The International Monetary System (IMS) is to a large extent based on one leading currency, the US Dollar (USD) and a small number of other currencies with some international importance, e.g. the Euro (EUR) or the British Pound (GBP). International leadership implies that one currency fulfills, to a great extent, the role of unit of account, store of value and medium of exchange. Historically, we can count less than a hand full of leading currencies in the last centuries. The Dutch Guilder preceded the GBP, which in turn has been dethroned by the USD. Remarkably, each currency maintained its leading position for decades or even centuries. For example, the creation of the EUR in 1999 did not contest the USD’s position to date. Moreover, aspiring currencies such as the Chinese Yuan (CNY), the Brazilian Real, the Indian Rupee and others may defy the actual organization of the IMS. Thus, whether the USD can maintain its position in this currency competition critically hinges on the determinants of being the leading currency. Surprisingly, not much economic research has been devoted to address currency competition or even war, and the systematic study of the determinants of a leading currency. -        The central topic of this research proposal is currency competition – the competition that takes place between currencies resulting in a leadership of a currency lasting for a long period. Despite its relevance this topic has been largely neglected in macroeconomic theory. Why so few leading international currencies existed and the long-run determinants of their rise and fall have yet to be explored. The latter will be studied along the concrete short-run example of the design of optimal monetary policy. Our approach is in sharp contrast to the existing literature which emphasizes the benefits of international policy cooperation. We study currency war, a manifestation of currency competition and the unstudied opposite scenario of what has been examined. In sum, we develop...

In this project we explore the links between education and production activity. We want to quantify the phenomena of undereducation, overeducation, and generically the mismatch between education and the labor market in Portugal. We also want to determine its recent evolution and its impact on productivity and productivity gaps between Portugal and other developed economies, specifically within the European Union. Productivity Differences have also been explained by the type of education investment made by each country or group of countries (Aghion and Howitt, 2006; Jones, 2008; Krueger and Kumar, 2004). This issue can be studied in terms of the adequacy of general or vocational education to a country's productive structure or of the adequacy of different fields of study to that productive structure. This motivates us to think that other features of the relationship between education and the productive system can affect productivity differences. The main aim of the project is to identify the role the levels of mismatch have in explaining productivity differences inside and between countries.

This Project is inserted in the Theory of Endogenous Growth. We want to increase scientific knowledge about different models of endogenous growth with physical capital, human capital, and R&D applied to the world economy and to small open economies. In the first class, of closed world economy models, the frontier knowledge is defined by a generation of endogenous growth models that include physical and human capital accumulation, vertical and horizontal R&D, in which literature has made an attempt to quantify the different externalities due to market failures in the R&D process (e.g. Strulik, 2007). Thus, the main lines to be pursued include introducing new cumulative assets in this class of models, such as social capital and natural capital, and new sectors, namely a sector of basic research. Social capital and natural capital are essential factors to define the wealth of Nations (World Bank, 2006), so their consideration in this type of models is crucial. Besides that, the consideration of a basic research sector is new in models with human capital accumulation. However, its inclusion and the interaction it may have with the other sectors (final good, differentiated goods, R&D, Human Capital) may introduce great differences in the equilibrium features, namely in stability properties and in convergence paths. Furthermore, there are externalities associated with social and natural capital and with the nature of basic research as a pure public good that have never been considered in this framework. We want to find these features, to calculate transition paths and to quantify the different types of externalities through the implementation of calibration exercises. These findings would be useful to identify, quantify and optimally time policy adoption. Concerning endogenous growth in open economies we will use two different approaches, modeling small open economies and modeling trade between two large blocks, North and South. Regarding small open econo...