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on European Economics |
| By: | Ulrike Busch; Dieter Nautz |
| Abstract: | Controllability of longer-term interest rates requires that the persistence of their deviations from the central bank's policy rate (i.e. the policy spreads) remains suciently low. This paper applies fractional integration techniques to assess the persistence of policy spreads of euro area money market rates along the yield curve. Independently from anticipated policy rate changes, there is strong evidence for all maturities that policy spreads exhibit long memory. We show that recent changes in the operational framework and the communication strategy of the European Central Bank have significantly decreased the persistence of euro area policy spreads and, thus, have enhanced the central bank's influence on longer-term money market rates. |
| Keywords: | Long memory and fractional integration, controllability and persistence of interest rates, new operational framework of the ECB |
| JEL: | C22 E43 E52 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2009-029&r=eec |
| By: | Sule Akkoyunlu (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Ilja Neustadt (University of Zürich, Socioeconomic Institute, Zürich); Peter Zweifel (University of Zürich, Socioeconomic Institute, Zürich) |
| Abstract: | In this paper, the amount of income redistribution in the United States, the European Union, and Switzerland is compared and empirically related to economic, political, and behavioral determinants elaborated in the literature. Lying in between the two poles, Switzerland provides unique evidence about the relative merits of competing hypotheses. It tips the balance against the economic explanation, which predicts more rather than less income redistribution in the United States compared to the EU. It only weakly supports the political model linking proportional representation and multiparty structure (which also characterize Switzerland) to redistribution; yet the Swiss share of transfers in the GDP is low. Behavioral explanations receive a good deal of support from the case of Switzerland, a country that shares with the United States the belief that hard work rather than luck, birth, connections, and corruption determine wealth. In this way, the Janus face of Switzerland may help to explain the difference in the amount of U.S. and EU income redistribution. |
| Keywords: | Redistribution, Income Mobility, Openness, Political Economy, Beliefs, Religion, Immigration |
| JEL: | D31 D63 D64 H53 I31 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:kof:wpskof:09-228&r=eec |
| By: | Jens Oelgemöller; Andreas Westermeier |
| Abstract: | This paper analyses the revealed comparative advantage for six European countries: Austria, France, Germany, Italy, the Netherlands and the UK. The results can be summarized as the follows: Italy always had a trade specialisation index which was well above average. Apart from Italy, whose trade performance index decreased substantially, changes in the trade performance index were fairly small. Austria, Germany and the Netherlands faced increasing average RCA-values (but they remain positive), while France, Italy and the United Kingdom faced decreasing average RCA-values. Italy’s RCA-value correlated negatively with the other countries (except for the correlation between Italy and France), while the other countries (Austria, France, Germany, the Netherlands and the United Kingdom) faced a positive correlation with each other. The top ten sectors with the highest RCA-value, shared about 50 % of total exports in France, Germany and the Netherlands. In the other three countries, the share was less than 40%. Regarding the top five sectors, specialization can be found only in Germany (>40 %) and the Netherlands (>30 %) whereas in the other countries the share was less than 20%. Germany and the Netherlands were the countries, in which most of the top 10 export sectors in 2005 also had CCA. The other countries had several top 10 export sectors with RCA-indicators significantly below the CCA-benchmarks. |
| Keywords: | Revealed Comparative Advantage, Comparative Cost Advantage, Trade |
| JEL: | F14 |
| Date: | 2009–04–06 |
| URL: | http://d.repec.org/n?u=RePEc:got:cegedp:79&r=eec |
| By: | Burcu Erdogan |
