Spanish Boom-bust Cycle Within the Euro Area: Credit Expansion, Malinvestments & Recession (2002-2014)

Miguel Ángel Alonso-Neira and Antonio Sanchez-Bayon ()

Politická ekonomie, 2024, vol. 2024, issue 4, 597-625

Abstract: This critical review explains the negative impact of the euro on the Spanish economy and its distortion in the period from 2002 to 2014. In this first cycle within the euro area, there was a financial boom, without voluntary savings, which generated a lack of coordination in the economic process and structure. The result was a bubble of overconsumption and malinvestments, which burst with a deflation of capital and wages, and a switch from construction industry to tourism services as Spain's main economic sector. The economic distortion was such that it delayed the exit from the Great Recession of 2008 and the European Financial Crisis of 2010 until 2014, with a recovery and the beginning of a new cycle. The Austrian business cycle theory and capital-based macroeconomics are used to support and illustrate the case study, with quantitative techniques: not to predict, but only to show the real development and to facilitate dialogue with other economic schools.

Keywords: Boom-bust cycle; Austrian economics; capital-based macroeconomics; euro monetary policy; economic history and institutions (search for similar items in EconPapers)
JEL-codes: B53 E32 E44 E52 G28 N14 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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DOI: 10.18267/j.polek.1429

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