Asset Price Keynesianism, Regional Imbalances and the Irish and Spanish Housing Booms and Busts

Michelle Norris and Michael Byrne
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Michelle Norris: School of Social Policy, Social Work and Social Justice, University College Dublin
Michael Byrne: National Institute of Regional and Spatial Analysis, Maynooth University,

No 201514, Working Papers from Geary Institute, University College Dublin

Abstract: Ireland and Spain were amongst the European countries which experienced the most severe economic and fiscal problems following the global financial crisis. The proximate causes of these economic crashes have been explored in-depth by researchers and governments, who have highlighted strong parallels between the policy, regulatory and economic factors which underpinned them. In both countries residential property price inflation increased dramatically from the late 1990s driven by increased availability of cheap mortgages but unusually was accompanied by marked growth in new house building. Thus, following the international credit crunch in 2008, a simultaneous contraction in both mortgage credit and house building occurred in Ireland and Spain, which precipitated a marked knock-on decline in the employment, tax revenue and consumer spending which the housing boom had underpinned. This paper argues that the Irish and Spanish housing booms and busts are similar not just in terms of scale and proximate causes but also in terms of fundamental causes. In both countries the housing boom/bust cycle was underpinned by a suite of macroeconomic policies which aimed to use asset price growth to underpin rising demand and economic growth, or in other words achieve what Robert Brenner (2006) terms ‘asset-price Keynesianism’. This approach was particularly attractive to the Irish and Spanish governments because it enabled them to resolve historical legacies of industrial underdevelopment and regional imbalances by generating construction jobs in underdeveloped areas. As a result of the latter, local/regional governments in both countries played a key role in facilitating the implementation of this policy.

Keywords: global financial crisis; economic crash; housing boom and bust; macroeconomic policies; asset price growth; industrial underdevelopment; ‘asset-price Keynesianism’ (search for similar items in EconPapers)
Pages: 30 pages
Date: 2015-07-20
New Economics Papers: this item is included in nep-eec, nep-pke and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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