Building on easy money: the political economy of housing bubbles in Ireland and Spain

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Title: Building on easy money: the political economy of housing bubbles in Ireland and Spain
Authors: Dellepiane, Sebastian
Hardiman, Niamh
Las Heras, Jon
Permanent link: http://hdl.handle.net/10197/4929
Date: Oct-2013
Abstract: This paper undertakes a structured, focused case-study comparison of housing bubbles in Ireland and Spain, based on the selection of two most-different cases that nonetheless share a common outcome of interest. Both countries were exposed to the same set of changes in their international policy environment in the late 1990s and early 2000s, in the form of a low interest rate regime associated with the creation of European Monetary Union (EMU). The two countries have very different economic structures, different political decisionmaking profiles, and different relationships between the political and banking systems. Yet these two countries had the most extreme experience of housing bubbles during the 200os, and both suffered a similar construction-related economic collapse that ruined their respective banking systems after 2008. The paper argues that the decision-making taking place within their very different domestic institutional frameworks was subordinated to the fact that they shared a similar form of international vulnerability. Both were extremely open to mobile international capital during the 2000s. Their vulnerability to financialization resulted in a common experience of very rapid asset price inflation, which left both countries particularly exposed when the international financial collapse took place. The shared experience of European ‘peripherality’ meant that two countries belonging to different ‘varieties of capitalism’ ended up with very similar kinds of economic collapse
Funding Details: Irish Research Council
Type of material: Working Paper
Publisher: University College Dublin. Geary Institute
Series/Report no.: UCD Geary Institute Discussion Paper Series; WP2013/18
Keywords: Housing bubblesEconomic collapseFinancial collapseBanking systems
Other versions: http://www.ucd.ie/geary/static/publications/workingpapers/gearywp201318.pdf
Language: en
Status of Item: Peer reviewed
Appears in Collections:Geary Institute Working Papers
Politics and International Relations Research Collection

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