Imbalances and Rebalancing in an Estimated Structural Model for Spain
by Jan in ít Velda, Andrea Paganob, Rafal Raciborskia, Marco Rattob and Werner Roegera
This paper uses an estimated DSGE model to analyze the
factors behind the buildup 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. A rebalancing
process in recent years with a sharp contraction in domestic
demand has moved the trade balance back into surplus. The
main driving factors were the collapse of the housing bubble
and tightening of credit conditions.
JEL Codes: C54, E21, E62, F32.
Full article (PDF, 41 pages, 3106 kb)
Supplementary Appendix. Shock Decompositions (PDF, 8 pages, 861 kb)
a European Commission, Directorate-General Economic and Financial Affairs
b European Commission, Joint Research Centre (JRC)