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The Financial Transmission of Housing Booms: Evidence from Spain

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  • Alberto Martín
  • Enrique Moral-Benito
  • Tom Schmitz

Abstract

How does a housing boom affect credit to non-housing firms? Using bank, firm and loan-level microdata, we show that the Spanish housing boom reduced non-housing credit growth during its first years, but stimulated it later on. These patterns can be rationalized by financial constraints for banks. Constrained banks initially accommodated higher housing credit demand by reducing non-housing credit. Eventually, however, the housing boom increased bank net worth and expanded credit supply. A quantitative model, disciplined by our cross-sectional estimates, indicates that the crowding-out effect was substantial but temporary, and had been fully absorbed by the end of the boom.

Suggested Citation

  • Alberto Martín & Enrique Moral-Benito & Tom Schmitz, 2018. "The Financial Transmission of Housing Booms: Evidence from Spain," Working Papers 1044, Barcelona Graduate School of Economics.
  • Handle: RePEc:bge:wpaper:1044
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    1. Bednarek, Peter & Ma, Chang & Rebucci, Alessandro & Te Kaat, Daniel Marcel, 2019. "Capital Flows, Real Estate, and Local Cycles: Evidence from German Cities, Banks, and Firms," CEPR Discussion Papers 14187, C.E.P.R. Discussion Papers.
    2. Nina Biljanovska & Alexandros Vardoulakis & Lucyna Gornicka, 2019. "Optimal Macroprudential Policy and Asset Price Bubbles," 2019 Meeting Papers 663, Society for Economic Dynamics.

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    More about this item

    Keywords

    housing bubble; credit; investment; financial frictions; financial transmission; Spain;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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