Bubble economics and structural change: the cases of Spain and France compared

Pablo Agnese, Jana Hromcová

    Research output: Contribution to journalArticleResearchpeer-review

    Abstract

    © 2016 Informa UK Limited, trading as Taylor & Francis Group. This paper delves into the recent events that led to the formation of the housing bubble in Spain and the resulting structural change that is arguably needed to put the economy back into the right track. For this purpose, we calibrate a model with different equilibria descriptive of the labor markets in Spain and France, where the unemployment rates went from the same initial spot to very different levels. In addition to this, we run a counterfactual analysis that throws some more light on the performance of the Spanish labor market and the housing bubble. Our results suggest that the unemployment rate in Spain has jumped to much higher levels while switching between equilibria or, what is the same, because of structural change. Moreover, our counterfactuals indicate that, first, there has been an important misdirection of resources into the construction industry mainly fueled by excessively low real interest rates and, second, the Spanish labor reform has fallen short of its own goals.
    Original languageEnglish
    Pages (from-to)59-79
    JournalJournal of Economic Policy Reform
    Volume21
    Issue number1
    DOIs
    Publication statusPublished - 2 Jan 2018

    Keywords

    • bubble
    • interest rate
    • productivity
    • structural change
    • unemployment

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