Historical Turning Points in Spanish Economic Growth and Development, 1808–2008 by Unknown

Author:Unknown
Language: eng
Format: epub
ISBN: 9783030409104
Publisher: Springer International Publishing

The main domestic imbalance was inflation, which was clearly above that of other Western countries (Fig. 5.2).2 Inflation exacerbated the overvaluation of the peseta and, consequently, the lack of competitiveness of Spanish products in the international markets became more acute and intensified current account deficits. There were three main factors behind the high Spanish inflation rates: (a) the public deficit, not due to its size but rather the way that these deficits and some other extra-budgetary expenditures were financed with public debt, which could be automatically discounted with the Bank of Spain without additional costs, increasing the amount of money in the economy; (b) a rise in wages that ended up being transferred to prices and that was especially high in 1956 and 1957 and (c) the lack of elasticity of the aggregate supply (González 1979).

Fig. 5.2Consumer Price 1952–1957 (Average annual change, %). (Source: Spain, INE; other countries, World Survey data United Nations (1957))

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