Series: Occasional Papers. 1805.
Author: Enrique Moral-Benito.
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Abstract
The Spanish growth experience over the 1995-2007 period was characterized by the
remarkable surge in employment and investment as well as the dismal evolution of productivity.
These macroeconomic fluctuations were coupled with an unprecedented credit boom fueled
by a housing bubble. This article reviews a line of research that investigates the connection
between these developments using micro-level data on Spanish firms and banks. The evidence
suggests that the abundant availability of credit, partially induced by the real estate bubble,
and its propagation through the Spanish production network explain a sizable part of the
massive accumulation of labor and capital. Also, the deterioration in the allocation of resources
across firms is the main responsible of the fall in aggregate productivity. The allocation of
credit across firms and municipalities, the softening of banks lending standards, and the low
productivity of Spanish firms can partly explain this deterioration.