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Accounting for Spanish business cycles


  • Jesús Rodríguez-López

    () (Department of Economics, Universidad Pablo de Olavide de Sevilla)

  • Mario Solís-García

    () (Department of Economics, Macalester College, Saint Paul (USA))


We apply the business cycle methodology proposed by Chari, Kehoe, and McGrattan (2007) to identify the sources of Spanish business fluctuations during two outstanding cyclical episodes: the recession alongside the transition to democracy in 1977 and the great recession of 2008. We find that the labor wedge plays a key role during both recessions and that taxes and labor market institutions are likely behind the wedge movements. We conclude that any model that tries to understand the causes of recessions that occurred in the last three decades should focus on the labor wedge.

Suggested Citation

  • Jesús Rodríguez-López & Mario Solís-García, 2014. "Accounting for Spanish business cycles," Working Papers 14.05, Universidad Pablo de Olavide, Department of Economics.
  • Handle: RePEc:pab:wpaper:14.05

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    References listed on IDEAS

    1. Hansen, Bruce E., 2000. "Testing for structural change in conditional models," Journal of Econometrics, Elsevier, vol. 97(1), pages 93-115, July.
    2. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
    3. Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, vol. 62(6), pages 1383-1414, November.
    4. Samuel Bentolila & Marcel Jansen & Gabriel Jiménez & Sonia Ruano, 2013. "When Credit Dries Up: Job Losses in the Great Recession," Working Papers 2013-20, FEDEA.
    5. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-856, July.
    6. Michele Boldrin & José Ignacio Conde-Ruiz & Javier Díaz Giménez, 2010. "Eppur si Muove! Spain: Growing without a Model," Working Papers 2010-12, FEDEA.
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    Cited by:

    1. repec:eee:macchp:v2-1013 is not listed on IDEAS
    2. Solis-Garcia, Mario, 2017. "Yes we can! Teaching DSGE models to undergraduate students," MPRA Paper 81754, University Library of Munich, Germany.
    3. Brinca, P. & Chari, V.V. & Kehoe, P.J. & McGrattan, E., 2016. "Accounting for Business Cycles," Handbook of Macroeconomics, Elsevier.

    More about this item


    Business cycle accounting; efficiency wedge; labor wedge; investment wedge;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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