We analyse the possible optimality of the path followed by the current account of the Spanish economy over a very long period of almost 170 years (1850-2016), according to the intertemporal approach to the current account and using a present-value model. In particular, from the estimation of a bivariate vector autoregression model for the current account, we attempt to assess the extent to which the latter has been used to smooth private consumption over time in the presence of temporary shocks that the economy might suffer. In general, evidence does not seem to be particularly favourable to the validity of the model over the period of analysis.

Economic and social impacts of aging trends will be of the utmost importance in the near future. We embed a stylized pay-as-you-go (PAYG) pension system into a DSGE model with overlapping generations to assess the macroeconomic effects of aging in a small Euro Area economy. The simulations suggest large negative impacts on GDP and private consumption. In addition, external imbalances may widen significantly under the PAYG system. All results are conditional on the policy options addressing debt sustainability–the impacts tend to be very large if the government finances the aging with higher social security premia instead of lower replacement ratios. Sensitivity analysis reveals that GDP and private consumption impacts are less robust than those on external imbalances. Results also imply that supranational policy coordination may be crucial if the objective is to preserve economic and financial stability in the Euro Area.