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Managing Housing Bubbles in Regional Economies Under EMU: Ireland and Spain

Published online by Cambridge University Press:  26 March 2020

Thomas Conefrey  and
John Fitz Gerald
Thomas Conefrey
Affiliation:
The Economic and Social Research Institute (ESRI)Dublin
John Fitz Gerald*
Affiliation:
The Economic and Social Research Institute (ESRI)Dublin
*
E-mail: John.FitzGerald@esri.ie
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Abstract

With the advent of EMU, monetary policy can no longer be used to prevent housing market bubbles in regional economies such as Ireland or Spain. However, fiscal policy can and should be used to achieve the same effect. This paper shows that the advent of EMU relaxed existing financial constraints in Ireland and Spain, allowing a more rapid expansion of the housing stock in those countries to meet their specific demographic circumstances. However, the failure to prevent these booms turning into bubbles did lasting damage to the two economies, damage that could have been avoided by more appropriate fiscal policy action.

Keywords

Housing marketEMUfiscal policyE32E42E62
Type
Research Articles
Information
National Institute Economic Review , Volume 211 , January 2010 , pp. R27 - R44
Copyright
Copyright © 2010 National Institute of Economic and Social Research

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Footnotes

∗

This paper was prepared as part of an IRCHSSfunded project, 'Turning Globalization to National Advantage: Economics Policy Lessons from Ireland's Experience'. It has benefited from comments from colleagues, especially Ide Kearney and David Duffy, from Philip Lane, TCD, as well as participants at the June 2009 EUROFRAME Conference in London and participants at a meeting of National Economic Research Organisations, Paris, OECD, September 2009.

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