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

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  • Miguel Ángel Alonso-Neira
  • Antonio Sánchez-Bayón

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.

Suggested Citation

  • Miguel Ángel Alonso-Neira & Antonio Sánchez-Bayón, 2024. "Spanish Boom-bust Cycle Within the Euro Area: Credit Expansion, Malinvestments & Recession (2002-2014)," Politická ekonomie, Prague University of Economics and Business, vol. 2024(4), pages 597-625.
    • Handle: RePEc:prg:jnlpol:v:2024:y:2024:i:4:id:1429:p:597-625
    DOI: 10.18267/j.polek.1429
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    References listed on IDEAS

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    More about this item

    Keywords

    Boom-bust cycle; Austrian economics; capital-based macroeconomics; euro monetary policy; economic history and institutions;
    All these keywords.

    JEL classification:

    • B53 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Austrian
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

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