0000000000726715
AUTHOR
Samuel Hurtado
Spain in the euro: a general equilibrium analysis
Bayesian dynamic stochastic general equilibrium (DSGE) models combine microeconomic behavioural foundations with a full-system Bayesian likelihood estimation approach using key macro-economic variables. Because of the usefulness of this class ofmodels for addressing questions regarding the impact and consequences of alternative monetary policies they are nowadays widely used for forecasting and policy analysis at central banks and other institutions. In this paper we provide a brief description of the two main aggregate euro area models at the ECB. Both models share a common core but their detailed specification differs reflecting their specific focus and use. The New Area Wide Model (NAWM)…
Deciphering the Macroeconomic Effects of Internal Devaluations in a Monetary Union
We study the macroeconomic effects of internal devaluations undertaken by a periphery of countries belonging to a monetary union. We find that internal devaluations have large and positive output effects in the long run. Through an expectations channel, most of these effects carry over to the short run. Internal devaluations focused on goods markets reforms are generally more powerful in stimulating growth than reforms aimed at moderating wages, but the latter are less deflationary. For a monetary union with a periphery the size of the euro area's, the countries at the periphery benefit from internal devaluations even at the zero lower bound (ZLB) of the nominal interest rate. Nevertheless,…