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Imbalances and rebalancing scenarios in an estimated structural model for Spain

  • Jan in 't Veld
  • Andrea Pagano
  • Rafal Raciborski
  • Marco Ratto
  • Werner Roeger

This paper uses an estimated DSGE model to analyse the factors behind the build-up of imbalances in the Spanish economy. Shock decompositions suggest that external imbalances have been able to build up mainly due to the reduction in real interest rates and easier access to credit following the elimination of the exchange rate risk premium. While the reduction in external imbalances has started in the recent period, projections of the estimated model indicate that faster correction to these imbalances will require an adjustment in domestic demand and a significant improvement in the trade balance in the coming years. The correction would be eased in a more favourable and less risk-averse environment.

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File URL: http://ec.europa.eu/economy_finance/publications/economic_paper/2012/ecp458_en.htm
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Paper provided by Directorate General Economic and Financial Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers 2008 - 2015 with number 458.

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Length: 40 pages
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:euf:ecopap:0458
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  16. Gorton, Gary B., 2010. "Slapped by the Invisible Hand: The Panic of 2007," OUP Catalogue, Oxford University Press, number 9780199734153, June.
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