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Housing Tenure, Consumption and Household Debt: Life-Cycle Dynamics During a Housing Bust in Spain

Clodomiro Ferreira, Julio Gálvez and Myroslav Pidkuyko
Additional contact information
Clodomiro Ferreira: Banco de España
Julio Gálvez: CUNEF Universidad/SHOF

No 285, Working Papers from Red Nacional de Investigadores en Economía (RedNIE)

Abstract: The housing bust in Spain was characterized by a significant and rapid drop in home ownership among the younger cohorts, a relatively homogeneous but significant decrease in consumption, and significant movements in the rent-to-house price ratio. To uncover the causes of these movements, we solve and estimate an equilibrium life-cycle model with non-linear income dynamics, mortgages, housing, and rental markets and simulate a series of counterfactual policy changes and macroeconomic conditions observed in Spain during the period. The lion’s share of the observed drop in home ownership and consumption and the housing market dynamics can be explained by the tightening of credit conditions and the major shift in income dynamics observed in Spain between the boom and bust phases.

Keywords: life-cycle models; mortgage debt; housing (search for similar items in EconPapers)
JEL-codes: E21 E44 (search for similar items in EconPapers)
Pages: 66 pages
Date: 2023-11
New Economics Papers: this item is included in nep-dge, nep-eec, nep-mac and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:aoz:wpaper:285

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