Growth regimes, growth drivers and private demand in financialised economies: The case of Spain

Abstract

Whereas several articles have studied the appearance of different growth regimes in the era of financialisation, other scholars have questioned the validity of this framework for analysing economies after the Great Recession and have proposed instead the analysis of growth drivers as a better approach. In this article, we argue that both perspectives can help each other to better understand economies under finance-dominated capitalism like Spain. Therefore, we analyse the Spanish economy before (2000–2007), during (2008–2013) and after (2014–2019) the Great Recession in two complementary steps. First, using the decomposition approach of national and financial accounts, we identify the emergence of three growth regimes: first, a debt-financed domestic demand-led regime, next, a contractive regime, and, finally, a self-financed domestic demand-led regime. Preliminary descriptive evidence suggests that changing growth drivers contributed to these regime transitions. In a second step, we study how a series of growth drivers related with financialisation are behind the evolution of the components of private demand (households’ and non-financial companies’ spending), and therefore the growth regimes, by estimating different econometric models. Our findings show the significant role played by drivers like income distribution, fiscal policy, and the financial cycle. We conclude highlighting the potential use of growth drivers by future researchers and policymakers to assess growth regimes.