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

Rubio, Margarita; Carrasco-Gallego, Jos� A.

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Authors

Jos� A. Carrasco-Gallego



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.

Citation

Rubio, M., & Carrasco-Gallego, J. A. (2017). Spain and the crisis: housing prices, credit, and macroprudential policies. Singapore Economic Review, 62(1), 109-133. https://doi.org/10.1142/S0217590817400057

Journal Article Type Article
Acceptance Date Jul 22, 2015
Online Publication Date Apr 21, 2016
Publication Date Mar 1, 2017
Deposit Date Sep 28, 2015
Publicly Available Date Apr 21, 2016
Journal Singapore Economic Review
Print ISSN 0217-5908
Electronic ISSN 1793-6837
Publisher World Scientific
Peer Reviewed Peer Reviewed
Volume 62
Issue 1
Pages 109-133
DOI https://doi.org/10.1142/S0217590817400057
Keywords Housing Boom, House Prices, Macroprudential Policy, Dynamic Provisioning
Public URL https://nottingham-repository.worktribe.com/output/970403
Publisher URL http://www.worldscientific.com/doi/abs/10.1142/S0217590817400057
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
Contract Date Sep 28, 2015

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