Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/208279
Authors: 
Martin, Alberto
Moral-Benito, Enrique
Schmitz, Tom
Year of Publication: 
2019
Series/Report no.: 
ECB Working Paper 2245
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.
Subjects: 
Housing bubble
Credit
Investment
Financial Frictions
Financial Transmission
Spain
JEL: 
E32
E44
G21
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3507-4
Document Type: 
Working Paper

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