2006): BEMOD: a DSGE model for the Spanish economy and the rest of the Euro Area. Banco de España Working Paper, n (original) (raw)
BEMOD: A DSGE Model for the Spanish Economy and the Rest of the Euro Area
SSRN Electronic Journal, 2000
In this paper we present the theoretical foundations and the simulation results obtained with a new dynamic general equilibrium model developed at the Banco de España for the Spanish economy and the rest of Euro area. The model is designed to help in simulating the effect of alternative shocks on the main aggregate variables.
MEDEA: A DSGE Model for the Spanish Economy
SSRN Electronic Journal, 2000
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.
Spain in the Euro: a general equilibrium analysis
Series, 2010
This paper analyzes the determinants of Spain's macroeconomic ‡uctuations since the inception of the euro in 1999, with a special attention to observed growth and in- ‡ation di¤erentials with respect to the rest of the European Monetary Union (EMU). For that purpose we estimate the Banco de España DSGE model of the Spanish economy and the rest of the Eurosystem (BEMOD). We …nd that observed di¤erentials are the result of a combination of asymmetric country-speci…c shocks (in particular, demand and productivity shocks for growth and cost-push shocks for in ‡ation) as well as asymmetric economic structure (especially lower nominal wage and price rigidities in Spain). Finally, we …nd that EMU membership has had a non-negligible e¤ect on observed di¤erentials. JEL codes: C11, C51, E17
2005, An Estimated Two-Country DSGE Model for the Euro Area and the
2014
Work in progress This paper develops an open economy DSGE model with sticky prices and wages linking the euro area and the US economy. The model is estimated with Bayesian tech-niques using ten country-speci c macroeconomic variables for each economy together with oil prices and the euro/dollar exchange rate. The introduction of a complete set of domestic and open economy shocks allows for an empirical investigation of their con-tribution to the business cycle uctuations in output, trade balance and exchange rate. The spill-over e¤ects depend crucially on the elasticity of substitution. The empirical t results in similar probabilities for high and low values of this parameter. The re-strictions that are imposed by the UIRP condition on the reaction of the model to the various shocks are not supported by the data. 1
International Review of Economics & Finance
This paper analyzes the role of a variety of shocks as determinants of Spanish macroeconomic fluctuations before the international financial and economic crisis (1970-2008). To do this we estimate a small open economy stochastic model using Kalman Filter techniques. The set of estimated parameters allows the replication with remarkable accuracy of the time path for the major macroeconomic aggregates. In particular, the model reproduces the so-called dual inflation phenomenon which burdens the competitiveness of the Spanish economy.
Disentangling the Effects of Supply and Demand Shocks: A DSGE Model for the Spanish Economy
Procedia Economics and Finance, 2014
In this paper we use a small open economy Dynamic Stochastic General Equilibrium Model (DSGE) for Spanish economy to search for a deeper characterization of the determinants of Spain's macroeconomic fluctuations throughout the period 1970-2008. In order to do this, we distinguish between tradable and non-tradable goods to take into account the fact that the presence of non-tradable goods in this economy is one of the largest in the world. We estimate a DSGE model with supply and demand shocks (sectorial productivity, public spending, international real interest rate and preferences) using Kalman Filter techniques. We find the following results. First of all, our variance decomposition analysis suggests that 1) the preference shock basically accounts for private consumption volatility 2) the idiosyncratic productivity shock accounts for non tradable output volatility; and 3) the sectorial productivity shock along with the international interest rate both greatly account for tradable output. Secondly, the model closely replicates the time path observed in the data for the Spanish economy and finally, the model captures the main cyclical qualitative features of this economy reasonably well.
Empirical Properties Of Closed-And Open-Economy Dsge Models Of The Euro Area
2008
Abstract In this paper, we compare the empirical properties of closed-and open-economy DSGE models estimated on Euro area data. The comparison is made along several dimensions; we examine the models in terms of their marginal likelihoods, forecasting performance, variance decompositions, and their transmission mechanisms of monetary policy.
Update of the Quarterly Model of the Bank of Spain
SSRN Electronic Journal, 2000
This paper presents the update of the macroeconometric model used at the Bank of Spain for medium term macroeconomic forecasting of the Spanish economy, as well as for performing policy simulations. The many changes that the Spanish economy has experimented in the last years, and the new system of national accounts published by the national statistical office, suggested that a reestimation of the model was due. This paper presents such reestimation with newer data (up to the end of 2005), and includes some modifications that were deemed necessary in certain equations.
