Political Credit Cycles: The Case of the Euro Zone
AbstractWe study the mechanisms through which the adoption of the Euro delayed, rather than advanced, economic reforms in the Euro zone periphery and led to the deterioration of important institutions in these countries. We show that the abandonment of the reform process and the institutional deterioration, in turn, not only reduced their growth prospects but also fed back into financial conditions, prolonging the credit boom and delaying the response to the bubble when the speculative nature of the cycle was already evident. We analyze empirically the interrelation between the financial boom and the reform process in Greece, Spain, Ireland, and Portugal and, by way of contrast, in Germany, a country that did experience a reform process after the creation of the Euro.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18899.
Date of creation: Mar 2013
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Other versions of this item:
- Fernández-Villaverde, Jesús & Garicano, Luis & Santos, Tano, 2013. "Political Credit Cycles: The Case of the Euro Zone," CEPR Discussion Papers 9404, C.E.P.R. Discussion Papers.
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- E0 - Macroeconomics and Monetary Economics - - General
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-30 (All new papers)
- NEP-EEC-2013-03-30 (European Economics)
- NEP-HIS-2013-03-30 (Business, Economic & Financial History)
- NEP-OPM-2013-03-30 (Open Economy Macroeconomic)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- The effect of the Euro on southern European countries
by Inaki Villanueva in Applied economist on 2013-04-15 20:45:00
- Philip R. Lane, 2013.
"Growth And Adjustment Challenges For The Euro Area,"
The Economic and Social Review,
Economic and Social Studies, vol. 44(2), pages 273-295.
- Philip R. Lane, 2013. "Growth and Adjustment Challenge for the Euro Area," The Institute for International Integration Studies Discussion Paper Series iiisdp426, IIIS.
- Philip R. Lane, 2013. "Growth and Adjustment Challenge for the Euro Area," The Institute for International Integration Studies Discussion Paper Series iiisdp427, IIIS.
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