The Drivers of Housing Cycles in Spain

ByPau Rabanal, Oriol Aspachs-Bracons

September 1, 2009

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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. In this paper we estimate 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. We also examine the role of different rigidities and find that labor market frictions are crucial to explain main features of the data. On the other hand, financial frictions that impose a collateral constraint on borrowing do not appear to be relevant.

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

Pages:
39
Volume:
2009
DOI:
https://doi.org/10.5089/9781451873504.001
Issue:
203
Series:
Working Paper No. 2009/203
Stock No:
WPIEA2009203
ISBN:
9781451873504
ISSN:
1018-5941

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