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Accounting Spanish business cycles: What can be learned from past recessions?

Jesús Rodríguez López (jrodlop@upo.es) and Mario Solis-Garcia
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Jesús Rodríguez López: Department of Economics, Universidad Pablo de Olavide

Authors registered in the RePEc Author Service: Jesús Rodríguez-López (jrodlop@upo.es)

No 12.05, Working Papers from Universidad Pablo de Olavide, Department of Economics

Abstract: We apply the business cycle methodology proposed by Chari, Kehoe, and McGrattan (2007) to identify the sources of Spanish business fluctuations during two outstanding cyclical episodes: the recession alongside the inception of democracy on 1977, and the recession of 2008. We find that the labor wedge is the key element behind these fluctuations, and that both taxes and labor market institutions are likely behind the wedge movements. Our conclusion suggests that any model that tries to understand the causes of the recessions occurred in the last three decades should focus on the labor wedge. This conclusion holds regardless the framework assumes a closed economy or an open economy.

Keywords: Business cycle accounting; efficiency wedge; labor wedge; investment wedge (search for similar items in EconPapers)
JEL-codes: E32 O11 O41 O47 O53 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2012-09
New Economics Papers: this item is included in nep-dge and nep-mac
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http://www.upo.es/serv/bib/wps/econ1205.pdf First version, 2012 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pab:wpaper:12.05

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