| Abstract: | This paper examines the integration of stock markets in Germany, France, Netherlands, Ireland and UK over January 1973-August 2008 at the aggregate market and industry level considering the following industries: basic materials, consumer goods, industrials, consumer services, health care and financials. The analysis is carried out by using correlation analysis, ß-convergence and s-convergence methods. ß-convergence serves to measure the speed of convergence and s-convergence serves to measure the degree of financial integration. It might be expected a priori that European stock markets have converged during the process of monetary, economic and financial integration in Europe. This study offers evidence for an increasing degree of integration both at the aggregate level and also at the industry level, although some differences in the speed and degree of convergence exist among stock markets. Surprisingly, there is an upswing of cross sectional dispersion for health care industry, which is more prone to regional shocks. The other industries show a significant s-convergence. The average half-life of a shock to convergence changes at a range from 5.75 days for aggregate market to 10.25 days for consumer goods. |
| Keywords: | Financial integration, EU, stock markets, ß-convergence, s-convergence, correlation analysis |
| JEL: | C22 G12 G15 F36 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp885&r=eec |
| By: | Cristina Conflitti |
| Abstract: | The main contribution of the paper is to identify the socio economic characteristics that affect the perception of the euro across the original 12 Euro Area countries by specifying and estimating a multilevel multinomial model for polytomous data. The analysis is based on the Flash Eurobarometer dataset that contains cross-country data augmented speci?c country macroeconomic and political series. The use of the multilevel multinomial logistic regression allows to estimate the model considering individuals features and countries characteristics in a single analysis with two-level structure. This structure takes into account dependence between individuals within the same country given a certain component of unobserved heterogeneity between countries. The attitudes towards the euro vary across individuals and across countries and are driven by personal considerations based on the bene?ts and costs of using a single currency within a common area. Individual features, as a high level of education and living in a metropolitan area, have a positive impact towards the perception of the euro, since people having these characteristics can bene?t more from new markets opportunities created by the common area. Moreover, a positive country economic context (low in?ation and high growth) can in?uence people attitudes. |
| Keywords: | Public attitudes, opinion surveys, European integration, multilevel modeling, gllamm. |
| JEL: | C31 C35 C42 E65 F15 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2009_015&r=eec |
| By: | Raquel Ortega-Argiles (European Commission, Joint Research Centre (JRC); Institute for Prospective Technological Studies (IPTS), Sevilla); Mariacristina Piva (Universita Cattolica del Sacro Cuore, Milano); Lesley Potters (European Commission, Joint Research Centre (JRC); Institute for Prospective Technological Studies (IPTS), Sevilla; Utrecht School of Economics, Utrecht); Marco Vivarelli (European Commission, Joint Research Centre (JRC); Institute for Prospective Technological Studies (IPTS), Sevilla; Universita' Cattolica del Sacro Cuore, Milano; Institute for the Study of Labour (IZA), Bonn) |
| Abstract: | This paper discusses the link between R&D and productivity across the European industrial and service sectors. The empirical analysis is based on both the European sectoral OECD data and on a unique micro longitudinal database consisting of 532 top European R&D investors. The main conclusions are as follows. First, the R&D stock has a significant positive impact on labour productivity; this general result is largely consistent with previous literature in terms of the sign, the significance and the magnitude of the estimated coefficients. More interestingly, both at sectoral and firm levels the R&D coefficient increases monotonically (both in significance and magnitude) when we move from the low-tech to the medium and high-tech sectors. This outcome means that corporate R&D investment is more effective in the high-tech sectors and this may need to be taken into account when designing policy instruments (subsidies, fiscal incentives, etc.) in support of private R&D. However, R&D investment is not the sole source of productivity gains; technological change embodied in gross investment is of comparable importance on aggregate and is the main determinant of productivity increase in the low-tech sectors. Hence, an economic policy aiming to increase productivity in the low-tech sectors should support overall capital formation. |
| Keywords: | R&D, productivity, high-tech sectors, innovation and industrial policy |
| JEL: | O33 |
| Date: | 2009–05–19 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2009-038&r=eec |
| By: | Sîle O'Dorchai (DULBEA, Université libre de Bruxelles, Brussels) |
