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Building on easy money:The political economy of housing bubbles in Ireland and Spain

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Author Info

  • Sebastian Dellepiane

    (University of Strathclyde)

  • Niamh Hardiman

    (School of Politics and International Relations, University College Dublin, UCD Geary Institute)

  • Jon Las Heras

    (Manchester University)

Abstract

This paper undertakes a structured, focused case-study comparison of housing bubbles in Ireland and Spain, based on the selection of two most-different cases that nonetheless share a common outcome of interest. Both countries were exposed to the same set of changes in their international policy environment in the late 1990s and early 2000s, in the form of a low interest rate regime associated with the creation of European Monetary Union (EMU). The two countries have very different economic structures, different political decision-making profiles, and different relationships between the political and banking systems. Yet these two countries had the most extreme experience of housing bubbles during the 200os, and both suffered a similar construction-related economic collapse that ruined their respective banking systems after 2008. The paper argues that the decision-making taking place within their very different domestic institutional frameworks was subordinated to the fact that they shared a similar form of international vulnerability. Both were extremely open to mobile international capital during the 2000s. Their vulnerability to financialization resulted in a common experience of very rapid asset price inflation, which left both countries particularly exposed when the international financial collapse took place. The shared experience of European ‘peripherality’ meant that two countries belonging to different ‘varieties of capitalism’ ended up with very similar kinds of economic collapse.

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File URL: http://www.ucd.ie/geary/static/publications/workingpapers/gearywp201318.pdf
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Bibliographic Info

Paper provided by Geary Institute, University College Dublin in its series Working Papers with number 201318.

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Length: 57 pages
Date of creation: 08 Oct 2013
Date of revision:
Handle: RePEc:ucd:wpaper:201318

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Keywords: housing bubbles; financial liberalization; credit; Ireland; Spain;

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References

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  1. Sebastian Dellepiane Avellaneda & Niamh Hardiman, 2010. "The European Context of Ireland’s Economic Crisis," The Economic and Social Review, Economic and Social Studies, vol. 41(4), pages 473–500.
  2. Callan, Tim & Walsh, John R. & Coleman, Kieran, 2005. "Tax Expenditures," Papers BP2006/3, Economic and Social Research Institute (ESRI).
  3. José Gabriel Palma, 2009. "The revenge of the market on the rentiers," Cambridge Journal of Economics, Oxford University Press, vol. 33(4), pages 829-869, July.
  4. Morgan Kelly, 2009. "The Irish Credit Bubble," Working Papers 200950, Geary Institute, University College Dublin.
  5. Michelle Norris & Menelaos Gkartzios, 2011. "Twenty years of property-led urban regeneration in Ireland: outputs, impacts, implications," Public Money & Management, Taylor & Francis Journals, vol. 31(4), pages 257-264, July.
  6. repec:esr:chaptr:jacb200505 is not listed on IDEAS
  7. Christophe André, 2010. "A Bird's Eye View of OECD Housing Markets," OECD Economics Department Working Papers 746, OECD Publishing.
  8. Morgan Kelly, 2009. "The Irish Credit Bubble," Working Papers 200932, School Of Economics, University College Dublin.
  9. Pedro Lains, 2008. "The Portuguese Economy in the Irish Mirror, 1960–2004," Open Economies Review, Springer, vol. 19(5), pages 667-683, November.
  10. repec:sae:niesru:v:211:y:2010:i:1:p:r27-r44 is not listed on IDEAS
  11. Blánaid Clarke & Niamh Hardiman, 2012. "Crisis in the Irish Banking System," Working Papers 201203, Geary Institute, University College Dublin.
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Cited by:
  1. Marcell Zoltán Végh, 2014. "Has Austerity Succeeded in Ameliorating the Economic Climate? The Cases of Ireland, Cyprus and Greece," Social Sciences, MDPI, Open Access Journal, vol. 3(2), pages 288-307, June.
  2. Niamh Hardiman, 2013. "Rethinking the political economy of fiscal consolidation in two recessions in Ireland," Working Papers 201316, Geary Institute, University College Dublin.

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