Update of the Quarterly Model of the Bank of Spain

The quarterly model of the Banco de Espana (MTBE) is a primary tool in the elaboration of medium term projections for the Spanish economy and for the quantification of the effects of different economic policy measures or economic shocks of a very diverse nature. As part of the process of continuous development of this tool, a substantial revamping of the model has been recently carried out. Changes have been introduced both in the estimation of the coefficients – with an updated sample period that now extends to the end of 2008 – and in the methodology, affecting all aspects of the model. In addition, new explicative variables have been introduced in order to approximate the effects of agents' confidence and credit restrictions on spending decisions, which allow for a more fitting analysis of the recent evolution of the Spanish economy.