January 2015 issue contents
Imbalances and Rebalancing in an Estimated Structural Model for Spain

by Jan in 't 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)