Housing bubbles can boost credit supply, Spanish paper finds
Evidence of Spanish housing bubble show banks boosting credit supply, researchers say
A housing bubble can actually increase the supply of credit to firms across an economy, a paper published by the Bank of Spain argues.
In The financial transmission of housing bubbles: evidence from Spain, Alberto Martín, Enrique Moral-Benito and Tom Schmitz use their own model to analyse the links between the housing and non-housing sectors of an economy.
They find that “if firms and banks face collateral constraints, a housing bubble initially raises credit demand by housing firms while
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