Testing for co-explosive behavior between mortgages loans and house prices in the Spanish economy

Omar Blanco-Arroyo, Vicente Esteve and María A. Prats
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Omar Blanco-Arroyo: Universidad de Valencia, Spain
Vicente Esteve: Universidad de Valencia
María A. Prats: Universidad de Murcia, Spain and European Institute, London School of Economics and Political Science, UK

No 2515, Working Papers from Department of Applied Economics II, Universidad de Valencia

Abstract: In this paper, we apply the methodology developed by Evripidou et al. (2022) to assess the co-explosivity of explosive processes between housing credit and housing prices in the Spanish economy from 1971 to 2024. Our Öndings highlight a signiÖcant pattern of co-explosivity: a stable bubble relationship emerges when housing credit precedes hous- ing prices. This co-explosivity is evident for lead times of 2 to 5 years, with the strongest relationship observed at a 4-year lead. These results suggest that credit dynamics drive housing price bubbles, emphasizing the importance of targeting creditís leading e§ect for e§ective policy and market interventions to mitigate real estate bubbles.

Keywords: Housing market; Mortgages loans; Explosive behavior; Co-explosivity (search for similar items in EconPapers)
JEL-codes: C22 E31 E44 E51 G21 R31 (search for similar items in EconPapers)
Date: 2025-12
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