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Testing for co-explosive behavior between mortgages loans and house prices in the Spanish economy

Author

Listed:
  • Omar Blanco-Arroyo

    (Universidad de Valencia, Spain)

  • Vicente Esteve

    (Universidad de Valencia)

  • María A. Prats

    (Universidad de Murcia, Spain and European Institute, London School of Economics and Political Science, UK)

Abstract

In this paper, we apply the methodology developed by Evripidou et al. (2022) to assess the co-explosivity of explosive processes between housing credit and housing prices in the Spanish economy from 1971 to 2024. Our Öndings highlight a signiÖcant pattern of co-explosivity: a stable bubble relationship emerges when housing credit precedes hous- ing prices. This co-explosivity is evident for lead times of 2 to 5 years, with the strongest relationship observed at a 4-year lead. These results suggest that credit dynamics drive housing price bubbles, emphasizing the importance of targeting creditís leading e§ect for e§ective policy and market interventions to mitigate real estate bubbles.

Suggested Citation

  • Omar Blanco-Arroyo & Vicente Esteve & María A. Prats, 2025. "Testing for co-explosive behavior between mortgages loans and house prices in the Spanish economy," Working Papers 2515, Department of Applied Economics II, Universidad de Valencia.
    • Handle: RePEc:eec:wpaper:2515
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    Keywords

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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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