A Rational Expectations Model for Simulation and Policy Evaluation of the Spanish Economy

José Boscá, A. Díaz, Rafael Domenech, Javier Ferri, E. Pérez and Luis Puch
Additional contact information
A. Díaz: Ministry of Economics and Finance, Spain
E. Pérez: Ministry of Economics and Finance, Spain

No 706, Working Papers from International Economics Institute, University of Valencia

Abstract: This paper describes a Rational Expectations Model of the Spanish economy, REMS, which is in the tradition of small open economy dynamic general equilibrium models, with a strongly microfounded system of equations. The model is built on standard elements, but incorporates some distinctive features to provide an accurate description of the Spanish economy. We contribute to the existing models of the Spanish economy by adding search and matching rigidities to a small open economy framework. Our model also incorporates habits in consumption and rule-of-thumb households. As Spain is a member of EMU, we model the interaction between a small open economy and monetary policy in a monetary union. The model is primarily constructed to serve as a simulation tool at the Spanish Ministry of Economic Affairs and Finance. As such, it provides a great deal of information regarding the transmission of policy shocks to economic outcomes. The paper describes the structure of the model in detail, as well as the estimation and calibration technique and some examples of simulations.

Keywords: general equilibrium; rigidities; policy simulations (search for similar items in EconPapers)
JEL-codes: E24 E32 E62 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2007-12
New Economics Papers: this item is included in nep-cba, nep-cmp, nep-dge, nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Journal Article: A rational expectations model for simulation and policy evaluation of the Spanish economy (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:iei:wpaper:0706

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