The Great Depression in Spain

Laburpena

In the decade of the 1930s the Spanish economy reported an slowdown of 20%, less severe than what occurred in the US, France and Germany, but very similar to the Italian and British experiences. In this paper we study two issues concerning this period of the Spanish economy: Did the World Depression account for the slump in the Spanish economy? And, why did the Spanish economy –unlike others– still show no signs of recovery at the onset of the Spanish Civil War (1936-1939)? We find that TFP accounts for most of the slowdown throughout this period, and the terms of trade explain the evolution of foreign trade. These findings suggest that (i) the origin of the Spanish downturn had a domestic source –with a drop in GDP, investment and imports–; (ii) the external economic and political situation affected the Spanish economy with some delay –with a drop in foreign trade and investment–; and, (iii) the socio-political situation delineated the recovery pattern.