Origins and Consequences
Now available through Palgrave Macmillan
Booms and busts of house prices are a recurrent feature throughout history. This book provides a comprehensive overview of the origins and economic consequences of these housing bubbles. The book starts with a formal definition of asset price bubbles and a summary of the most famous episodes, before describing how economists have thought about asset price bubbles; specifically behavioral vs. rational interpretations. These theories are applied to the special case of housing and the same framework is used to explain the implications of financial globalization for capital flows and housing bubbles. After analyzing its origins, the economic consequences of housing bubbles for both households and firms are derived and documented. The final sections are devoted to discussing the effects of financial crises and explain how financial regulation could mitigate the emergence of future housing bubbles. Case studies of the recent housing bubbles in the United States and Spain are also featured in the book.
"Housing makes up the largest share of investable assets. And for most families, it is the only form of leveraged investment. Not surprisingly, when a housing bubble bursts it has devastating consequences for many. Basco provides an accessible, yet formal framework to understand how housing bubbles arise, their international dimension, their consequences, and ways to prevent them. Basco’s monograph collects the latest scholarship (including his own) on this vital yet sometimes overlooked economic policy topic." -Òscar Jordà, University of California, Davis
"Sergi Basco’s book provides an indispensable and insightful guide to the causes and consequences of speculative bubbles. His analysis blends in a very rigorous but enjoyable manner state-of-the-art theory and historical examples, adding also a very timely and valuable set of policy orientations. This book needs to be read by those who seek a deep, comprehensive and coherent interpretation of some of the main macrofinancial phenomena witnessed in the global economy over the last decades." -Óscar Arce, Director General, Banco de España