The Drivers of Housing Cycles in Spain
IMF Working Papers, September 1, 2009
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- The Drivers of Housing Cycles in Spain
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Bibliographic details
- Authors: Pau Rabanal, Oriol Aspachs-Bracons
- Published: September 1, 2009
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451873504.001
Summary
- Since Spain joined the EMU, two main important factors behind the housing boom appear to be the decrease of nominal interest rates and demographic factors.
- The paper estimates a New Keynesian model of a currency area, using data for Spain and the rest of the EMU to study the importance of those factors.
- The role of different rigidities is examined; labor market frictions are identified as crucial to explain main features of the data, while financial frictions that impose a collateral constraint on borrowing do not appear to be relevant.
Methodology
- Model: New Keynesian model of a currency area.
- Data: Spain and the rest of the EMU.
- Focus: Assess importance of decreased nominal interest rates and demographic factors for the housing boom; evaluate different rigidities including labor market frictions and financial (collateral) constraints.
Key Findings
- Decrease of nominal interest rates: Listed as one of the two main important factors behind the housing boom since Spain joined the EMU.
- Demographic factors: Listed as the other main important factor behind the housing boom since Spain joined the EMU.
- Labor market frictions: Crucial to explain main features of the data.
- Financial frictions (collateral constraints on borrowing): Do not appear to be relevant.
Subject Areas and Keywords
- Subject: Consumption, Housing, Housing prices, Labor, National accounts, Prices, Return on investment
- Keywords: Consumption, consumption goods, durable goods, Europe, Housing, Housing prices, investment adjustment cost, monetary policy shock, nondurable goods, preference shock, price level, Return on investment, technology shock, utility function, WP