SMILE: a small macro-econometric model of the French economy

Abstract

This paper describes SMILE, a small quarterly macro-econometric model of the French economy. The model mingles short-run Keynesian dynamics with a consistent, partly estimated, neo-classical supply side. A well-defined steady-state growth path is fully derived analytically. Standard simulations display plausible short to long-run responses to both demand and supply shocks. The model is helpful in a variety of policy analysis. To illustrate, we use our framework, first to gauge the role of factor costs in the evolution of French structural unemployment, then to evaluate relevant weights for building a Monetary Conditions Index.