IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

International capital flows and the boom-bust cycle in Spain

  • in 't Veld, Jan

    (DG-ECFIN, EU Commission)

  • Kollmann, Robert

    ()

    (ECARES, Université Libre de Bruxelles and CEPR)

  • Pataracchia, Beatrice

    (JRC, EU Commission)

  • Ratto, Marco

    ()

    (JRC, EU Commission)

  • Roeger, Werner

    (DG-ECFIN, EU Commission)

We study the joint dynamics of foreign capital flows and real activity during the recent boom- bust cycle of the Spanish economy, using a three-country New Keynesian model with credit- constrained households and firms, a construction sector and a government. We estimate the model using 1995Q1-2013Q2 data for Spain, the rest of the Euro Area (REA) and the rest of the world. We show that falling risk premia on Spanish housing and non-residential capital, a loosening of collateral constraints for Spanish households and firms, as well as a fall in the interest rate spread between Spain and the REA fuelled the Spanish output boom and the persistent rise in foreign capital flows to Spain, before the global financial crisis. During and after the global financial crisis, falling house prices, and a tightening of collateral constraints for Spanish borrowers contributed to a sharp reduction in capital inflows, and to the persistent slump in Spanish real activity. The credit crunch was especially pronounced for Spanish households; firm credit constraints tightened later and more gradually, and contributed much less to the slump.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.dallasfed.org/assets/documents/institute/wpapers/2014/0181.pdf
File Function: Full text
Download Restriction: no

Paper provided by Federal Reserve Bank of Dallas in its series Globalization and Monetary Policy Institute Working Paper with number 181.

as
in new window

Length: 33 pages
Date of creation: 01 May 2014
Date of revision:
Handle: RePEc:fip:feddgw:181
Contact details of provider: Web page: http://www.dallasfed.org/
Email:


