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Spain and the crisis: housing prices, credit, and macroprudential policies

Rubio, Margarita; Carrasco-Gallego, José A.

Authors

José A. Carrasco-Gallego jose.carrasco-gallego@port.ac.uk



Abstract

In this paper, we propose a two-country, two sector monetary union DSGE model with housing. One of the countries is calibrated to represent the Spanish economy while the other one is the rest of the European monetary union. First, we illustrate how looser credit conditions coming from the Euro area, together with increases in housing demand, lead to an increase in house prices and credit in Spain. Then, we analyze to what extent, macroprudential policies could have avoided the excess in credit that triggered the financial crisis in Spain. We find that a countercyclical loan-to-value rule that mainly responds to house prices would have mitigated the credit boom in Spain. These results can also be applied to other countries facing similar problems in the housing sector and thinking about implementing macroprudential policies.

Journal Article Type Article
Publication Date Mar 1, 2017
Journal Singapore Economic Review
Print ISSN 0217-5908
Electronic ISSN 1793-6837
Publisher World Scientific
Peer Reviewed Peer Reviewed
Volume 62
Issue 1
APA6 Citation Rubio, M., & Carrasco-Gallego, J. A. (2017). Spain and the crisis: housing prices, credit, and macroprudential policies. Singapore Economic Review, 62(1), https://doi.org/10.1142/S0217590817400057
DOI https://doi.org/10.1142/S0217590817400057
Keywords Housing Boom, House Prices, Macroprudential Policy, Dynamic Provisioning
Publisher URL http://www.worldscientific.com/doi/abs/10.1142/S0217590817400057
Copyright Statement Copyright information regarding this work can be found at the following address: http://eprints.nottingh.../end_user_agreement.pdf
Additional Information The Singapore Economic Review, March 2017, Vol. 62, No. 01 : pp. 109-133 doi: 10.1142/S0217590817400057 © World Scientific Publishing Company http://www.worldscientific.com/worldscinet/ser

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Copyright Statement
Copyright information regarding this work can be found at the following address: http://eprints.nottingham.ac.uk/end_user_agreement.pdf





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