458 - Imbalances and rebalancing scenarios in an estimated structural model for Spain
Author(s): Jan in 't Veld, Andrea Pagano, Rafal Raciborski, Marco Ratto, Werner Roeger (European Commission)
Imbalances and rebalancing scenarios in an estimated structural model for Spain(3 MB)
This paper uses an estimated DSGE model to analyse the factors behind the build-up of imbalances in the Spanish economy
Summary for non-specialists(30 kB)
This paper uses an estimated DSGE model to analyse the factors behind the build-up of imbalances in the Spanish economy. Shock decompositions suggest that external imbalances have been able to build up mainly due to the reduction in real interest rates and easier access to credit following the elimination of the exchange rate risk premium. While the reduction in external imbalances has started in the recent period, projections of the estimated model indicate that faster correction to these imbalances will require an adjustment in domestic demand and a significant improvement in the trade balance in the coming years. The correction would be eased in a more favourable and less risk-averse environment.
(European Economy. Economic Papers 458. July 2012.
Brussels. PDF. 40pp. Tab. Graph. Bibliogr. Free.)
JEL classification: C54; E21; E62;F32
Economic Papers are written by the staff of the Directorate-General for Economic and Financial Affairs, or by experts working in association with them. The Papers are intended to increase awareness of the technical work being done by staff and to seek comments and suggestions for further analysis. The views expressed are the author’s alone and do not necessarily correspond to those of the European Commission.