A rational expectations model for simulation and policy evaluation of the Spanish economy
SERIEs, 2010
This paper describes a Rational Expectations Model of the Spanish economy, REMS, which is in the tradition of small open economy dynamic general equilibrium models, with a strongly microfounded system of equations. The model is built on standard elements, but incorporates some distinctive features to provide an accurate description of the Spanish economy. We contribute to the existing models of the Spanish economy by adding search and matching rigidities to a small open economy framework. Our model also incorporates habits in consumption and rule-of-thumb households. As Spain is a member of EMU, we model the interaction between a small open economy and monetary policy in a monetary union. The model is primarily constructed to serve as a simulation tool at the Spanish Ministry of Economic Affairs and Finance. As such, it provides a great deal of information regarding the transmission of policy shocks to economic outcomes. The paper describes the structure of the model in detail, as well as the estimation and calibration technique and some examples of simulations.
A general equilibrium assessment of external and domestic shocks in Spain
Economic Modelling, 2012
After many years of growth, the Spanish economy plunged into the most severe and prolonged recession recorded since reliable national accounts data have been available. The main goal of this paper is to quantify the effects of the external and domestic shocks that hit the Spanish economy in 2008-2009 by employing a disaggregated general equilibrium model calibrated to a 2000 SAM elaborated by the authors. External shocks are simulated by employing the neoclassical closure (private investment is determined by domestic and external savings) and the Keynesian closure (investment is exogenous). External and domestic shocks are also jointly simulated with the Keynesian closure. The results provide a good approximation to observed changes in key macroeconomic variables.
2009
I am also grateful for helpful comments from participants to these two conferences. The opinions expressed in this paper are the author's and do not necessarily re ‡ect those of the Central Bank of Argentina. 3 The features of ARGEM that are suppressed in order to simplify the model are: 1) investment, and hence the capital stock and its intensity of utilization, implying that what is called consumption in ARGEMmy should be interpreted as absorption (consumption plus investment), 2) the deposit rate, which is collapsed with the Central Bank bond rate under the assumption that they are perfect substitutes, 3) bank reserves in the Central Bank and Bank demand for foreign and domestic currency cash, 4) manufactured exports, which leaves only primary sector exports (commodities). As a consequence of 4) in (this version of) ARGEMmy there is no Phillips equations for manufactured exports. Nevertheless, there is still abundant nominal rigidity in ARGEMmy since it includes three Phillips equations (wages, domestic goods, and imported goods), all with Calvo style stickiness plus full indexation to the previous period's in ‡ation for those who do not optimize currently. Also, imported goods prices are set in domestic (local) currency, generating a slow pass-through of both foreign prices and the exchange rate to domestic import prices.
The Global Multi-Country Model (GM): an Estimated DSGE Model for the Euro Area Countries
2017
This paper presents the European Commission's Global Multi-country model (the GM model). The GM model is an estimated multi-country DSGE model, developed by the European Commission, that can be used for spillover analysis, forecasting and medium term projections. Its development is jointly performed by the Joint Research Centre and DG ECFIN. Since the GM model is developed to be flexible under different country configurations,we present the GM model in its configuration designed for EMU-countries (GM3-EMU), which has been estimated for the four largest European economies (Germany, France, Italy and Spain). We analyse business cycle properties, present the model fit and provide a quantitative assessment of the relative importance that supply, demand and international shocks as well as discretionary policy interventions had in explaining the cyclical patterns observed in each country since the establishment of the EMU.
