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Spain in the Euro: a general equilibrium analysis


This paper analyzes the determinants of Spain’s macroeconomic fluctuations since the inception of the euro in 1999, with a special attention to observed growth and inflation differentials 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 find that observed differentials are the result of a combination of asymmetric country-specific shocks (in particular, demand and productivity shocks for growth and cost-push shocks for inflation) as well as asymmetric economic structure (especially lower nominal wage and price rigidities in Spain). Finally, we find that EMU membership has had a non-negligible effect on observed differentials.


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We would like to thank Angel Estrada, Juan Francisco Jimeno, Nooman Rebei and Alberto Urtasun for their help and very useful suggestions, and to Jesús Vázquez and participants of the conference “Estimation and Empirical Validation of Structural Dynamic Stochastic Models for the Spanish Economy” celebrated at Banco de España on 13March 2009. Javier Andrés acknowledges financial support by CICYT grant ECO2008-04669. This paper represents the views of the authors and should not be reported as representing the views of the Banco de España or the Eurosystem.

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Correspondence to Carlos Thomas.

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Andrés, J., Hurtado, S., Ortega, E. et al. Spain in the Euro: a general equilibrium analysis. SERIEs 1, 67–95 (2010).

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  • DSGE model
  • Monetary union
  • Growth and inflation differentials
  • Bayesian inference

JEL Classification

  • C11
  • C51
  • E17