[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/ecb/ecbwps/20192245.html
   My bibliography  Save this paper

The financial transmission of housing bubbles: evidence from Spain

Author

Listed:
  • Martin, Alberto
  • Moral-Benito, Enrique
  • Schmitz, Tom
Abstract
How do housing bubbles affect other economic sectors? We show that in the presence of collateral constraints, a bubble initially raises housing credit demand and crowds out credit to non-housing firms. If the bubble lasts, however, housing credit repayments raise banks’ net worth and expand credit supply, so that crowding-out eventually gives way to crowding-in. This is consistent with evidence from the recent Spanish housing bubble. Initially, credit growth of non-housing firms was lower at banks with higher bubble exposure, and firms relying on these banks exhibited lower credit and output growth. During the bubble’s last years, these effects reversed. JEL Classification: E32, E44, G21

Suggested Citation

  • Martin, Alberto & Moral-Benito, Enrique & Schmitz, Tom, 2019. "The financial transmission of housing bubbles: evidence from Spain," Working Paper Series 2245, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20192245
    as

    Download full text from publisher

    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2245~334a97f21d.en.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. den Haan, Wouter J. & Ramey, Garey & Watson, Joel, 2003. "Liquidity flows and fragility of business enterprises," Journal of Monetary Economics, Elsevier, vol. 50(6), pages 1215-1241, September.
    2. Piazzesi, M. & Schneider, M., 2016. "Housing and Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1547-1640, Elsevier.
    3. Jesús Fernández-Villaverde & Luis Garicano & Tano Santos, 2013. "Political Credit Cycles: The Case of the Eurozone," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 145-166, Summer.
    4. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    5. Gita Gopinath & Şebnem Kalemli-Özcan & Loukas Karabarbounis & Carolina Villegas-Sanchez, 2017. "Capital Allocation and Productivity in South Europe," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(4), pages 1915-1967.
    6. Guerrieri, V. & Uhlig, H., 2016. "Housing and Credit Markets," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1427-1496, Elsevier.
    7. Enrique G. Mendoza & Marco E. Terrones, 2008. "An Anatomy Of Credit Booms: Evidence From Macro Aggregates And Micro Data," NBER Working Papers 14049, National Bureau of Economic Research, Inc.
    8. Thomas Chaney & David Sraer & David Thesmar, 2012. "The Collateral Channel: How Real Estate Shocks Affect Corporate Investment," American Economic Review, American Economic Association, vol. 102(6), pages 2381-2409, October.
    9. Saleem Bahaj & Angus Foulis & Gabor Pinter, 2020. "Home Values and Firm Behavior," American Economic Review, American Economic Association, vol. 110(7), pages 2225-2270, July.
    10. Alberto Martin & Jaume Ventura, 2012. "Economic Growth with Bubbles," American Economic Review, American Economic Association, vol. 102(6), pages 3033-3058, October.
    11. Albert Saiz, 2010. "The Geographic Determinants of Housing Supply," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(3), pages 1253-1296.
    12. Miguel Almunia & David López-Rodríguez & Enrique Moral-Benito, 2018. "Evaluating the macro-representativeness of a firm-level database: an application for the Spanish economy," Occasional Papers 1802, Banco de España.
    13. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 215-268, November.
    14. Enrique G. Mendoza & Marco E. Terrones, 2014. "An Anatomy of Credit Booms and their Demise," Central Banking, Analysis, and Economic Policies Book Series, in: Miguel Fuentes D. & Claudio E. Raddatz & Carmen M. Reinhart (ed.),Capital Mobility and Monetary Policy, edition 1, volume 18, chapter 6, pages 165-204, Central Bank of Chile.