| Abstract: | This paper analyses disparity in women’s pay across 20 European countries using EU-SILC 2006. First, a selectivity-adjusted gender pay gap is computed and examined in each of the countries. Next, the impact of parenthood is analysed. We show that women suffer a wage disadvantage compared with men all over Europe. Motherhood usually reinforces the gender gap but discrimination is more sex- than maternity-related so that it concerns all women as (potential) mothers. Fatherhood has a positive impact on men’s wages. Finally, in most countries, the wage gap between mothers and fathers is even deeper than that between women and men. |
| Keywords: | wage gap estimation/decomposition, gender, parenthood. |
| JEL: | C21 J24 J31 J71 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:dul:wpaper:09-11.rs&r=eec |
| By: | Christophe J. Godlewski (Laboratoire de Recherche en Gestion et Economie, Université de Strasbourg); Ydriss Ziane (BETA, Université de Nancy) |
| Abstract: | The aim of this paper is to empirically investigate the determinants of creditor concentration in the use of bank loans by firms in a European cross-country framework. We analyze the influence of loan and borrower characteristics but also banking market structure and legal enforcement country-specific variables that are expected to influence the financial and strategic decision relative to the number of bank lenders. We find that firms tend to diversify sources of financing by reducing bank concentration when their level of quality is higher and both asymmetric information and the risk of early liquidation are minimal (larger, older, transparent, liquid and profitable firms). Furthermore, lenders’ monitoring appears to be an important feature of lending concentration, particularly in order to prevent private benefits extraction by insiders in legal environment where shareholders benefit from better protections. |
| Keywords: | Financial intermediation, bank lending, creditor concentration, information asymmetry, Europe. |
| JEL: | G21 G32 G33 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:lar:wpaper:2009-06&r=eec |
| By: | Norikazu Tawara; Gerwin Bell |
| Abstract: | An influential strand of recent research has claimed that large governments in European countries explain their weaker long-term economic performance compared to the U.S. On the other hand, despite these alleged costs, large governments have been popular with electorates. This paper seeks to shed light on this apparent inconsistency; it confirms an adverse effect of taxes on labor supply, but also finds evidence of efficiency-increasing government intervention. However, and especially in the core "Rhineland-model" European countries, actual government policies often depart from such efficient interventions, pointing to the possibility that voters prefer redistribution even at the cost of allocational efficiency. |
| Keywords: | Public sector , United States , Europe , Public finance , National income , Government expenditures , Economic models , Cross country analysis , |
| Date: | 2009–04–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:09/92&r=eec |
| By: | Zagaglia, Paolo (Dept. of Economics, Stockholm University) |
| Abstract: | I study a general-equilibrium model of the term structure where bond prices are an integral part of the monetary transmission mechanism. The model is estimated on quarterly Euro area data. I show that, besides shocks to the inflation target, also exogenous variations in money demand and bond supply can explain movements in long-term interest rates. I also find that taking into account the impact of bond yields on the macroeconomy generates superior in-sample and out-of-sample forecasts for output, inflation and for bond yields. |
| Keywords: | Monetary policy; yield curve; monetary transmission mechanism |
| JEL: | E43 E44 E52 |
| Date: | 2009–05–13 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:sunrpe:2009_0012&r=eec |
| By: | Daniela Pirvu (Faculty of Economics, University of Pitesti); Martina Eckardt (Andrássy University, Budapest) |
| Abstract: | In the last few years, many countries Central and Eastern European countries have reduced their corporate income tax rates with the purpose of attracting multinational companies. |
| Keywords: | competitiveness, corporate income taxes, foreign direct investments |
| JEL: | F5 H3 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:pts:wpaper:f1&r=eec |
| By: | Jens Schmidt-Ehmcke; Petra Zloczysti |
| Abstract: | This paper analyzes research efficiency at the industry level in manufacturing for 13 European member and four nonmember countries during 2000 and 2004. A unique dataset was compiled that matches patent applications at the European Patent Office (EPO) to industry-specific R&D inputs from EU KLEMS. We find that Germany, the United States, and Denmark have the highest efficiency scores on average in total manufacturing. The main industries that are at the technology frontier are those involved in electrical and optical equipment and machinery. Separate frontier estimations for these industries, conducted without the constraint of a constant technology frontier, provide additional support for our results. |