More information through EDIRC

Order Information: Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Calza, Alessandro & Stracca, Livio & Monacelli, Tommaso, 2009. "Housing finance and monetary policy," Working Paper Series 1069, European Central Bank.
  2. Klaus Adam & Pei Kuang & Albert Marcet, 2012. "House Price Booms and the Current Account," NBER Macroeconomics Annual, University of Chicago Press, vol. 26(1), pages 77 - 122.
  3. Robert Kollmann & Werner Roeger & Jan in'tVeld, 2012. "Fiscal Policy in a Financial Crisis: Standard Policy vs. Bank Rescue Measures," Working Papers ECARES ECARES 2012-006, ULB -- Universite Libre de Bruxelles.
  4. Robert Kollmann, 2013. "Global Banks, Financial Shocks, and International Business Cycles: Evidence from an Estimated Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(s2), pages 159-195, December.
  5. Barry Eichengreen & Muge Adalet, 2005. "Current Account Reversals: Always a Problem?," NBER Working Papers 11634, National Bureau of Economic Research, Inc.
  6. Galina Hale & Maurice Obstfeld, 2014. "The Euro and The Geography of International Debt Flows," NBER Working Papers 20033, National Bureau of Economic Research, Inc.
  7. Guillermo A. Calvo, 1998. "Capital Flows and Capital-Market Crises: The Simple Economics of Sudden Stops," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 35-54, November.
  8. Robert Kollmann & Marco Ratto & Werner Roeger & Jan in’t Veld & Lukas Vogel, 2014. "What drives the German current account? And how does it affect other EU member states?," CAMA Working Papers 2014-35, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  9. Robert KOLLMANN, 2011. "Global Banking and International Business Cycles," 2011 Meeting Papers 20, Society for Economic Dynamics.
  10. Joshua Aizenman & Yothin Jinjarak, 2013. "Real Estate Valuation, Current Account and Credit Growth Patterns, Before and After the 2008-9 Crisis," NBER Working Papers 19190, National Bureau of Economic Research, Inc.
  11. Ratto, Marco & Roeger, Werner & Veld, Jan in 't, 2009. "QUEST III: An estimated open-economy DSGE model of the euro area with fiscal and monetary policy," Economic Modelling, Elsevier, vol. 26(1), pages 222-233, January.
  12. Christopher J. Erceg & Luca Guerrieri & Christopher Gust, 2006. "SIGMA: a new open economy model for policy analysis," International Finance Discussion Papers 835, Board of Governors of the Federal Reserve System (U.S.).
  13. Kollmann, Robert, 2002. "Monetary policy rules in the open economy: effects on welfare and business cycles," Journal of Monetary Economics, Elsevier, vol. 49(5), pages 989-1015, July.
  14. In''t Veld, Jan & Kollmann, Robert & Ratto, Marco & Roeger, Werner, 2012. "Fiscal Policy, Banks and the Financial Crisis," CEPR Discussion Papers 9175, C.E.P.R. Discussion Papers.
  15. Ben Bernanke & Mark Gertler, 1999. "Monetary policy and asset price volatility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 77-128.
  16. Robert E. Hall, 2011. "The High Sensitivity of Economic Activity to Financial Frictions," Economic Journal, Royal Economic Society, vol. 121(552), pages 351-378, 05.
  17. Jan in 't Veld & Andrea Pagano & Rafal Raciborski & Marco Ratto & Werner Roeger, 2012. "Imbalances and rebalancing scenarios in an estimated structural model for Spain," European Economy - Economic Papers 458, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  18. Jermann, Urban & Quadrini, Vincenzo, 2009. "Macroeconomic Effects of Financial Shocks," CEPR Discussion Papers 7451, C.E.P.R. Discussion Papers.
  19. Christian Hott & Terhi Jokipii, 2012. "Housing Bubbles and Interest Rates," Working Papers 2012-07, Swiss National Bank.
  20. Kollmann, Robert, 2001. "The exchange rate in a dynamic-optimizing business cycle model with nominal rigidities: a quantitative investigation," Journal of International Economics, Elsevier, vol. 55(2), pages 243-262, December.
  21. Gomes, Sandra & Jacquinot, Pascal & Pisani, Massimiliano, 2010. "The EAGLE. A model for policy analysis of macroeconomic interdependence in the euro area," Working Paper Series 1195, European Central Bank.
  22. Kiyotaki, Nobuhiro & Moore, John, 1997. "Credit Cycles," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 211-48, April.
  23. Fernández-Villaverde, Jesús & Garicano, Luis & Santos, Tano, 2013. "Political Credit Cycles: The Case of the Euro Zone," CEPR Discussion Papers 9404, C.E.P.R. Discussion Papers.
  24. Robert Kollmann, 1998. "U.S. trade balance dynamics: the role of fiscal policy and productivity shocks and of financial market linkages," ULB Institutional Repository 2013/7634, ULB -- Universite Libre de Bruxelles.
  25. Smets, Frank & Wouters, Rafael, 2007. "Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach," CEPR Discussion Papers 6112, C.E.P.R. Discussion Papers.
  26. Alejandro Justiniano & Giorgio E. Primiceri & Andrea Tambalotti, 2013. "Household Leveraging and Deleveraging," NBER Working Papers 18941, National Bureau of Economic Research, Inc.
  27. Gorton, Gary B., 2010. "Slapped by the Invisible Hand: The Panic of 2007," OUP Catalogue, Oxford University Press, number 9780199734153.
  28. Urban Jermann & Vincenzo Quadrini, 2012. "Erratum: Macroeconomic Effects of Financial Shocks," American Economic Review, American Economic Association, vol. 102(2), pages 1186-1186, April.
  29. Hobza, Alexandr & Zeugner, Stefan, 2014. "Current accounts and financial flows in the euro area," Journal of International Money and Finance, Elsevier, vol. 48(PB), pages 291-313.
  30. Aizenman, Joshua & Jinjarak, Yothin, 2013. "Real Estate Valuation, Current Account, and Credit Growth Patterns Before and After the 2008–2009 Crisis," ADBI Working Papers 429, Asian Development Bank Institute.
  31. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  32. Gauti B. Eggertsson & Paul Krugman, 2012. "Debt, Deleveraging, and the Liquidity Trap: A Fisher-Minsky-Koo Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 127(3), pages 1469-1513.
  33. Adjemian, Stéphane & Bastani, Houtan & Karamé, Fréderic & Juillard, Michel & Maih, Junior & Mihoubi, Ferhat & Perendia, George & Pfeifer, Johannes & Ratto, Marco & Villemot, Sébastien, 2011. "Dynare: Reference Manual Version 4," Dynare Working Papers 1, CEPREMAP, revised Jul 2014.
  34. In't Veld, Jan & Raciborski, Rafal & Ratto, Marco & Roeger, Werner, 2011. "The recent boom-bust cycle: The relative contribution of capital flows, credit supply and asset bubbles," European Economic Review, Elsevier, vol. 55(3), pages 386-406, April.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fip:feddgw:181. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Amy Chapman)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.