Analysis of the Monetary Policy and Housing Bubble in Spain

The real estate market constitutes an important part of the global economy, not only as an important part of residents lives but also as one of the key drivers of economic growth. However, fluctuations in the property market can lead to serious economic problems. During the late 1990s and early 2000s, Spain experienced rapid economic growth, during which time the Spanish government viewed the property sector as a pillar of economic development that fueled the rapid expansion of the property market. However, with the onset of the global financial crisis in 2008, the Spanish property market was also hit hard. This paper aims to investigate whether monetary policy adopted in Spain contributed to the boom and bust of the property market. This paper focuses on Spain before the property bubble erupted through literature references and case comparisons. It is concluded that the low interest rates, easy credit and other monetary policies adopted in Spain eventually led to the property bubble.