    15. Ventura, Jaume, 2012. "Bubbles and capital flows," Journal of Economic Theory, Elsevier, vol. 147(2), pages 738-758.
    16. Manuel García‐Santana & Enrique Moral‐Benito & Josep Pijoan‐Mas & Roberto Ramos, 2020. "Growing Like Spain: 1995–2007," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(1), pages 383-416, February.
    17. Atif Mian & Amir Sufi, 2011. "House Prices, Home Equity-Based Borrowing, and the US Household Leverage Crisis," American Economic Review, American Economic Association, vol. 101(5), pages 2132-2156, August.
    18. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters, in: This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press.
    19. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "Recovery from Financial Crises: Evidence from 100 Episodes," American Economic Review, American Economic Association, vol. 104(5), pages 50-55, May.
    20. Alberto Martin & Jaume Ventura, 2018. "The Macroeconomics of Rational Bubbles: A User's Guide," Annual Review of Economics, Annual Reviews, vol. 10(1), pages 505-539, August.
    21. Adelino, Manuel & Schoar, Antoinette & Severino, Felipe, 2015. "House prices, collateral, and self-employment," Journal of Financial Economics, Elsevier, vol. 117(2), pages 288-306.
    22. Ozlem Akin & José Montalvo & Jaume García Villar & José-Luis Peydró & Josep Raya, 2014. "The real estate and credit bubble: evidence from Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 5(2), pages 223-243, August.
    23. Greg Kaplan & Kurt Mitman & Giovanni L. Violante, 2020. "The Housing Boom and Bust: Model Meets Evidence," Journal of Political Economy, University of Chicago Press, vol. 128(9), pages 3285-3345.
    24. Daniel Paravisini & Veronica Rappoport & Philipp Schnabl, 2015. "Specialization in Bank Lending: Evidence from Exporting Firms," NBER Working Papers 21800, National Bureau of Economic Research, Inc.
    25. Asim Ijaz Khwaja & Atif Mian, 2008. "Tracing the Impact of Bank Liquidity Shocks: Evidence from an Emerging Market," American Economic Review, American Economic Association, vol. 98(4), pages 1413-1442, September.
    26. Martin, Alberto & Ventura, Jaume, 2015. "The international transmission of credit bubbles: Theory and policy," Journal of Monetary Economics, Elsevier, vol. 76(S), pages 37-56.
    27. Óscar Arce & David López-Salido, 2011. "Housing Bubbles," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(1), pages 212-241, January.
    28. Sergi Basco, 2018. "Housing Bubbles," Springer Books, Springer, number 978-3-030-00587-0, December.
    29. Ignacio Hernando & Ernesto Villanueva, 2014. "The recent slowdown in bank lending in Spain: are supply-side factors relevant?," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 5(2), pages 245-285, August.
    30. Mary Amiti & David E. Weinstein, 2018. "How Much Do Idiosyncratic Bank Shocks Affect Investment? Evidence from Matched Bank-Firm Loan Data," Journal of Political Economy, University of Chicago Press, vol. 126(2), pages 525-587.
    31. J. B. Taylor & Harald Uhlig (ed.), 2016. "Handbook of Macroeconomics," Handbook of Macroeconomics, Elsevier, edition 1, volume 2, number 2.
    32. repec:hal:spmain:info:hdl:2441/75koqefued8i7pihbrl9u84p4u is not listed on IDEAS
    33. Indraneel Chakraborty & Itay Goldstein & Andrew MacKinlay, 2018. "Housing Price Booms and Crowding-Out Effects in Bank Lending," The Review of Financial Studies, Society for Financial Studies, vol. 31(7), pages 2806-2853.
    34. Juan Jimeno & Tano Santos, 2014. "The crisis of the Spanish economy," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 5(2), pages 125-141, August.
    35. Andrews,Donald W. K. & Stock,James H. (ed.), 2005. "Identification and Inference for Econometric Models," Cambridge Books, Cambridge University Press, number 9780521844413, September.
