Politická ekonomie 2024, 72(4):597-625 | DOI: 10.18267/j.polek.1429

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

Miguel Ángel Alonso-Neira ORCID..., Antonio Sánchez-Bayón ORCID...
Miguel Ángel Alonso-Neira: King Juan Carlos University, Madrid, Spain
Antonio Sánchez-Bayón: King Juan Carlos University, Madrid, Spain

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
JEL classification: B53, E32, E44, E52, G28, N14

Received: June 12, 2023; Revised: December 19, 2023; Accepted: January 1, 2024; Prepublished online: August 12, 2024; Published: August 20, 2024  Show citation

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Ángel Alonso-Neira, M., & Sánchez-Bayón, A. (2024). Spanish Boom-bust Cycle Within the Euro Area: Credit Expansion, Malinvestments & Recession (2002-2014). Politická ekonomie, 72(4), 597-625. doi: 10.18267/j.polek.1429
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