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

  • Bleich, Dirk
  • Fendel, Ralf

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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File URL: http://purl.umn.edu/143463
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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
Contact details of provider: Web page: http://www.lincoln.ac.nz/story11874.html

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  1. Clarida, Richard & Gali, Jordi & Gertler, Mark, 1998. "Monetary policy rules in practice Some international evidence," European Economic Review, Elsevier, vol. 42(6), pages 1033-1067, June.
  2. Janko Gorter & Jan Jacobs & Jakob de Haan, 2008. "Taylor Rules for the ECB using Expectations Data," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(3), pages 473-488, 09.
  3. Athanasios Orphanides, 1998. "Monetary policy rules based on real-time data," Finance and Economics Discussion Series 1998-03, Board of Governors of the Federal Reserve System (U.S.).
  4. Lars E. O. Svensson, 2003. "What Is Wrong with Taylor Rules? Using Judgment in Monetary Policy through Targeting Rules," Journal of Economic Literature, American Economic Association, vol. 41(2), pages 426-477, June.
  5. Richard Clarida & Jordi Galí & Mark Gertler, 1997. "Monetary policy rules and macroeconomic stability: Evidence and some theory," Economics Working Papers 350, Department of Economics and Business, Universitat Pompeu Fabra, revised May 1999.
  6. Svensson, L-E-O, 1996. "Inflation Forecast Targeting : Implementaing and Monitoring Inflation Targets," Papers 615, Stockholm - International Economic Studies.
  7. Heppke-Falk, Kirsten H. & Hüfner, Felix P., 2004. "Expected budget deficits and interest rate swap spreads - Evidence for France, Germany and Italy," Discussion Paper Series 1: Economic Studies 2004,40, Deutsche Bundesbank, Research Centre.
  8. Morten O. Ravn & Harald Uhlig, 2002. "On adjusting the Hodrick-Prescott filter for the frequency of observations," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 371-375.
  9. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2007. "Enhanced routines for instrumental variables/GMM estimation and testing," Boston College Working Papers in Economics 667, Boston College Department of Economics, revised 05 Sep 2007.
  10. Glenn D. Rudebusch, 2005. "Monetary policy inertia: fact or fiction?," Working Paper Series 2005-19, Federal Reserve Bank of San Francisco.
  11. Suarez, Javier, 2010. "The Spanish Crisis: Background and Policy Challenges," CEPR Discussion Papers 7909, C.E.P.R. Discussion Papers.
  12. Javier Andrés & Samuel Hurtado & Eva Ortega & Carlos Thomas, 2009. "Spain in the euro: a general equilibrium analysis," Banco de Espa�a Working Papers 0927, Banco de Espa�a.
  13. 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.
  14. Jonas Dovern & Johannes Weisser, 2009. "Accuracy, Unbiasedness and Efficiency of Professional Macroeconomic Forecasts: An empirical Comparison for the G7," Jena Economic Research Papers 2009-091, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  15. Beck, Roland, 2001. "Do country fundamentals explain emerging market bond spreads?," CFS Working Paper Series 2001/02, Center for Financial Studies (CFS).
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