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MEDEA: A DSGE Model for the Spanish Economy

  • Pablo Burriel

    ()

    (Monetary and Financial Studies Department, Bank of Spain)

  • Jesus Fernandez-Villaverde

    ()

    (Department of Economics, University of Pennsylvania)

  • Juan F. Rubio-Ramirez

    ()

    (Department of Economics, Duke University)

In this paper, we provide a brief introduction to a new macroeconometric model of the Spanish economy named MEDEA (Modelo de Equilibrio Dinámico de la Economía EspañolA). MEDEA is a dynamic stochastic general equilibrium (DSGE) model that aims to describe the main features of the Spanish economy for policy analysis, counterfactual exercises, and forecasting. MEDEA is built in the tradition of New Keynesian models with real and nominal rigidities, but it also incorporates aspects such as a small open economy framework, an outside monetary authority such as the ECB, and population growth, factors that are important in accounting for aggregate fluctuations in Spain. The model is estimated with Bayesian techniques and data from the last two decades. Beyond describing the properties of the model, we perform different exercises to illustrate the potential of MEDEA, including historical decompositions, long-run and short-run simulations, and counterfactual experiments.

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Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 09-017.

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Length: 72 pages
Date of creation: 04 May 2009
Date of revision:
Handle: RePEc:pen:papers:09-017
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