Spotting Excessive Regional House Price Growth and What to Do About It

Gregory Clayes, Konstantinos Efstathiou and Dirk Schoenmaker

ERIM Report Series Research in Management from Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam

Abstract: Housing bubbles are a well-known source of financial instability. In addition, given the importance of this sector to the economy, the collapse of such bubbles tends to be followed by deeper recessions and slower recoveries than other crises, as the recent boom-bust housing cycles in many countries have clearly demonstrated. In the European union, the policy instruments available to address this and to prevent future housing bubbles are implemented either at the national level (macroprudential policies) or at the euro-area level (monetary policy). However, recent research suggests that house price developments and bubbles are above all a local phenomenon. There are significant regional differences in house price developments within EU countries, in particular between capital cities and other regions. Our results suggest that house price fluctuations in capital cities tend to be more volatile and stronger than in the rest of the countries, warranting more targeted measures at the local level.

Keywords: House Price Bubbles; Credit Bubbles; Financial Stability (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 (search for similar items in EconPapers)
Pages: 16
Date: 2017-11-06
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Citations: View citations in EconPapers (3)

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Working Paper: Spotting excessive regional house price growth and what to do about it (2017)
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