EconPapers    
Economics at your fingertips  
 

The Financial Transmission of Housing Bubbles: Evidence from Spain

Alberto Martin, Enrique Moral-Benito () and Tom Schmitz

No 12999, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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. It therefore crowds out credit to non-housing firms. If time passes and the bubble lasts, however, housing firms eventually 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: crowding-out gives way to crowding-in. These predictions are confirmed by empirical evidence from the recent Spanish housing bubble. 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 had lower credit and output growth. In its last years, these effects were reversed.

Keywords: credit; Financial Frictions; Financial Transmission; housing bubble; investment; Spain (search for similar items in EconPapers)
JEL-codes: E32 E44 G21 (search for similar items in EconPapers)
Date: 2018-06
New Economics Papers: this item is included in nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12999 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: The financial transmission of housing bubbles: evidence from Spain (2019) Downloads
Working Paper: The financial transmission of housing bubbles: evidence from Spain (2018) Downloads
Working Paper: The Financial Transmission of Housing Bubbles: Evidence from Spain (2018) Downloads
Working Paper: The financial transmission of housing bubbles: evidence from spain (2018) Downloads
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:cpr:ceprdp:12999

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... rs/dp.php?dpno=12999

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2020-03-29
Handle: RePEc:cpr:ceprdp:12999