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Would a euro's depreciation improve the French economy?

Author

Listed:
  • Riccardo Magnani

    (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique)

  • Luca Piccoli

    (UIB - Université des îles Baléares)

  • Martine Carré

    (LEDa - Laboratoire d'Economie de Dauphine - Université Paris-Dauphine)

  • Amedeo Spadaro

    (PSE - Paris School of Economics)

Abstract

In this paper, we use a Micro-Macro mo del to evaluate the e ects of a euro's depreciation on the French economy, both at the macro and micro level. Our Micro-Macro model consists of a Microsimulation mo del that includes an arithmetical mo del for the French fiscal system and two behavioral mo dels used to simulate the eff ects on consumption b ehavior and lab or supply, and a multisectoral CGE model which simulates the macro economic e ects of a reform or a shock. The integration of the two mo dels 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 nd that the macro economic shock reduces poverty and, to a lesser extent, income inequality. In particular, the decrease in the equilibrium wage, determined in the macro mo del, 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.

Suggested Citation

  • Riccardo Magnani & Luca Piccoli & Martine Carré & Amedeo Spadaro, 2013. "Would a euro's depreciation improve the French economy?," CEPN Working Papers hal-01515823, HAL.
  • Handle: RePEc:hal:cepnwp:hal-01515823
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01515823
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    More about this item

    Keywords

    CGE models; Microsimulation; Exchange rates;

    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

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