| Keywords: | R&D efficiency, industry level, data envelopment analysis, manufacturing |
| JEL: | C14 L60 O31 O57 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp884&r=eec |
| By: | Figari F |
| Abstract: | This paper analyses the effects of implementing a family-based and an individually-based in-work benefit in the Southern European Countries using EUROMOD, the EU-wide tax-benefit microsimulation model. In-Work Benefits (IWBs) are means-tested cash transfers given to individuals, through the tax system,conditional on their employment status. They are intended to enhance the incentives to accept work and redistribute resources to low income groups. The research confirms the presence of a trade off between the redistributive and the incentive effects of the different policies. Family-based in-work benefits are better targeted on the poorest households, in particular in Italy and Portugal. Individually-based policies lead to greater incentives to work, in particular in Italy and in Greece. Individually-based IWBs seem to be more efficient if the enhancement of the labour market participation of women in couples is of fundamental concern. |
| Keywords: | poverty, work benefits, fiscal microsimulation, female labour market |
| JEL: | H53 I32 I38 |
| Date: | 2009–05–12 |
| URL: | http://d.repec.org/n?u=RePEc:ese:emodwp:em4/09&r=eec |
| By: | Pablo Vazquez Vega; Mario Alloza; Raquel Vegas; Stefano Bertozzi |
| Abstract: | The current slump is having a heterogeneous impact on the EU economies regarding their GDP and employment growth responses. The impact of immigrants’ unemployment on public finances of EU countries depends on three factors: (i) the sensitiveness of the economy to the business cycle, (ii) the share that migrants represent over total labour force population and (iii) the benefits structure of their unemployment benefits programs. Our results confirm that the impact of the rise in immigrants’ unemployment on the unemployment benefit burden during the next few years is likely to be sizeable. Unemployment benefit burden is expected to peak in 2009 after an increase in 2008, and to slow down slightly in 2010. We find that Latvia, Estonia and France are the ones more likely to suffer a higher public finance burden from the rise in immigrants´ unemployment. Other economies such as Germany, Finland, Spain, Ireland, Italy or Austria would also register a noticeable increase in their public burden although to a lesser extent. |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:fda:fdaddt:2009-15&r=eec |
| By: | Andrea Bigano (Fondazione Eni Enrico Mattei); Mariaester Cassinelli (Fondazione Eni Enrico Mattei); Fabio Sferra (Fondazione Eni Enrico Mattei); Lisa Guarrera (Observatoire Méditerranéen de l'Energie); Sohbet Karbuz (Observatoire Méditerranéen de l'Energie); Manfred Hafner (Fondazione Eni Enrico Mattei and Observatoire Méditerranéen de l'Energie); Anil Markandya (Fondazione Eni Enrico Mattei, University of Bath and Basque Centre for Climate Change Research); Ståle Navrud (Norwegian University of Life Sciences) |
| Abstract: | This paper is the first to assess operational and probabilistic externalities of oil extraction and transportation to Europe on the basis of a comprehensive evaluation of realistic future oil demand-supply scenarios, of the relative relevance of import routes, of the local specificities in terms of critical passages and different burdens and impacts along import routes. The resulting externalities appear reasonable both under the assumption of high future demand and under low demand. Estimates range from 2.32 Euro in 2030 in the low demand scenario to 2.60 Euro in 2010 in the high demand scenario per ton of imported oil. |
| Keywords: | Oil Transport, Externalities Oil Spills, Risk Analysis |
| JEL: | Q32 Q25 Q41 R40 |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2009.13&r=eec |
| By: | Kemmerling , Achim (Jacobs University Bremen); Stephan, Andreas (Jonkoping International Business School) |
| Abstract: | We study the determinants and productivity effects of regional transportation infrastructure investment in France, Germany, Italy, and Spain. We estimate productivity effects with regional production functions for each country controlling for the potential endogeneity of public infrastructure investment. In analyzing the determinants of public infrastructure investment two broad categories are considered: First, the normative principles such as efficiency, equity, and redistribution; and second, political factors such as electoral competition and electoral rents. The evidence shows that road infrastructure positively contributes to regional production. As to the determinants, efficiency and redistribution are consistently found to be the dominant norms while equity considerations appear to be less important. However, we find remarkable differences across countries regarding the political determinants. Which political factors matter for infrastructure investment is related to the different political systems of the various countries. |
