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A Rational Expectations Model for Simulation and Policy Evaluation of the Spanish Economy

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Author Info

  • J.E. Boscá

    (University of Valencia, Spain)

  • A. Díaz

    (Ministry of Economics and Finance, Spain)

  • R. Doménech

    (Economic Bureau of the Prime Minister, Spain. University of Valencia, Spain)

  • J. Ferri

    (University of Valencia, Spain)

  • E. Pérez

    (Ministry of Economics and Finance, Spain)

  • L. Puch

    (FEDEA, Universidad Complutense and ICAE, Spain)

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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File URL: http://iei.uv.es/docs/wp_internos/RePEc/pdf/iei_0706.pdf
File Function: First version, 2007
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Bibliographic Info

Paper provided by International Economics Institute, University of Valencia in its series Working Papers with number 0706.

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Length: 53 pages
Date of creation: Dec 2007
Date of revision:
Handle: RePEc:iei:wpaper:0706

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Keywords: general equilibrium; rigidities; policy simulations;

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References

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Citations

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Cited by:
  1. Farhi, Emmanuel & Gopinath, Gita & Itskhoki, Oleg, 2011. "Fiscal Devaluations," CEPR Discussion Papers 8721, C.E.P.R. Discussion Papers.
  2. Gonzalo Fernandez-de-Córdoba & José L. Torres, 2009. "Forecasting the Spanish economy with an Augmented VAR-DSGE model," Working Papers 2009-1, Universidad de Málaga, Department of Economic Theory, Málaga Economic Theory Research Center.
  3. Pablo Burriel & Jesus Fernandez-Villaverde & Juan F. Rubio-Ramirez, 2009. "MEDEA: A DSGE Model for the Spanish Economy," PIER Working Paper Archive 09-017, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  4. J. Andres & J.E. Bosca & R. Domenech & J. Ferri, 2010. "Job Creation in Spain. Productivity Growth, Labour Market Reforms or both," Working Papers 1013, BBVA Bank, Economic Research Department.
  5. J.E. Bosca & R. Domenech & J. Ferri, 2009. "Tax Reforms and Labour-market Performance. An Evaluation for Spain using REMS," Working Papers 0910, BBVA Bank, Economic Research Department.
  6. 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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