Leverage and bubbles: a note on the Spanish property market between 1998 and 2006

Daniel Fuentes-Castro
Authors registered in the RePEc Author Service: Daniel Fuentes Castro

Applied Economics Letters, 2011, vol. 18, issue 7, pages 693-695

Abstract: Financial leverage means the debt taken to make a property investment is revalued in the same proportion as the speculative asset acquired. When the expected price rises above a certain threshold, it becomes rational to take on long-term debt to finance a short-term investment. This causes bubbles, which can have disastrous consequences for the economy as a whole. We model here the economics of speculative leverage and calculate the speculative threshold for the Spanish property market over the last decade, showing how far prices were above the mark.

Date: 2011
References: Add references at CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.informaworld.com/openurl?genre=article& ... 40C6AD35DC6213A474B5 (text/html)
Access to full text is restricted to subscribers.

Related works:
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: http://EconPapers.repec.org/RePEc:taf:apeclt:v:18:y:2011:i:7:p:693-695

Ordering information: This journal article can be ordered from
http://www.tandf.co.uk/journals/subscription.asp

Access Statistics for this article

Applied Economics Letters is edited by Mark Taylor

More articles in Applied Economics Letters from Taylor and Francis Journals
Series data maintained by Michael McNulty ().