Co-moving systems with explosive regressors and time-varying volatility: Evidence from the Spanish housing market

This study investigates the co-explosivity between Spain’s nominal house price index and the housing credit-to-GDP ratio over the period 1971–2024, with particular emphasis on the housing bubble years from 1998 to 2008. Applying the framework proposed by Chen et al. (2017), the analysis reveals an asymmetric relationship: house prices exhibit a stronger sensitivity to credit expansion than credit does to price increases, underscoring the disproportionate influence of credit on housing market dynamics. During the 1998–2008 bubble phase, the relationship becomes more symmetric, suggesting a feedback loop in which relaxed lending standards fueled housing demand, while rising prices reinforced further credit growth. This period is characterized by tighter coupling between the two variables, stronger co-movement, and faster correction dynamics—indicative of speculative lending behavior. The findings highlight the importance of monitoring credit conditions to better understand and manage housing market volatility.