آیا سیاست پولی متاثر بر سیاست های مالی؟یک مورد از اسپانیا، 1874-1935

The Spanish peseta never formally belonged to the gold club, neither the classical nor the exchange-rate gold standards. It has been traditionally argued that the reason was the predominance of deficits in the Spanish budget from 1874 to 1935. The financing needs of the Treasury led to money creation and, consequently, to sacrificing the gold commitment and a fixed exchange rate. Applying a stationary VAR (Vector AutoRegressive) model, this paper estimates the dynamic link between budget and money and tests whether Spanish fiscal policy actually influenced monetary policy. The results confirm the dominance of fiscal policy for the period and, therefore, provide empirical support to the idea that the problems of the Treasury were behind Spain’s renouncement of gold

In 1992, the Maastricht Treaty imposed the cutting of deficits and debt on the countries committed to the building of the European Monetary Union. Implicit in the measure was the agreement that fiscal policy could interfere with the strict monetary policy needed by some economies to control inflation and fix the exchange rate against the euro. The scenario was quite reminiscent of that of a century ago when the impact of fiscal policy on monetary policy was also argued to be the main barrier to some peripheral currencies joining the gold standard or, after joining, to remain in it. This applied to the Spanish peseta in 1874–1935, a period that starts with the Bank of Spain becoming the monopolist of issue and ends with the outbreak of the Spanish Civil war. During this period, the peseta never formally belonged to the gold club, neither to the classical (until WWI) nor to the exchange-rate (after WWI) gold standards. According to Spanish literature, the failure to control deficits for most of that period led Treasury to repeatedly look for money creation financing (seigniorage), provoking episodes of price divergence and preventing the peseta from maintaining gold convertibility. Nevertheless, despite the general perception that the government budget conditioned money creation in these years, there has been no econometric estimation that confirms the existence of a dynamic link between both variables. To overcome this lacuna, we start by presenting, in Section 2, the episodes of Spanish monetary history on which that perception is based. Then, in Section 3, we introduce the theory of fiscal dominance. Under a regime of fiscal dominance the deficits (contemporaneous or previous) drive the path of money creation. No matter whether or not deficits are immediately monetized through the sales of Treasury or Government bonds to the central bank, the nexus is between deficits and the present value of the revenue from seigniorage. For this reason, the theoretical framework of fiscal dominance appears especially suitable for analysing the effects of the Spanish budget on money, since a sizeable part of the deficits was financed by the sales of Government bonds to private holders. Thus, in Section 4, by applying a stationary VAR (Vector AutoRegressive) model, we estimate the dynamic link between budget and money and test whether Spanish fiscal policy actually influenced monetary policy. The results confirm the existence of a strong Granger causality from Government budget deficits to monetary base for Spain during the period 1874–1935, in line with the findings obtained for countries such as Italy, with repeated episodes of inconvertibility. On the contrary, the Spanish fulfilment of the hypothesis of fiscal dominance contrasts with the absence of links between budget and money in core gold countries such as the United Kingdom and the United States of America. Therefore, given that the confirmation of the hypothesis provides evidence of how Spanish fiscal authorities actually took advantage of the fact that they were not constrained by convertibility clauses, in Section 5, we conclude that the behaviour of the Treasury was responsible for untying the peseta from gold.

5. Conclusions According to the Spanish literature, the failure to control Government budget deficits for most of the period 1874–1935 led the Treasury to repeatedly look for financing through money creation (seigniorage). At first, fiscal authorities directly monetized deficits by selling debt to the Bank of Spain; from 1917 onwards, they indirectly contributed to the monetization of deficits by making the pledging of Treasury and Government bonds at the Bank immediately profitable. As a result of the interference of fiscal policy with monetary policy, domestic prices experienced episodes of divergence from the prices of the gold countries, preventing the peseta from maintaining convertibility. Nevertheless, unlike the relationship between prices and the exchange rate of the peseta, the link between budget and money in Spain during those years has never been modelled, so there was no formal evidence that fiscal policy had actually influenced monetary policy and, thus, Spanish inflation. This paper provides this evidence by modelling the link between budget and monetary base and carrying out a Granger causality analysis that shows, even excluding war years, the influence of the former on the latter. The paper also models the link between budget and the Treasury component of the monetary base and the link between the budget and the sum of the Treasury component plus the pledging of public bonds in the Bank. The causality strengthens when the Treasury component is enlarged to include the pledging of bonds, which illustrates how the Spanish fiscal authorities, by managing interest rates to make the pledging profitable, continued to condition the path of money from 1917 onwards. In any case, whatever the channel, the point is that the budget drove money movements, or in other words, that the hypothesis of fiscal dominance held for Spain in 1874–1935. This finding clearly contrasts with the absence of links between budget and money in countries such as the United Kingdom and the United States, where the sustained commitment to gold left the control of monetary policy out of the hands of the domestic authorities. For this reason, the confirmation of the hypothesis of fiscal dominance constitutes supporting evidence that the behaviour of Treasury was responsible for the peseta’s inconvertibility. In other words, confirmation of fiscal dominance implies that the floating of the peseta permitted Spain to go through fiscal problems without tax reform.