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Update and re-estimation of the quarterly model of Banco de España (MTBE)

Author

Listed:
  • Samuel Hurtado

    (Banco de España)

  • Pablo Manzano

    (Banco de España)

  • Eva Ortega

    (Banco de España)

  • Alberto Urtasun

    (Banco de España)

Abstract

The Quarterly Model of Banco de España (MTBE, Modelo Trimestral del Banco de España) is a large-scale macro-econometric model used for medium term macroeconomic forecasting of the Spanish economy, as well as for evaluating the staff projections and performing scenario simulations. The model is specified as a large set of error correction mechanism equations, and, especially in the short run, is mostly demand driven. This paper presents an update of the model, estimated with data from 1995-2012. In this new version, private productive investment and employment react more to output, capturing the higher sensitivity of these variables observed during the crisis, and prices and wages react less both to each other and to the evolution of real variables. Credit is now an endogenous variable in the model and it also helps explain the behaviour of the main demand components. As a result of all these changes, simulations now generally display a somewhat stronger demand channel and show nominal effects that are both smaller and with less inertia. The updated model describes an economy that is more reactive to financial shocks other than changes in interest rates, where wage moderation can generate growth and employment if it is followed by price moderation and where fiscal consolidation reduces public deficit and has negative but moderate effects on GDP.

Suggested Citation

  • Samuel Hurtado & Pablo Manzano & Eva Ortega & Alberto Urtasun, 2014. "Update and re-estimation of the quarterly model of Banco de España (MTBE)," Occasional Papers 1403, Banco de España;Occasional Papers Homepage.
  • Handle: RePEc:bde:opaper:1403
    as

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    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosOcasionales/14/Fich/do1403e.pdf
    File Function: First version, August 2014
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    References listed on IDEAS

    as
    1. Olympia Bover, 2008. "The Spanish Survey of Household Finances (EFF): description and methods of the 2005 wave," Occasional Papers 0803, Banco de España;Occasional Papers Homepage.
    2. Olympia Bover, 2008. "Oversampling of the wealthy in the Spanish Survey of Household Finances (EFF)," IFC Bulletins chapters,in: Bank for International Settlements (ed.), The IFC's contribution to the 56th ISI Session, Lisbon, August 2007, volume 28, pages 399-402 Bank for International Settlements.
    3. Sarai Criado & Adrian van Rixtel, 2008. "Structured finance and the financial turmoil of 2007-2008: and introductory overview," Occasional Papers 0808, Banco de España;Occasional Papers Homepage.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Javier J. Pérez & Marie Aouriri & Maria M. Campos & Dmitrij Celov & Domenico Depalo & Evangelia Papapetrou & Jurga Pesliakaite & Roberto Ramos Magdaleno & Marta Rodríguez-Vives, 2016. "The fiscal and macroeconomic effects of government wages and employment reform," Occasional Papers 1607, Banco de España;Occasional Papers Homepage.

    More about this item

    Keywords

    Spanish economy; macroeconometric model;

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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