Bayesian Estimation of a DSGE Model for the Portuguese Economy
SSRN Electronic Journal, 2009
In this paper, a New-Keynesian DSGE model for a small open economy integrated in a monetary union is developed and estimated for the Portuguese economy, using a Bayesian approach. Estimates for some key structural parameters are obtained and a set of exercises exploring the model's statistical and economic properties are performed. A survey on the main events and literature associated with DSGE models that motivated this study is also provided, as well as a comprehensive discussion of the Bayesian estimation and model validation techniques applied. The model features five types of agents namely households, firms, aggregators, the rest of the world and the government, and includes a number of shocks and frictions, which enable a closer matching of the short-run properties of the data and a more realistic short-term adjustment to shocks. It is assumed from the outset that monetary policy is defined by the union's central bank and that the domestic economy's size is negligible, relative to the union's one, and therefore its specific economic fluctuations have no influence on the union's macroeconomic aggregates and monetary policy. An endogenous risk-premium is considered, allowing for deviations of the domestic economy's interest rate from the union's one. Furthermore it is assumed that all trade and financial flows are performed with countries belonging to the union, which implies that the nominal exchange rate is irrevocably set to unity.
QUEST III: an estimated DSGE model of the euro area with fiscal and monetary policy
2008
This paper develops a DSGE model for an open economy and estimates it on euro area data using Bayesian estimation techniques. The model features nominal and real frictions, as well as financial frictions in the form of liquidity constrained households. The model incorporates active monetary and fiscal policy rules (for government consumption, investment, transfers and wage taxes) and can be used to analyse the effectiveness of stabilisation policies. To capture the unit root character of macroeconomic time-series we allow for stochastic trend in TFP, but instead of filtering data prior to estimation, we estimate the model in growth rates and stationary nominal ratios.
2015
In this paper we develop and estimate a new bayesian DSGE model for the Spanish economy that has been designed to evaluate different structural reforms. The small open economy model incorporates a banking sector, consumers and entrepreneurs that accumulate debt, a rich fiscal structure and monopolistic competition in products and labor markets, for a country in a currency union, with no independent monetary policy. The model can be used to evaluate ex-ante and ex-post policies and structural reforms and to decompose the evolution of macroeconomic aggregates according to different shocks.
The Global Multi-Country Model (GM): An Estimated DSGE Model for Euro Area Countries
ECFIN DISCUSSION PAPER 102, 2019
This paper introduces the Global Multi-country (GM) model, an estimated multi-country Dynamic Stochastic General Equilibrium (DSGE) model of the world economy. We present the model in 3-region configurations for Euro area (EA) countries that include an individual EA Member State, the rest of the EA (REA), and the rest of the world (RoW). We provide and compare estimates of this model structure for the four largest EA countries (Germany, France, Italy, and Spain). The novelty of the paper is the estimation of ex-ante identical country models on the basis of a unified information set, which allows for clean cross-country comparison of parameter estimates and drivers of economic dynamics. The paper also provides an overview of applications of the GM model such as the structural interpretation of business cycle dynamics, the contribution to the European Commission’s economic forecast, the scenario analysis and policy counterfactuals.
Impact of the Single Currency in the Spanish Economy Using a Dynamic Multisectoral Model
1998
Using a dynamic multisectoral model of the Spanish economy, we investigate the impact that the introduction of a single currency in Europe will have on the economy of Spain. We decompose the phenomenon in three sub-scenarios which we first analyse separately to better understand the effects of the global single currency scenario that includes all three at the same time. The three components studied are: 1) the reduction in transactions costs, 2) the financial integration, 3) the fixing of exchange rates in the area. All scenarios are compared with a baseline constructed under the assumption that the single currency process does not exist. Therefore, the study analyses the effects that the single currency will have on the Spanish economy, not the effects of Spain entering the European Monetary Union versus staying out. A brief excerpt of the results is presented in this paper.
Forecasting the Spanish economy with an augmented VAR–DSGE model
SERIEs, 2011
Over the past ten years Dynamic Stochastic General Equilibrium (DSGE) models have become an important tool in quantitative macroeconomics. However, DSGE models were not considered as a forecasting tool until very recently. The objective of this paper is twofold. First, we compare the forecasting ability of a canonical DSGE model for the Spanish economy with other standard econometric techniques. More precisely, we compare out-of-sample forecasts obtained from di¤erent estimation methods of the DSGE model with the forecasts produced by a VAR and a Bayesian VAR. Second, we propose a new method for combining DSGE and VAR models (in what we have called Augmented VAR-DSGE) through the expansion of the variable space where the VAR operates with arti…cial series obtained from a DSGE model. The results indicate that the out-of-sample forecasting performance of the proposed method is capable of competing with all the considered alternatives, and thus even a simple canonical RBC model contains useful information that can be used for forecasting purposes.