Would a real depreciation of the euro improve the French economy?
AbstractIn this paper, we use a Micro-Macro model to evaluate the effects of a euro's depreciation on the French economy, both at the macro and micro level. Our Micro-Macro model consists of a Microsimulation model that includes an arithmetical model for the French fiscal system and two behavioral models used to simulate the effects on consumption behavior and labor supply, and a multisectoral CGE model which simulates the macroeconomic effects of a reform or a shock. The integration of the two models is made using an iterative (or sequential) approach. We find that a 10% euro's depreciation stimulates the aggregate demand by increasing exports and reducing imports which increases production and reduces the unemployment rate in the economy. At the individual level, we find that the macroeconomic shock reduces poverty and, to a lesser extent, income inequality. In particular, the decrease in the equilibrium wage, determined in the macro model, slightly reduces the available income for people who have already a job, while the reduction in the level of unemployment permits to some individuals to find a job, substantially increasing their income and, in many cases, bringing them out of poverty.
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Bibliographic InfoPaper provided by Universitat de les Illes Balears, Departament d'Economía Aplicada in its series DEA Working Papers with number 60.
Date of creation: 2013
Date of revision:
Exchange rates; Microsimulation; CGE models;
Find related papers by JEL classification:
- F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-05-19 (All new papers)
- NEP-CMP-2013-05-19 (Computational Economics)
- NEP-EEC-2013-05-19 (European Economics)
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