    36. Gabriel Chodorow-Reich, 2014. "The Employment Effects of Credit Market Disruptions: Firm-level Evidence from the 2008-9 Financial Crisis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(1), pages 1-59.
    37. Basco, Sergi, 2014. "Globalization and financial development: A model of the Dot-Com and the Housing Bubbles," Journal of International Economics, Elsevier, vol. 92(1), pages 78-94.
    38. Gabriel Chodorow-Reich, "undated". "The Employment Effects of Credit Market Disruptions: Firm-level Evidence from the 2008-09 Financial Crisis," Working Paper 90811, Harvard University OpenScholar.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Vladimir Asriyan & Luc Laeven & Alberto Martin & Alejandro Van der Ghote & Victoria Vanasco, 2021. "Falling Interest Rates and Credit Misallocation: Lessons from General Equilibrium," Working Papers 1268, Barcelona School of Economics.
    2. Rafael González-Val, 2021. "The Effects of the 2012 Spanish Law Reform to Protect Mortgage Debtors," Housing Policy Debate, Taylor & Francis Journals, vol. 31(2), pages 239-253, March.
    3. Sebastian Kohl & Alexander Spielau, 2022. "Centring construction in the political economy of housing: variegated growth regimes after the Keynesian construction state," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 46(3), pages 465-490.
    4. Harald Hau & Difei Ouyang, 2019. "Local Capital Scarcity and Small Firm Growth: Evidence from Real Estate Booms in China," CESifo Working Paper Series 7928, CESifo.
    5. Peter Bednarek & Daniel Marcel te Kaat & Chang Ma & Alessandro Rebucci, 2021. "Capital Flows, Real Estate, and Local Cycles:Evidence from German Cities, Banks, and Firms," The Review of Financial Studies, Society for Financial Studies, vol. 34(10), pages 5077-5134.
    6. Vladimir Asriyan & Luc Laeven & Alberto Martin & Alejandro Van der Ghote & Victoria Vanasco, 2021. "Falling interest rates and credit reallocation: Lessons from general equilibrium," Economics Working Papers 1784, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2022.
    7. Arce, Fernando, 2021. "Private Overborrowing under Sovereign Risk," MPRA Paper 113176, University Library of Munich, Germany.
    8. Nina Biljanovska & Lucyna Gornicka & Alexandros Vardoulakis, 2019. "Optimal Macroprudential Policy and Asset Price Bubbles," IMF Working Papers 2019/184, International Monetary Fund.
    9. Álvarez-Román, Laura & García-Posada, Miguel, 2021. "Are house prices overvalued in Spain? A regional approach," Economic Modelling, Elsevier, vol. 99(C).
    10. Doerr, Sebastian, 2018. "Collateral, Reallocation, and Aggregate Productivity: Evidence from the U.S. Housing Boom," MPRA Paper 106163, University Library of Munich, Germany.
    11. Carro, Adrian, 2023. "Taming the housing roller coaster: The impact of macroprudential policy on the house price cycle," Journal of Economic Dynamics and Control, Elsevier, vol. 156(C).
    12. Jaume Freire González & Oliver Canosa, 2023. "Economic Crises and Energy Use: An Input-Output Analysis of Catalonia’s 2008–2014 Financial Crisis," Working Papers 1405, Barcelona School of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alberto Martín & Enrique Moral-Benito & Tom Schmitz, 2021. "The Financial Transmission of Housing Booms: Evidence from Spain," American Economic Review, American Economic Association, vol. 111(3), pages 1013-1053, March.
    2. Daisuke Ikeda & Toan Phan & Timothy Sablik, 2020. "Asset Bubbles and Global Imbalances," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, vol. 20, pages 1-4, January.
    3. Alfaro, Laura & García-Santana, Manuel & Moral-Benito, Enrique, 2021. "On the direct and indirect real effects of credit supply shocks," Journal of Financial Economics, Elsevier, vol. 139(3), pages 895-921.
