Causality Tests In Spain. 1960-2021: Development, Industry, Investment Per Capita And Financial Indicators

We analyse the evolution of industrial production and economic development in Spain for the period 1960-2021, with comparison with other OECD countries, particularly with Germany and the United States, and with special concern on the decline and stagnation of real Value-Added of Industry per head, after year 2008. We analyze some causality relationships between economic development and financial indicators. We apply to versions of Granger´s test, being the modified version suggested by Guisan(2003) the one that presents better results, due to the diminution of multicollinearity. The modified version of Granger´s test shows evidence of the direction of causality from development to financial indicators. We also apply mixed dynamic models for possible contemporaneous relationships, which confirm that the main direction of causality is from development to financial indicators, and that also shows a bilateral relationship when Bank Credit contributes to increase Investment, Industrial Production or other variables that have a positive impact on economic development. During the financial bubble Spain experienced an increase of Bank resources from foreign countries, which should be more addressed to sustained investments in Industry and other sectors with impact on development, but unfortunately it was an opportunity lost due to the lack of enough support from economic policies. For a more dynamic recuperation of industrial development, the Spanish society needs to improve support by citizens to sound economic policies addressed to increase real income per capita and quality of life.