Academic research

Published papers

  • An ethical defense of cryptocurrencies

    Bagus, P., & de la Horra, L.P (2021). An ethical defense of cryptocurrencies. Business Ethics, the Environment & Responsibility. https://doi.org/10.1111/beer.12344.

    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, governments 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. [Continue reading: BEER]

    • 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. (2020). 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]

      • 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(March 2019), 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]

        • 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. (2021). Monetary policy and corporate investment: A panel-data analysis of transmission mechanisms in contexts of high uncertainty. International Review of Economics & Finance, 75 (September 2021), 609-624. https://doi.org/10.1016/j.iref.2021.04.035.

          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 2000–2019, 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’s, firms with higher levels of investment irreversibility, operational inflexibility, and market power, as well as firms with lower cash flows and who operate in low-innovation sectors 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. [Continue reading: IREF]

        • Working papers

          • Monetary policy and the correlation shift question

            de la Horra, L.P., Giménez Roche, G.A., Gabriel, A., & Perote, J. (2021). Monetary policy and the correlation shift question. Working paper.

            Asset return correlations have historically broken down during financial and economic crises. In this paper, we examine whether and to what extent monetary policy explains correlation shifts, especially in the aftermath of a crisis. In order to do so, we estimate conditional correlations for several pairs of assets over the period 1990-2019 using a dynamic conditional correlation model that allows for the impact of monetary policy. We show that asset return 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 caused by financial crises.

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

              de la Horra, L. P., Perote, J., & de la Fuente, G. (2021). 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 (QE) and forward guidance (FG) on corporate investment. Using a panel of U.S. firms, we find that expansionary QE and FG announcements have a positive but asymmetric impact on corporate investment. Particularly, firms with higher investment irreversibility and operating inflexibility, as well as firms with lower opportunity costs in terms of competitive advantages are less responsive to unconventional 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.

              • The impact of economic policy uncertainty and monetary policy on R&D investment: an option pricing approach

                de la Horra, L. P., Perote, J., & de la Fuente, G. (2021). The impact of economic policy uncertainty and monetary policy on R&D investment: an option pricing approach. Working paper.

                This paper adopts a real options approach to investigate the effects of economic policy uncertainty (EPU) and monetary policy on R&D investment. Using a panel of U.S. firms over the period 2000-2019, we show that higher (lower) EPU and contractionary (expansionary) monetary policy exert a positive (negative) and significant influence on R&D investment. Our findings shed light on the counter-intuitive impact of EPU and monetary policy on R&D projects, which may help policymakers to anticipate such collateral effects.

              • Book chapters

                • Why the World Needs More Immigration

                  de la Horra (2019). Why the World Needs More Immigration. Migration & Immigration, vol. 359, Independence Educational Publishers, pp. 27–28.[Continue reading: IEP]