Building on Easy Money: The Political Economy of Housing Bubbles in Ireland and Spain

56 Pages Posted: 19 Aug 2013 Last revised: 7 May 2015

See all articles by Niamh Hardiman

Niamh Hardiman

University College Dublin (UCD)

Sebastian Dellepiane

University College Dublin - School of Politics and International Relations

Jon Las Heras

University College Dublin (UCD)

Date Written: 2013

Abstract

This paper undertakes a structured, focused case-study comparison of housing bubbles in Ireland and Spain, based on the selection of two most-different cases that nonetheless share a common outcome of interest. Both countries were exposed to the same set of changes in their international policy environment in the late 1990s and early 2000s, in the form of a low interest rate regime associated with the creation of European Monetary Union (EMU). The two countries have very different economic structures, different political decision-making profiles, and different relationships between the political and banking systems. Yet these two countries had the most extreme experience of housing bubbles during the 200os, and both suffered a similar construction-related economic collapse that ruined their respective banking systems after 2008. The paper argues that the decision-making taking place within their very different domestic institutional frameworks was subordinated to the fact that they shared a similar form of international vulnerability. Both were extremely open to mobile international capital during the 2000s. Their vulnerability to financialization resulted in a common experience of very rapid asset price inflation, which left both countries particularly exposed when the international financial collapse took place. The shared experience of European ‘peripherality’ meant that two countries belonging to different ‘varieties of capitalism’ ended up with very similar kinds of economic collapse.

Keywords: financialization, housing bubble, Ireland, Spain

JEL Classification: F5, F6, G1, G3

Suggested Citation

Hardiman, Niamh and Dellepiane, Sebastian and Las Heras, Jon, Building on Easy Money: The Political Economy of Housing Bubbles in Ireland and Spain (2013). APSA 2013 Annual Meeting Paper; American Political Science Association 2013 Annual Meeting. Available at SSRN: https://ssrn.com/abstract=2299534

Niamh Hardiman (Contact Author)

University College Dublin (UCD) ( email )

Belfield, Dublin 4 4
Ireland

Sebastian Dellepiane

University College Dublin - School of Politics and International Relations ( email )

Belfield
Dublin 4
Ireland

Jon Las Heras

University College Dublin (UCD) ( email )

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