| Keywords: | transport infrastructure; regional growth; political economy |
| JEL: | H54 O40 R10 |
| Date: | 2008–07–18 |
| URL: | http://d.repec.org/n?u=RePEc:ris:eibpap:2008_007&r=eec |
| By: | Carlo Altavilla; Matteo Ciccarelli (-; -) |
| Abstract: | This paper explores the role that model uncertainty plays in determining the effect of monetary policy shocks on unemployment dynamics in the euro area and the US. We specify a range of BVARs that differ in terms of variables, lag structure, and the way the inflation process is modelled. For each model the central bank sets the interest rate minimizing a loss function. Given this solution, we quantify the impact of a monetary policy shock on unemployment for each model, and measure the degree of uncertainty as represented by the dispersion of both the policy rule parameters and the impulse response functions between models. The comparative evidence from the US and the euro area data indicates that model uncertainty is indeed an important feature, and that a model combination strategy might be a valuable advise to policymakers. |
| Keywords: | Inflation models, Unemployment, Model uncertainty, Taylor rule, Impulse response analysis |
| JEL: | C53 E24 E37 |
| Date: | 2008–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:prt:dpaper:8_2008&r=eec |
| By: | Antonelli Cristiano (University of Turin); Quatraro Francesco (University of Turin) |
| Abstract: | Internal labour markets and industrial relations in Continental Europe are characterized by substantial rigidity of employed labour. The rigidity of employed labor adds and augments the irreversibility of fixed capital. This rigidity affects both the rate and the direction of technological change. The irreversibility of both production factors induces the localized introduction of biased technological change directed towards the more intensive use of inputs that are becoming more expensive. The localized introduction of biased technological change contrasts the classical inducement hypothesis according to which new biased technologies are directed towards the most intensive use of inputs that are becoming less expensive. In our theoretical underpinning the localized introduction of biased technological change is induced, instead, towards the more productive use of the inputs that are becoming more expensive because they are characterized by substantial rigidity and irreversibility. Firms, localized in a limited portion of the technical space by the competence and expertise acquired by learning processes in the proximity of the techniques in use and by the quasi-irreversibility of their stocks of both capital and labour, react to the changes in the levels of wages by means of the introduction of new biased technologies directed towards the more intensive use of labour that in the European experience can be characterized as a rigid production factor. The localized introduction of directed and biased technological innovations has clear effects on total factor productivity levels. The empirical evidence on the determinants and the effects of the localized introduction of directed technological changes across a sample of European regions in the years 1995-2004 provides significant support to the hypotheses and confirms both the significant role of the changes in wages in the increase of the output elasticity of labour and its significant effects on multi factor productivity. |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:uto:labeco:200907&r=eec |
| By: | Harald Uhlig |
| Abstract: | This paper compares monetary policy in the US and EMU during the last decade, employing an estimated hybrid New Keynesian cash-in-advance model, driven by five shocks. It appears that the difference between the two monetary policies between 1998 and 2006 is due to both surprises in productivity as well as surprises in wage demands, moving interest rates in opposite directions in Europe and the US, but not due to a more sluggish response in Europe to the same shocks or to different monetary policy surprises. |
| JEL: | E32 E50 E52 E58 E63 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14996&r=eec |
| By: | Capannelli, Giovanni (Asian Development Bank); Filippini, Carlo (Bocconi University) |
