Konstantin Kholodilin

Interdisciplinary seminars
finance seminar

Konstantin Kholodilin

DIW, Berlin
Government-made house price bubbles? Austerity, homeownership, rental and credit liberalization policies and the ’irrational exuberance’ on housing markets

MEGA Salle Carine Nourry

MEGA - Salle Carine Nourry

Maison de l'économie et de la gestion d'Aix
424 chemin du viaduc
13080 Aix-en-Provence

Tuesday, November 7 2023| 10:30am to 12:00pm

Eric Girardin: eric.girardin[at]univ-amu.fr
Gaël Leboeuf: gael.leboeuf[at]univ-amu.fr
Christelle Lecourt: christelle.lecourt[at]univ-amu.fr


Housing bubbles and crashes are catastrophic events for economies and imply enormous destruction of housing wealth, financial default risks, construction unemployment and business cycle downturns. This paper investigates whether governmental housing policies and regulation can affect economies’ propensity to build up speculative house price bubbles. In particular, we focus on the liberalization effects of rent and credit regulation as well as homeownership and austerity policies. Drawing on long-run time series from 16 countries since 1870, we identify speculative price bubbles through explosive root tests, corroborated by a narrative approach. Estimating logit models, we find that tighter rent and credit controls and more housing construction make bubbles less likely to emerge by dampening price increases, while certain homeownership subsidies and government austerity increase the likelihood of bubbles. The paper illustrates the logic of rent, credit, homeownership and austerity effects with two case studies.