The financial transmission of housing bubbles: evidence from spain

Alberto Martin, Enrique Moral-Benito and Tom Schmitz

No 299, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: What are the effects of a housing bubble on the rest of the economy? We show that if firms and banks face collateral constraints, a housing bubble initially raises credit demand by housing firms while leaving credit supply unaffected, and therefore crowds out credit to non-housing fims. If time passes and the bubble lasts, however, housing fims pay back their higher loans. This leads to an increase in banks' net worth and thus to an expansion in their supply of credit to all firms, so that crowding-out gives way to crowding-in. These predictions are confirmed by empirical evidence from the Spanish housing bubble of 1995-2008. In the early years of the bubble, non-housing firms reduced their credit from banks that were more exposed to the bubble, and firms that were more exposed to these banks exhibited lower credit and output growth. In its last years, however, these effects were reversed.

Date: 2018
New Economics Papers: this item is included in nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2018/paper_299.pdf (application/pdf)

Related works:
Working Paper: The financial transmission of housing bubbles: evidence from Spain (2019)
Working Paper: The financial transmission of housing bubbles: evidence from Spain (2018)
Working Paper: The Financial Transmission of Housing Bubbles: Evidence from Spain (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed018:299

Access Statistics for this paper

More papers in 2018 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().