Impact of Securitization on House Price Dynamics in Spain

Masterarbeit , 2014 , 78 Seiten , Note: A

VWL - Sonstiges

The thesis tries to explain different nature of the dynamics during the upward and downward part of the last house price cycle in Spain, characterized by important rigidities. Covered bonds are introduced as an instrument which may accelerate a house price boom, while it may also serve as a source of correction to overvalued house prices in downturn. In a serious economic stress, lack of investment opportunities motivates investors to buy the covered bonds due to the strong guarantees provided, which may in turn help to revitalize the credit and housing markets.
To address such regime shift, house price dynamics is modelled within a framework of mutually related house price, credit and business cycles using smooth transition vector autoregressive model. Linear behaviour of such system is rejected, indicating the need to model house prices in a nonlinear framework. Also, importance of modelling house prices in the context of credit and business cycles is confirmed. Possible causality from issuance of covered bonds to house price dynamics was identified in this nonlinear structure.
Finally, potential threat to financial stability resulting from rising asset encumbrance both in the upward and downward part of the house price cycle was identified, stressing the need to model impact of the covered bonds on house prices in a situation when Basel III liquidity requirements motivate towards use of this instrument.

Inhaltsverzeichnis (Table of Contents)

• Introduction
• House price dynamics and financial crisis in Spain
  • House prices in the context of real economy and financial system
• Covered bonds in the framework of house price and credit cycles
  • Covered bonds and financial stability
  • The role of covered bonds in house price dynamics
• Empirical analysis of house price dynamics in Spain
  • Nonlinear regime switching models
  • Smooth transition vector autoregression
  • Empirical model
• Financial stability threats resulting from the usage of covered bonds

Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

This thesis aims to explain the distinct dynamics of house price cycles in Spain, particularly the rigidities observed during the downward phase. It examines the role of covered bonds as a potential instrument that can both accelerate a house price boom and provide a corrective mechanism for overvalued prices in a downturn. The study utilizes a nonlinear framework to model house price dynamics within the context of mutually related house price, credit, and business cycles.

• The impact of covered bonds on house price dynamics in Spain
• The role of covered bonds in mitigating house price bubbles and promoting financial stability
• The importance of modeling house price dynamics within a nonlinear framework, considering the interconnectedness of house prices, credit, and business cycles
• The identification and analysis of potential financial stability threats arising from the use of covered bonds
• The contribution of covered bonds to the dynamics of the Spanish housing market in the context of the recent financial crisis

Zusammenfassung der Kapitel (Chapter Summaries)

Chapter 2 reviews house price dynamics in Spain, highlighting the interconnectedness of business, credit, and house price cycles. It explores potential sources of rigidities in the downward phase of the house price cycle and introduces covered bonds as a possible corrective mechanism.

Chapter 3 provides a detailed analysis of covered bonds, emphasizing their differences from mortgage-backed securities. It examines the potential threats to financial stability posed by covered bonds and discusses the importance of modeling them within the context of house price and business cycles.

Chapter 4 reviews theoretical foundations of nonlinear regime switching models and presents a smooth transition vector autoregression model for explaining house price dynamics in the context of credit cycles, incorporating the use of covered bonds.

Schlüsselwörter (Keywords)

The main keywords and focus topics of this thesis include house price dynamics, credit cycle, rigidities in the housing market, covered bonds, securitization, smooth transition vector autoregressive models, and asymmetric behavior. These terms represent the core concepts and research areas explored within the study.

• Hochschule: Univerzita Karlova v Praze (Institute of Eeconomic Studies)
• Note: A
• Autor: Hana Hejlova (Autor:in)
• Erscheinungsjahr: 2014
• Seiten: 78
• Katalognummer: V312365
• ISBN (eBook): 9783668111806
• ISBN (Buch): 9783668111813
• Sprache: Englisch
• Schlagworte: impact, securitization, house, price, dynamics, spain