| Abstract: | This paper compares the economic integration processes of the European Union and the East Asian nations and comments on the possible reciprocal lessons, if any, that can be drawn in order to smooth the future paths of the two groups. On the EU side, institutions, structural policies, and the monetary union are most relevant, and in East Asia, production networks, trade, and financial cooperation. Both entities are presently facing difficult challenges to progress and growth. |
| Keywords: | East Asia; European Union; regional integration; economic cooperation |
| JEL: | F59 P52 |
| Date: | 2009–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbrei:0029&r=eec |
| By: | Gustavo A. Marrero |
| Abstract: | The 20/20/20 plan for Europe emphasizes the role of changing the energy model as a means to reach the objective of reducing emissions in 2020 by 20% with respect to 1990 levels. Most empirical emission models are found within the framework of the Environmental Kuznetz Curve (EKC), which focuses on the relationship between emissions and economic activity, ignoring energy aspects. However, the importance of energy on GHG emissions is reflected by the fact that 80% of said emissions in Europe are currently due to the use and production of energy. This paper includes energy variables in an EKC dynamic panel data (DPD) model and uses the one-step system GMM estimator of Blundell and Bond (1998), which should allow for endogeneity, measurement error and omitted variable problems. For a panel of 24 European countries between 1990 and 2006, results suggest the existence of conditional convergence in terms of GHG emissions, no evidence of the EKC hypothesis, a positive and lower than one emissions-energy elasticity and how merely shifting the energy mix toward renewable sources (and, to a lesser extent, nuclear) would yield significant reductions in per capita emissions. |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:fda:fdaddt:2009-16&r=eec |
| By: | Crescenzi, Riccardo (Robert Schuman Centre of the European University Institute, Florence); Rodriguez-Pose, Andres (London School of Economics) |
| Abstract: | This paper analyses the role of infrastructure endowment and investment in the genesis of regional growth in the European Union. It assesses the economic effects of the existence and improvement of transport networks in light of their interactions with innovation and local socio-economic conditions. The analysis accounts for spatial interactions between different regions in the form of spillovers and network externalities. The regression results highlight the impact of infrastructural endowment on regional economic performance, but also the weak contribution of additional investment. Regions having good transport infrastructure endowment and being well connected to regions with similar good endowments tend to grow faster. However, investment in infrastructure within a region or in neighbouring regions seems to leave especially peripheral regions more vulnerable to competition. Furthermore, the positive impact of infrastructure endowment on growth tends to wane quickly and is weaker than that of, for example, the level of human capital. |
| Keywords: | Economic growth; infrastructure; transport network; investment; innovation; spillovers; regions; endowment |
| JEL: | R11 R12 R42 R58 |
| Date: | 2008–07–18 |
| URL: | http://d.repec.org/n?u=RePEc:ris:eibpap:2008_008&r=eec |
| By: | Giuseppe Bruno; Riccardo De Bonis |
| Abstract: | Many authors underlined the convergence of financial structures towards a model which combines elements of the Anglo Saxon one, where markets prevail, with characteristics of the continental European systems, where intermediaries are predominant. The goal of this paper is to study financial systems convergence through the lens of household asset allocation. We analyze s and ß convergence of total household financial assets and their main components: deposits, securities other than shares, shares and other equity, insurance technical reserves. The novelty of the paper is to exploit a database containing time series since 1980 for nine OECD countries. Using disposable income as a scale variable, we found convergence of household total financial assets, insurance technical reserves and shares and other equity. Weaker results are obtained for convergence of household securities other than shares, and currency and deposits. In a nutshell, financial systems show signals of convergence in asset allocation, but national characteristics persist when households invest in securities and deposits. |
| Keywords: | financial systems, alpha and beta convergence |
| JEL: | G10 G20 |
| Date: | 2009–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:oec:stdaaa:2009/1-en&r=eec |
| By: | Pablo Burriel; Jesús Fernández-Villaverde; Juan F. Rubio-Ramírez |
| Abstract: | 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. |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:fda:fdaddt:2009-17&r=eec |