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  • Jean Barthélemy (a1) and Guillaume Cléaud (a2)

We estimate a medium-scale dynamic stochastic general equilibrium (DSGE) model for the euro area in an open-economy framework. The model includes structural trends on all variables, allowing us to estimate on gross data. First, we provide a theoretical balanced growth path consistent with permanent productivity shocks, inflation target changes, and permanent shocks to the openness of the economies. We then define the cycle as the gap between this sustainable trajectory and the gross data. Hence, we can properly deal with persistent deviations of the trade balance. Finally, we find persistent and strong effects from the asymmetric increase of euro-area imports during the last 10 years on domestic inflation. From 2000Q1 to 2008Q4, we estimate the contribution of the imbalanced development of international trade on euro-area inflation to an average of −0.7%, and on nominal interest rate, to an average of −1.4%.

Corresponding author
Address correspondence to: Jean Barthélemy, Department of Economics, Sciences Po, 28 rue des saints pères, 75007 Paris, France; e-mail:
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B. Saes-Escorbiac and J. Tanguy provided excellent research assistance. We thank two anonymous referees, L. Benati, F. Bilbiie, F. Canova, R. Farmer, P.-O. Gourinchas, C. Hellwig, M. Juillard, S. Krause, M. Melitz, B. Mojon, R. Ranciere, S. Rebelo, J.P. Renne, A. Sbordone, and M. Woodford for their very helpful comments. We are also grateful for comments from seminar participants at the Banque de France, INSEE, and Université de la Méditerranée Aix-Marseille 2. Both authors or the two authors were working at the Banque de France when writing this paper. The views expressed in this paper do not necessarily reflect the opinion of the Banque de France. All the remaining errors are ours.

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Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
  • URL: /core/journals/macroeconomic-dynamics
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