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

Michael Arghyrou () and María Dolores Gadea ()

No E2008/23, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: 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 macrofundamentals. 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.

Keywords: Spain; ECB; monetary policy; domestic fundamentals; compatibility (search for similar items in EconPapers)
JEL-codes: C51 C52 E43 E58 F37 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
Date: 2008-10
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Persistent link: http://EconPapers.repec.org/RePEc:cdf:wpaper:2008/23

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