W ORLD ECONOMICS฀•฀Vol.฀15฀•฀No.฀2฀•฀ April–June 2014 77 José Luis Cendejas is a researcher and fellow of the IIES Francisco de฀Vitoria. When Money Matters Some Policy Lessons from the Business Cycle in Spain, 1998–2013 José Luis Cendejas, Félix-Fernando Muñoz and Juan E. Castañeda Introduction: the monetary origins of the recent crisis in Spain In฀2014,฀the฀15th฀anniversary฀of฀Spain’s฀entry฀into฀the฀European฀Monetary฀ Union (EMU), it is timely to compare the situation of the Spanish econ- omy with the expectations held for it when Spain joined the Eurozone. Far from experiencing stable, non-inflationary and financially sound eco- nomic growth, since 2009 Spain has been suffering from the consequences Key points •฀ The Spanish adoption of the euro involved a large-scale expansion of the money supply which is at the very root of the severe economic and financial crisis endured until 2013. •฀ The expansion of the money supply distorted the prices of real and financial assets and impacted as well on financial stability and aggregate production in the long term. •฀ The expansion distorted Spain’s economic structure – the residential construc- tion sector expanded as a share both of GDP and the workforce over a very short period of time and has almost halved since 2007. Félix- Fernando Muñoz is Senior Lecturer in Economics at Universidad Autónoma de Madrid. Juan E. Castañeda, is lecturer in Economics at the University of Buckingham. Acknowledgements: The authors would like to thank the Instituto de Investigaciones Económicas y Sociales Francisco฀de฀Vitoria฀for฀the฀grant฀received฀for฀this฀project.