CHAPTER 6
Regulating Housing Bubbles
Abstract In this final chapter, we explain how regulation could mitigate the emergence of credit and housing bubbles. We start with a discussion on the origin of the recent credit boom. Then, we use the Spanish mortgage bubble to describe how macroprudential tools would have affected the lending behavior of banks. Finally, we discuss how the recent financial crisis has changed the consensus on the determinants of potential vulnerabilities of countries. Keywords Housing bubble · Financial crisis Macroprudential tools · LTV
· Mortgage ·
6.1 What Have We Learnt from Past Episodes? We have arrived at the end of our journey through the origins and economic consequences of housing bubbles. As we have seen in the last chapter, the crash of housing bubbles has large economic costs. Thus, it seems reasonable to ask what could be done to mitigate the emergence of bubbles. There exists a large academic literature that relates the probability of having financial crises to excessive credit (see, for example, Jordà et al. 2013). Moreover, we have discussed that asset price bubbles are funded by credit. Therefore, it is important to understand the causes of credit growth.
© The Author(s) 2018 S. Basco, Housing Bubbles, https://doi.org/10.1007/978-3-030-00587-0_6
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