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Indebtedness and macroeconomic imbalances in a monetary-union DSGE model

Author

Listed:
  • Florina-Cristina Badarau

    (Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales - UB - Université de Bordeaux)

  • Florence Huart

    (EQUIPPE - Economie Quantitative, Intégration, Politiques Publiques et Econométrie - Université de Lille, Sciences et Technologies - Université de Lille, Sciences Humaines et Sociales - PRES Université Lille Nord de France - Université de Lille, Droit et Santé)

  • Ibrahima Sangaré

    (Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales - UB - Université de Bordeaux)

Abstract

We build a two-country open-economy monetary union DSGE model in order to explain some macroeconomic imbalances in the euro area. We fo cus on the role of cyclic al behaviour of public spending and sovereign risk premium. Pro-cyclical primary public expenditures in one country do not lead to higher interest rates on domestic public bonds in the short term as long as output growth helps financing public debt. Spillover effects on th e other country can be positive on output as long as a real effective depreciation of the common currency leads to higher exports to the rest of the world.

Suggested Citation

  • Florina-Cristina Badarau & Florence Huart & Ibrahima Sangaré, 2013. "Indebtedness and macroeconomic imbalances in a monetary-union DSGE model," Working Papers hal-00996622, HAL.
    • Handle: RePEc:hal:wpaper:hal-00996622
    Note: View the original document on HAL open archive server: https://hal.univ-lille.fr/hal-00996622
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    References listed on IDEAS

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    Cited by:

    1. Perego, Erica R. & Vermeulen, Wessel N., 2016. "Macro-economic determinants of European stock and government bond correlations: A tale of two regions," Journal of Empirical Finance, Elsevier, vol. 37(C), pages 214-232.

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    Keywords

    macroeconomic divergences; euro area; DSGE; risk premium; pro-cyclical fiscal policy; spillover effects;
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