We study the inter-temporal spending behavior of Spanish local governments during the last housing boom (1997-2006), a period of substantial short-run momentum in housing-construction revenues. We argue that the unprecedented growth in these revenues might be one of the reasons underlying the...

The aim of this paper is to analyze whether Spanish municipalities adjust in response to budget shocks and (if so) which elements of the budget they are more likely to adjust. The methodology we use to answer these questions is a vector error-correction model (VECM), estimated with data from a...