The Portuguese Slump and Crash and the Euro Crisis
Between 2000 and 2012, the Portuguese economy grew less than the United States during the Great Depression and less than Japan during its lost decade. This paper asks why this happened, with a particular focus on the slump between 2000 and 2007. It describes the main facts of Portugal's recent economic history, evaluates some possible explanations for its dismal performance, and proposes a new hypothesis based on the misallocation of abundant capital flows from abroad. I put forward a model of credit frictions to show that if financial integration exceeds financial deepening, productivity will fall, generating a slump as relatively unproductive firms in the nontradables sector expand at the expense of more productive tradables firms. This explanation can also potentially account for the similarities and the differences between Portugal on the one hand, and Ireland and Spain on the other, during this period, and for some features of the crash in Portugal after 2010.
I am grateful to the editors, David Romer and Justin Wolfers, to my discussants Olivier Blanchard and Gita Gopinath, to Javier Bianchi, Luca Fornaro, Vitor Gaspar, Stephanie Schmitt-Grohé, Mike Treadway, and Martin Uribe for many comments, and to Stéphane Dupraz for excellent research assistance. Participants in conferences at the Fundação de Serralves, Encontros da Junqueira-AIP, and Columbia University gave useful feedback on earlier drafts. All errors are mine. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
Ricardo A. M. R. Reis
Outside Professional Activities, 2011-2013
Columbia University, CEPR, and NBER
Compensated teaching or advising at central banks or related organizations
Study Center, Gerzensee, Switzerland: lecturer, 2011.
Banco Central do Brasil: lecturer, 2011.
International Monetary Fund Institute: lecturer, 2011-13.
Federal Reserve Bank of New York: academic consultant and visiting scholar, 2011-13.
Federal Reserve Bank of Minneapolis: academic consultant, 2013.
Federal Reserve Bank of Richmond: academic consultant, 2013
Others sources of compensated activities
Journal of Monetary Economics: co-editor, 2011-13.
Cowles Foundation, Yale University: visitor and lecturer, 2011.
Brookings Papers on Economic Activity: panel member, 2011-13.
Russell Sage Foundation: visiting scholar, 2011-12.
Regular opinion column in Portuguese newspaper Dinheiro Vivo, 2011-13.
Financial support for research
INET grant to study “New-style central banking”, 2013-14.
NSF grant to study “Dynamic Measures of Inflation, 2009-12.
NBER grant to study “Central Bank Design”, 2013
Brookings Papers for Economic Activity support for articles published, 2011-13.
Member of the euro-nomics group advocating for original solutions to the European crisis.
Member of SEDES blog, theportugueseeconomy.blogspot.com and of the advisory council of “Plataforma para o Crescimento Sustentável”, independent reflection groups / think tanks on the state and future of Portugal.
Member of ISEG Budget Watch, panel of independent experts evaluating the Portuguese government budget proposals.
Member of the Monetary Policy Advisory Panel, FRB New York.
Ricardo Reis, 2013. "The Portugese Slump and Crash and the Euro Crisis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(1 (Spring), pages 143-210. citation courtesy of