    4. Stijn Claessens & M Ayhan Kose, 2018. "Frontiers of macrofinancial linkages," BIS Papers, Bank for International Settlements, number 95.
    5. Albertazzi, Ugo & Barbiero, Francesca & Marqués-Ibáñez, David & Popov, Alexander & Rodriguez d’Acri, Costanza & Vlassopoulos, Thomas, 2020. "Monetary policy and bank stability: the analytical toolbox reviewed," Working Paper Series 2377, European Central Bank.
    6. Sergi Basco & David López-Rodríguez & Enrique Moral-Benito, 2021. "House prices and misallocation: The impact of the collateral channel on productivity," Working Papers 2135, Banco de España.
    7. Glancy, David, 2021. "Housing bust, bank lending & employment: Evidence from multimarket banks," Journal of Banking & Finance, Elsevier, vol. 127(C).
    8. Bahaj, Saleem Abubakr & Foulis, Angus & Pinter, Gabor & Surico, Paolo, 2018. "Employment and the collateral channel of monetary policy," LSE Research Online Documents on Economics 100934, London School of Economics and Political Science, LSE Library.
    9. Ivashina, Victoria & Laeven, Luc & Moral-Benito, Enrique, 2022. "Loan types and the bank lending channel," Journal of Monetary Economics, Elsevier, vol. 126(C), pages 171-187.
    10. Wix, Carlo, 2017. "The long-run real effects of banking crises: Firm-level investment dynamics and the role of wage rigidity," SAFE Working Paper Series 189, Leibniz Institute for Financial Research SAFE.
    11. Borsi, Mihály Tamás, 2018. "Credit contractions and unemployment," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 573-593.
    12. Daniel I. García, 2018. "Employment in the Great Recession : How Important Were Household Credit Supply Shocks?," Finance and Economics Discussion Series 2018-074, Board of Governors of the Federal Reserve System (U.S.).
    13. Alberto Martin & Jaume Ventura, 2018. "The Macroeconomics of Rational Bubbles: A User's Guide," Annual Review of Economics, Annual Reviews, vol. 10(1), pages 505-539, August.
    14. Flannery, Mark J. & Lin, Leming & Wang, Luxi, 2022. "Housing booms and bank growth," Journal of Financial Intermediation, Elsevier, vol. 52(C).
    15. Kilian Huber, 2015. "The Persistence of a Banking Crisis," Discussion Papers 1532, Centre for Macroeconomics (CFM).
    16. Sebastian Doerr & Stefan Gissler & José‐Luis Peydró & Hans‐Joachim Voth, 2022. "Financial Crises and Political Radicalization: How Failing Banks Paved Hitler's Path to Power," Journal of Finance, American Finance Association, vol. 77(6), pages 3339-3372, December.
    17. Berger, Allen N. & Molyneux, Phil & Wilson, John O.S., 2020. "Banks and the real economy: An assessment of the research," Journal of Corporate Finance, Elsevier, vol. 62(C).
    18. Sebastian Doerr & Stefan Gissler & José-Luis Peydró & Hans-Joachim Voth, 2018. "From finance to fascism," Economics Working Papers 1651, Department of Economics and Business, Universitat Pompeu Fabra, revised Nov 2020.
    19. Peter Bednarek & Daniel Marcel te Kaat & Chang Ma & Alessandro Rebucci, 2021. "Capital Flows, Real Estate, and Local Cycles:Evidence from German Cities, Banks, and Firms," The Review of Financial Studies, Society for Financial Studies, vol. 34(10), pages 5077-5134.
    20. Mark Gertler & Simon Gilchrist, 2018. "What Happened: Financial Factors in the Great Recession," Journal of Economic Perspectives, American Economic Association, vol. 32(3), pages 3-30, Summer.

    More about this item

    Keywords

    credit; financial frictions; financial transmission; housing bubble; investment; Spain;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecb:ecbwps:20192245. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Official Publications (email available below). General contact details of provider: https://edirc.repec.org/data/emieude.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.