Compartir: 
Documentos de trabajoPau Rabanal

Cross country studies of infiation differentials, in particular in the EMU, have focused on three explanations: (i) the role of tradable and nontradable sector technology shocks and the Balassa-Samuelson effect, (ii) the role of the demand-side effects, and (iii) heterogeneity of infiationary processes inside the EMU. This paper estimates a two country, two sector Dynamic Stochastic General Equilibrium (DSGE) model with nominal rigidities in a currency union using data for Spain and the euro area, to understand the role of each feature in shaping infiation differentials. The paper finds that tradable sector technology shocks are the most important source of infiation differentials, while nontradable sector technology shocks help explain nontradable infiation only, and demand shocks help explain a fraction of output growth, but not of infiation dispersion. In addition, the estimated model finds evidence against infiation dynamics being different in Spain and in the rest of the euro area.

Compartir: