Multicointegration, seigniorage and fiscal sustainability. Spain 1857–2000

Spanish long-run fiscal sustainability is analysed by using the multicointegration methodology. It permits the estimation of dynamic equilibrium relationships between flow and stock variables, and is here adjusted to fit the recurrent use of monetization. The results reveal that seigniorage was essential in guaranteeing long-run government solvency, and thus, highlight the relevance for Spain of its loss of monetary independence when joining the EMU in 1998. After a prosperous decade the lesson from the current crisis emerges even clearer: being deprived of monetization, structural measures for fiscal consolidation should not be postponed any longer if sustainability is to be maintained.