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Spain in the euro: a general equilibrium analysis

Author

Listed:
  • Javier Andrés

    () (Universidad de Valencia)

  • Samuel Hurtado

    () (Banco de España)

  • Eva Ortega

    () (Banco de España)

  • Carlos Thomas

    () (Banco de España)

Abstract

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.

Suggested Citation

  • Javier Andrés & Samuel Hurtado & Eva Ortega & Carlos Thomas, 2009. "Spain in the euro: a general equilibrium analysis," Working Papers 0927, Banco de España;Working Papers Homepage.
  • Handle: RePEc:bde:wpaper:0927
    as

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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Brzoza-Brzezina, Michał & Kolasa, Marcin & Makarski, Krzysztof, 2015. "Macroprudential policy and imbalances in the euro area," Journal of International Money and Finance, Elsevier, vol. 51(C), pages 137-154.
    2. Kolasa, Marcin, 2014. "Real convergence and its illusions," Economic Modelling, Elsevier, vol. 37(C), pages 79-88.
    3. Bleich, Dirk & Fendel, Ralf, 2012. "Monetary Policy Conditions in Spain Before and After the Changeover to the Euro: A Taylor Rule Based Assessment," Review of Applied Economics, Review of Applied Economics, vol. 8(1).
    4. Samuel Hurtado & Elena Fernández & Eva Ortega & Alberto Urtasun, 2011. "Nueva actualización del modelo trimestral del Banco de España," Occasional Papers 1106, Banco de España;Occasional Papers Homepage.
    5. Tim Schwarzmüller & Nikolai Stähler, 2013. "Reforming the labor market and improving competitiveness: an analysis for Spain using FiMod," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 4(4), pages 437-471, November.
    6. Martín-Moreno, José M. & Pérez, Rafaela & Ruiz, Jesús, 2016. "Exploring the sources of Spanish macroeconomic fluctuations: An estimation of a small open economy DSGE model," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 417-437.
    7. Álvarez, Luis J. & Hurtado, Samuel & Sánchez, Isabel & Thomas, Carlos, 2011. "The impact of oil price changes on Spanish and euro area consumer price inflation," Economic Modelling, Elsevier, vol. 28(1-2), pages 422-431, January.
    8. Jan in 't Veld & Andrea Pagano & Rafal Raciborski & Marco Ratto & Werner Roeger, 2012. "Imbalances and rebalancing scenarios in an estimated structural model for Spain," European Economy - Economic Papers 2008 - 2015 458, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    9. Martín-Moreno, José M. & Pérez, Rafaela & Ruiz, Jesús, 2014. "A real business cycle model with tradable and non-tradable goods for the Spanish economy," Economic Modelling, Elsevier, vol. 36(C), pages 204-212.
    10. Samuel Hurtado & Carlos Thomas, 2010. "Un modelo de equilibrio general (BEMOD) para el análisis de la economía española en la zona del euro," Boletín Económico, Banco de España;Boletín Económico Homepage, issue JAN, Enero.
    11. Jan in ’t Veld & Andrea Pagano & Rafal Raciborski & Marco Ratto & Werner Roeger, 2015. "Imbalances and Rebalancing in an Estimated Structural Model for Spain," International Journal of Central Banking, International Journal of Central Banking, vol. 11(1), pages 1-41, January.
    12. 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.
    13. Dieppe, Alistair & Ortega, Eva & D'Agostino, Antonello & Karlsson, Tohmas & Benkovskis, Konstantins & Caivano, Michele & Hurtado, Samuel & Várnai, Tímea, 2011. "Assessing the sensitivity of inflation to economic activity," Working Paper Series 1357, European Central Bank.
    14. Ciccarelli, Matteo & Osbat, Chiara, 2017. "Low inflation in the euro area: Causes and consequences," Occasional Paper Series 181, European Central Bank.
    15. José Luis Cendejas Bueno & Félix-Fernando Muñoz & Juan Castañeda, 2014. "When Money Matters," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 15(2), pages 77-110, April.
    16. Nikolay Hristov, 2016. "The Ifo DSGE Model for the German Economy," ifo Working Paper Series 210, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.

    More about this item

    Keywords

    DSGE model; monetary union; growth and inflation differentials; Bayesian inference;

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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