Spain in the Euro: a general equilibrium analysis
This paper analyzes the determinants of Spain’s macroeconomic fluctuations since the inception of the euro in 1999, with a special attention to observed growth and inflation differentials with respect to the rest of the European Monetary Union (EMU). For that purpose we estimate the Banco de España DSGE model of the Spanish economy and the rest of the Eurosystem (BEMOD). We find that observed differentials are the result of a combination of asymmetric country-specific shocks (in particular, demand and productivity shocks for growth and cost-push shocks for inflation) as well as asymmetric economic structure (especially lower nominal wage and price rigidities in Spain). Finally, we find that EMU membership has had a non-negligible effect on observed differentials.
KeywordsDSGE model Monetary union Growth and inflation differentials Bayesian inference
JEL ClassificationC11 C51 E17
We would like to thank Angel Estrada, Juan Francisco Jimeno, Nooman Rebei and Alberto Urtasun for their help and very useful suggestions, and to Jesús Vázquez and participants of the conference “Estimation and Empirical Validation of Structural Dynamic Stochastic Models for the Spanish Economy” celebrated at Banco de España on 13March 2009. Javier Andrés acknowledges financial support by CICYT grant ECO2008-04669. This paper represents the views of the authors and should not be reported as representing the views of the Banco de España or the Eurosystem.
- Adolfson M, Laséen S, Lindé J, Villani M (2005) Bayesian estimation of an open economy DSGE model with incomplete pass-through. Sveriges Riksbank, Working Paper 179Google Scholar
- Álvarez LJ, Hurtado S, Sánchez I, Thomas C (2009) The impact of oil price changes on Spanish consumer price inflation. Banco de España Occasional Paper No. 09XXGoogle Scholar
- Andrés J, Burriel P, Estrada A (2006) BEMOD: a DSGE model for the Spanish economy and the rest of the Euro Area. Banco de España Working Paper No. 0631Google Scholar
- Aspachs-Bracons O, Rabanal P (2009) The drivers of housing cycles in Spain. La Caixa Working Paper Series 02/2009Google Scholar
- Banco de España (2007) Adjustment of the Spanish economy: the real estate cycle and the functioning of the labour market, Chap 2 of the Banco de España Annual Report 2007Google Scholar
- Burriel P, Fernández-Villaverde J, Rubio-Ramírez JF (2009) MEDEA: a DSGE model for the Spanish economy. FEDEA Working Paper 2009-17Google Scholar
- Christoffel K, Coenen G, Warne A (2008) The New Area-Wide Model of the Euro Area: a micro-founded open-economy model for forecasting and policy analysis. ECB Working Paper Series No. 944, October 2008Google Scholar
- Druant M, Fabiani S, Kezdi G, Lamo A, Martins F, Sabbatini R (2008) How are firms’ wages and prices linked: survey evidence in Europe, mimeo, EurosystemGoogle Scholar
- Du Caju P, Gautier E, Momferatou D, Ward-Warmedinger M (2008) Institutional features of wage bargaining in 22 EU countries, the US and Japan, forthcoming in ECB Working Paper SeriesGoogle Scholar
- Guerron-Quintana P (2008) What you match does matter: the effects of data on DSGE estimation. MimeoGoogle Scholar
- López P, Estrada Á, Thomas C (2008) Una Primera Estimación del Impacto Económico de Una Reducción de las Cargas Administrativas en España. Boletín Económico del Banco de España, July–August 2008Google Scholar
- Tovar C (2008) DSGE models and central banks. BIS, Working Paper No. 258Google Scholar
This article is published under license to BioMed Central Ltd. Open Access This article is distributed under the terms of the Creative Commons Attribution Noncommercial License which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.