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Monetary Policy Conditions in Spain Before and After the Changeover to the Euro: A Taylor Rule Based Assessment

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  • Bleich, Dirk
  • Fendel, Ralf

Abstract

This paper analyzes monetary policy conditions in Spain before and after the changeover to the Euro as the single European currency. We use forward-looking Taylor-type rules to describe the Banco de España's pre-Euro monetary policy and find that it was clearly inflation stabilizing. Compared to this we find that the monetary policy stance of the European Central Bank (ECB) since 1999 which was appropriate for the euro area as a whole was too expansionary for Spain's economy. The resulting cheap credit conditions for real estate must be seen as an important explanation for Spain's housing boom.

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Bibliographic Info

Article provided by Review of Applied Economics in its journal Review of Applied Economics.

Volume (Year): 08 (2012)
Issue (Month): 1 ()
Pages:

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Handle: RePEc:ags:reapec:143463

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Web page: http://www.lincoln.ac.nz/story11874.html

Related research

Keywords: Spanish monetary policy; European Central Bank; euro area; interest rate setting; Taylor rules; Financial Economics; Industrial Organization; International Relations/Trade; Political Economy; Research Methods/ Statistical Methods; E52; D84;

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  1. Glenn D. Rudebusch, 2005. "Monetary policy inertia: fact or fiction?," Working Paper Series 2005-19, Federal Reserve Bank of San Francisco.
  2. Suarez, Javier, 2010. "The Spanish Crisis: Background and Policy Challenges," CEPR Discussion Papers 7909, C.E.P.R. Discussion Papers.
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  11. Lars E.O. Svensson, 2002. "What Is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules," Working Papers 118, Princeton University, Department of Economics, Center for Economic Policy Studies..
  12. John B. Taylor, 1999. "A Historical Analysis of Monetary Policy Rules," NBER Chapters, in: Monetary Policy Rules, pages 319-348 National Bureau of Economic Research, Inc.
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Cited by:
  1. Dirk Bleich & Ralf Fendel & Jan-Christoph Rülke, 2013. "Monetary Policy and Stock Market Volatility," Economics Bulletin, AccessEcon, vol. 33(3), pages 1669-1680.

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