Working Paper: CEPR ID: DP7297
Authors: Pablo Burriel; Jesús Fernández-Villaverde; Juan Francisco Rubio-Ramírez
Abstract: In this paper, we provide a brief introduction to a new macroeconometric model of the Spanish economy named MEDEA (Modelo de Equilibrio Dinámico de la Economía EspañA). MEDEA is a dynamic stochastic general equilibrium (DSGE) model that aims to describe the main features of the Spanish economy for policy analysis, counterfactual exercises, and forecasting. MEDEA is built in the tradition of New Keynesian models with real and nominal rigidities, but it also incorporates aspects such as a small open economy framework, an outside monetary authority such as the ECB, and population growth, factors that are important in accounting for aggregate fluctuations in Spain. The model is estimated with Bayesian techniques and data from the last two decades. Beyond describing the properties of the model, we perform different exercises to illustrate the potential of MEDEA, including historical decompositions, long-run and short-run simulations, and counterfactual experiments.
Keywords: Bayesian methods; DSGE models; Likelihood estimation
JEL Codes: C11; C13; E30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| technological progress (O33) | aggregate fluctuations (E10) |
| investment-specific shocks (E22) | aggregate fluctuations (E10) |
| population growth (J11) | aggregate fluctuations (E10) |
| shocks to technology (O33) | fluctuations in output (E32) |
| shocks to preferences (D11) | fluctuations in consumption (E21) |
| shocks to policy (E65) | fluctuations in investment (E22) |
| changes in fiscal policies (E62) | economic outcomes (F61) |
| monetary policy decisions by ECB (E52) | economic outcomes in Spain (P27) |