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The single monetary policy and domestic macro-fundamentals: Evidence from Spain

  • Michael G. Arghyrou

    (Cardiff Business School)

  • Maria Dolores Gadea

    (University of Zaragoza)

We model pre-euro Spanish monetary policy and use our findings to assess the compatibility of the interest rates set by the ECB since 1999 with Spanish macro-fundamentals. We find that in the 1990s Spain implemented successfully a monetary strategy tailored to its own domestic fundamentals; and by abolishing it to join the euro she has paid a cost in the form of a sub-optimal monetary policy. Spain’s experience suggests a cautious approach with regards to the timing of further EMU enlargement.

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Paper provided by Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza in its series Documentos de Trabajo with number dt2008-05.

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Date of creation: May 2008
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Handle: RePEc:zar:wpaper:dt2008-05
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