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The Drivers of Housing Cycles in Spain

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  • Pau Rabanal
  • Oriol Aspachs-Bracons

Abstract

Since Spain joined the EMU, two main important factors behind the housing boom appear to be the decrease of nominal interest rates and demographic factors. In this paper we estimate a New Keynesian model of a currency area, using data for Spain and the rest of the EMU to study the importance of those factors. We also examine the role of different rigidities and find that labor market frictions are crucial to explain main features of the data. On the other hand, financial frictions that impose a collateral constraint on borrowing do not appear to be relevant.

Suggested Citation

  • Pau Rabanal & Oriol Aspachs-Bracons, 2009. "The Drivers of Housing Cycles in Spain," IMF Working Papers 09/203, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:09/203
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    9. Oriol Aspachs-Bracons & Pau Rabanal, 2011. "The Effects of Housing Prices and Monetary Policy in a Currency Union," International Journal of Central Banking, International Journal of Central Banking, vol. 7(1), pages 225-274, March.
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    Cited by:

    1. Lukas Vogel & Werner Roeger & Bernhard Herz, 2013. "The Performance of Simple Fiscal Policy Rules in Monetary Union," Open Economies Review, Springer, vol. 24(1), pages 165-196, February.
    2. repec:bis:bisbps:95 is not listed on IDEAS
    3. repec:bla:germec:v:18:y:2017:i:2:p:133-153 is not listed on IDEAS
    4. Robert Kelly & Kieran McQuinn, 2014. "On the Hook for Impaired Bank Lending: Do Sovereign-Bank Interlinkages Affect the Net Cost of a Fiscal Stimulus?," International Journal of Central Banking, International Journal of Central Banking, vol. 10(3), pages 95-128, September.
    5. Gete, Pedro, 2015. "Housing demands, savings gluts and current account dynamics," Globalization and Monetary Policy Institute Working Paper 221, Federal Reserve Bank of Dallas, revised 01 Aug 2015.
    6. Oriol Aspachs-Bracons & Pau Rabanal, 2011. "The Effects of Housing Prices and Monetary Policy in a Currency Union," International Journal of Central Banking, International Journal of Central Banking, vol. 7(1), pages 225-274, March.
    7. Bofinger, Peter & Debes, Sebastian & Gareis, Johannes & Mayer, Eric, 2013. "Monetary policy transmission in a model with animal spirits and house price booms and busts," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2862-2881.
    8. Stefan Hohberger & Lukas Vogel & Bernhard Herz, 2014. "Budgetary-Neutral Fiscal Policy Rules and External Adjustment," Open Economies Review, Springer, vol. 25(5), pages 909-936, November.
    9. Pau Rabanal & Marzie Taheri Sanjani, 2015. "Financial Factors; Implications for Output Gaps," IMF Working Papers 15/153, International Monetary Fund.
    10. Javier Andrés & Samuel Hurtado & Eva Ortega & Carlos Thomas, 2010. "Spain in the Euro: a general equilibrium analysis," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 1(1), pages 67-95, March.
    11. Gabriele Galati & Federica Teppa & Rob Alessie, 2011. "Macro and micro drivers of house price dynamics: An application to Dutch data," DNB Working Papers 288, Netherlands Central Bank, Research Department.
    12. Nikolay Hristov & Oliver Hülsewig & Timo Wollmershäuser, 2014. "Financial Frictions and Inflation Differentials in a Monetary Union," Manchester School, University of Manchester, vol. 82(5), pages 549-595, September.
    13. Vivek Arora & Karl Habermeier & Jonathan D. Ostry & Rhoda Weeks-Brown, 2013. "La liberalización y el manejo de los flujos de capital: una visión institucional," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 15(28), pages 205-255, January-J.
    14. Luis J. Álvarez & Alberto Cabrero, 2010. "Does housing really lead the business cycle?," Working Papers 1024, Banco de España;Working Papers Homepage.
    15. Ye, Guangliang & Deng, Guoying & Li, Zhigang, 2014. "Mortgage rate and choice of mortgage length: A quasi-experimental evidence from Chinese transaction-level data," Journal of Housing Economics, Elsevier, vol. 25(C), pages 96-103.
    16. Kelly, Robert & McQuinn, Kieran, 2013. "On the hook for impaired bank lending: Do sovereign-bank inter-linkages affect the fiscal multiplier?," Research Technical Papers 01/RT/13, Central Bank of Ireland.
    17. Gareis, Johannes & Mayer, Eric, 2012. "Financial market heterogeneity: Implications for the EMU," W.E.P. - Würzburg Economic Papers 90, University of Würzburg, Chair for Monetary Policy and International Economics.
    18. Eric Mayer & Johannes Gareis, 2013. "What Drives Ireland’s Housing Market? A Bayesian DSGE Approach," Open Economies Review, Springer, vol. 24(5), pages 919-961, November.
    19. Margarita Rubio, 2014. "Macroprudential Policy Implementation in a Heterogeneous Monetary Union," Discussion Papers 2014/03, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    20. Kim, Kwang Hwan & Katayama, Munechika, 2013. "Non-separability and sectoral comovement in a sticky price model," Journal of Economic Dynamics and Control, Elsevier, vol. 37(9), pages 1715-1735.
    21. Pau Rabanal & Marzie Sanjani, 2015. "Incorporating Financial Cycles in Output Gap Measures: Estimates for the Euro Area," 2015 Meeting Papers 426, Society for Economic Dynamics.
    22. Bernhard Herz & Stefan Hohberger, 2013. "Fiscal Policy, Monetary Regimes and Current Account Dynamics," Review of International Economics, Wiley Blackwell, vol. 21(1), pages 118-136, February.
    23. Gete, Pedro, 2009. "Housing Markets and Current Account Dynamics," MPRA Paper 20957, University Library of Munich, Germany, revised 24 Feb 2010.

    More about this item

    Keywords

    Economic models; European Union; Cross country analysis; Demand; Private sector; Private investment; Private consumption; Private savings; Spain; Household credit; Housing prices; Housing; Monetary policy; Labor markets; inflation; monetary shocks; price level; monetary economics; Financial Markets and the Macroeconomy; Open Economy Macroeconomics; Financial Constraints;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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