Spotting Excessive Regional House Price Growth and What to Do About It

Bruegel Policy Contribution, Issue No 26, October 2017

ERIM Report Series Reference No. ERS-2017-017-F&A

16 Pages Posted: 6 Nov 2017

See all articles by Gregory Claeys

Gregory Claeys

Bruegel; Conservatoire National des Arts et Métiers

Konstantinos Efstathiou

Bruegel

Dirk Schoenmaker

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM); Centre for Economic Policy Research (CEPR)

Date Written: October 20, 2017

Abstract

Housing bubbles are a well-known source of financial instability. In addition, given the importance of this sector to the economy, the collapse of such bubbles tends to be followed by deeper recessions and slower recoveries than other crises, as the recent boom-bust housing cycles in many countries have clearly demonstrated.

In the European union, the policy instruments available to address this and to prevent future housing bubbles are implemented either at the national level (macroprudential policies) or at the euro-area level (monetary policy). However, recent research suggests that house price developments and bubbles are above all a local phenomenon.

There are significant regional differences in house price developments within EU countries, in particular between capital cities and other regions. Our results suggest that house price fluctuations in capital cities tend to be more volatile and stronger than in the rest of the countries, warranting more targeted measures at the local level.

Keywords: House Price Bubbles, Credit Bubbles, Financial Stability

JEL Classification: G01, G21, G28

Suggested Citation

Claeys, Gregory and Efstathiou, Konstantinos and Schoenmaker, Dirk, Spotting Excessive Regional House Price Growth and What to Do About It (October 20, 2017). Bruegel Policy Contribution, Issue No 26, October 2017; ERIM Report Series Reference No. ERS-2017-017-F&A. Available at SSRN: https://ssrn.com/abstract=3064618

Gregory Claeys

Bruegel ( email )

Rue de la Charité 33
B-1210 Brussels Belgium, 1210
Belgium

Conservatoire National des Arts et Métiers ( email )

292 rue Saint Martin
Paris, 75003
France

Konstantinos Efstathiou

Bruegel ( email )

Rue de la Charité 33
B-1210 Brussels Belgium, 1210
Belgium

Dirk Schoenmaker (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam
Netherlands

HOME PAGE: http://www.rsm.nl/people/dirk-schoenmaker/

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
15
Abstract Views
253
PlumX Metrics