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Indebtedness and macroeconomic imbalances in a monetary-union DSGE model

  • Florina-Cristina Badarau

    ()

    (Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales - Université Montesquieu - Bordeaux IV : EA2954)

  • Florence Huart

    (EQUIPPE - ECONOMIE QUANTITATIVE, INTEGRATION, POLITIQUES PUBLIQUES ET ECONOMETRIE - Université Lille I - Sciences et technologies - Université Lille II - Droit et santé - Université Lille III - Sciences humaines et sociales - PRES Université Lille Nord de France)

  • Ibrahima Sangaré

    ()

    (Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales - Université Montesquieu - Bordeaux IV : EA2954)

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.

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File URL: http://hal.univ-lille3.fr/docs/00/99/66/22/PDF/30667_badarau_huart_sangare_equippe13_indebtedness_and_macroeconomic_imbalances_in_a_monetary-union_DSGE_model.pdf
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Paper provided by HAL in its series Working Papers with number hal-00996622.

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Date of creation: 2013
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Handle: RePEc:hal:wpaper:hal-00996622
Note: View the original document on HAL open archive server: http://hal.univ-lille3.fr/hal-00996622
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  1. Huixin Bi, 2010. "Sovereign Default Risk Premia, Fiscal Limits and Fiscal Policy," Caepr Working Papers 2010-007, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
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