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The Spanish housing market: is it fundamentally broken?

Author

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  • Juan Carlos Cuestas

    () (Department of Economics, Universitat Jaume I, Castellón, Spain)

  • Merike Kukk

    () (Department of Economics and Finance, Tallinn University of Technology, Estonia)

Abstract

This paper aims to investigate the relationship between housing prices and their fundamental determinants using the example of Spain and considering the possibility of structural breaks in the relationship. We find that the cointegrating coefficient estimates are quite unstable and need to be estimated for different subperiods. Specifically we find that the standard fundamentals explain the behaviour of equilibrium house prices well during the boom-bust period. However, only corporate profit or capital income seems to explain the evolution in recent years.

Suggested Citation

  • Juan Carlos Cuestas & Merike Kukk, 2019. "The Spanish housing market: is it fundamentally broken?," Working Papers 2019/04, Economics Department, Universitat Jaume I, Castellón (Spain).
  • Handle: RePEc:jau:wpaper:2019/04
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    References listed on IDEAS

    as
    1. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    2. Jushan Bai & Pierre Perron, 2003. "Critical values for multiple structural change tests," Econometrics Journal, Royal Economic Society, vol. 6(1), pages 72-78, June.
    3. Gimeno, Ricardo & Martí­nez-Carrascal, Carmen, 2010. "The relationship between house prices and house purchase loans: The Spanish case," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1849-1855, August.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    house prices; capital income; wage income; DOLS; structural breaks; crisis;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

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