in the impact of monetary policy when estimating time-varying correlations in order to optimize their portfolios and reduce losses due to financial crises.

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