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Financial resource curse in the Eurozone periphery

Author

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  • Sebastian Dellepiane-Avellaneda
  • Niamh Hardiman
  • Jon Las Heras

Abstract

The housing booms and busts in Ireland and Spain were among the most striking episodes of the Eurozone crisis. While asset price inflation and financialization of housing was gathering pace across the developed world, these two ‘most different’ cases converged on the same outcome as the most extreme forms of construction-based bubbles. The key contributions of this paper are threefold. Firstly, we show how cheap credit can be understood as analogous to a natural resource such as oil: resource abundance generates a ‘paradox of plenty’ whereby an asset becomes a liability. Secondly, we open the black box of political pathways through which this happens, expanding our understanding of how perverse outcomes are produced. Thirdly, we account for why Spain and Ireland were more susceptible to extreme outcomes than other European countries, thereby extending our understanding of asymmetries in the political economy of the Eurozone.

Suggested Citation

  • Sebastian Dellepiane-Avellaneda & Niamh Hardiman & Jon Las Heras, 2022. "Financial resource curse in the Eurozone periphery," Review of International Political Economy, Taylor & Francis Journals, vol. 29(4), pages 1287-1313, July.
  • Handle: RePEc:taf:rripxx:v:29:y:2022:i:4:p:1287-1313
    DOI: 10.1080/09692290.2021.1899960
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    Cited by:

    1. Destek, Gamze & Hossain, Mohammad Razib & Aydın, Sercan & Destek, Mehmet Akif, 2023. "Can the resource curse be reversed through financialization, human capital, and institutional quality? Evidence from Sustainable Development Index," Resources Policy, Elsevier, vol. 86(PB).

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