A state-space approach to the analysis of economic shocks in Spain

Considering the potential effects on regional convergence in Spain, this paper analyses the relative importance of asymmetric shocks in the Spanish regions between 1975 and 2005. To do this, we employ a technique - the state-space approach - which overcomes some drawbacks of previous methods and allows to decomposing shocks into their structural common and specific components. Our main conclusion is that the shocks that have impinged upon Spanish regions have been mostly symmetric, this meaning that they have not greatly affected the process of regional convergence. However, asymmetric shocks have also been present. Should this continue to happen in the future, it seems the Spanish economy is not well prepared to deal with them. For this reason, the paper offers some political recommendations.