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A rational expectations model for simulation and policy evaluation of the Spanish economy

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  • J. Boscá
  • A. Díaz
  • R. Doménech
  • J. Ferri

    ()

  • E. Pérez
  • L. Puch

Abstract

This paper describes a Rational Expectations Model of the Spanish economy, REMS, which is in the tradition of small open economy dynamic general equilibrium models, with a strongly microfounded system of equations. The model is built on standard elements, but incorporates some distinctive features to provide an accurate description of the Spanish economy. We contribute to the existing models of the Spanish economy by adding search and matching rigidities to a small open economy framework. Our model also incorporates habits in consumption and rule-of-thumb households. As Spain is a member of EMU, we model the interaction between a small open economy and monetary policy in a monetary union. The model is primarily constructed to serve as a simulation tool at the Spanish Ministry of Economic Affairs and Finance. As such, it provides a great deal of information regarding the transmission of policy shocks to economic outcomes. The paper describes the structure of the model in detail, as well as the estimation and calibration technique and some examples of simulations.

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Bibliographic Info

Article provided by Spanish Economic Association in its journal SERIEs.

Volume (Year): 1 (2010)
Issue (Month): 1 (March)
Pages: 135-169

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Handle: RePEc:spr:series:v:1:y:2010:i:1:p:135-169

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Postal: Universidad del País Vasco; DFAE II; Avenida Lehendakari Aguirre, 83; 48015 Bilbao; Spain
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Web page: http://www.springer.com/economics/journal/13209
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Related research

Keywords: General equilibrium; Rigidities; Policy simulations; E24; E32; E62;

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Citations

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Cited by:
  1. Nikolai Stähler & Carlos Thomas, 2011. "FiMod - a DSGE model for fiscal policy simulations," Banco de Espa�a Working Papers 1110, Banco de Espa�a.
  2. José Emilio Boscá & Rafael Domenech & Javier Ferri, 2009. "Tax reforms and labour-market performance: An evaluation for Spain using REMS," Working Papers 0910, BBVA Bank, Economic Research Department.
  3. Emmanuel Farhi & Gita Gopinath & Oleg Itskhoki, 2012. "Fiscal devaluations," Working Papers 12-10, Federal Reserve Bank of Boston.
  4. Gonzalo Fernández-de-Córdoba & José Torres, 2011. "Forecasting the Spanish economy with an augmented VAR–DSGE model," SERIEs, Spanish Economic Association, vol. 2(3), pages 379-399, September.
  5. Costa Junior, Celso José & Sampaio, Armando Vaz, 2014. "Tax Reduction Policies of the Productive Sector and Its Impacts on Brazilian Economy," Dynare Working Papers 36, CEPREMAP.
  6. Pablo Burriel & Jesús Fernández-Villaverde & Juan F. Rubio-Ramírez, 2009. "MEDEA: A DSGE Model for the Spanish Economy," Working Papers 2009-17, FEDEA.
  7. Javier Andrés Domingo & José Emilio Boscá & Rafael Domenech Vilariño & Javier Ferri, 2009. "Job Creation in Spain: Productivity Growth, Labour Market Reforms or both?," Working Papers 0903, International Economics Institute, University of Valencia.
  8. Faia, Ester & Lechthaler, Wolfgang & Merkl, Christian, 2013. "Fiscal stimulus and labor market policies in Europe," Journal of Economic Dynamics and Control, Elsevier, vol. 37(3), pages 483-499.
  9. Vogel, Lukas, 2012. "Structural reforms, fiscal consolidation and external rebalancing in monetary union: A model-based analysis," Economic Modelling, Elsevier, vol. 29(4), pages 1286-1298.
  10. Costa Junior, Celso Jose & Sampaio, Armando Vaz & Gonçalves, Flávio de Oliveria, 2012. "Income Transfer as Model of Economic Growth," MPRA Paper 45494, University Library of Munich, Germany.
  11. Schwarzmüller, Tim & Stähler, Nikolai, 2011. "Reforming the labor market and improving competitiveness: An analysis for Spain using FiMod," Discussion Paper Series 1: Economic Studies 2011,28, Deutsche Bundesbank, Research Centre.

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