With the advent of EMU monetary policy can no longer be used to prevent housing market bubbles in regional economies such as Ireland or Spain. However, fiscal policy can and should be used to achieve the same effect. This paper shows that the advent of EMU relaxed existing financial constraints in Ireland and Spain, allowing a more rapid expansion of the housing stock in those countries to meet their specific demographic circumstances. However, the failure to prevent these booms turning into bubbles did lasting damage to the two economies, damage that could have been avoided by more appropriate fiscal policy action.
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Paper provided by Economic and Social Research Institute (ESRI) in its series Papers with number
WP315.
Length: Date of creation: Sep 2009 Date of revision: Handle: RePEc:esr:wpaper:wp315
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