Ireland and Spain have been experiencing deep economic crises. The crises were the results of the preceding booms with fast credit growth, house price bubbles and real appreciations.
a) Why could not monetary policy prevent the earlier booms? Explain the dynamics implied by the so-called Walters critique!
b) Could the countries have used other policies to counteract the earlier booms?
c) Ireland and Spain have achieved real depreciations. How is this done within a monetary union? What are the problems involved?