Consequences of Housing Bubbles

  • Sergi Basco


In this chapter, we describe the economic consequences of housing bubbles. During the boom, the rise in house prices results in an increase in consumption, borrowing and investment. These effects are reversed during the bust. The collapse of housing bubbles is conducive to financial crises, which tend to be longer and deeper than normal recessions. Finally, we discuss how housing bubbles can distort the optimal allocation of resources and reduce the aggregate productivity of the economy.


Consumption Investment Housing bubble Financial crisis Misallocation 


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Copyright information

© The Author(s) 2018

Authors and Affiliations

  • Sergi Basco
    • 1
  1. 1.Universitat Autònoma BarcelonaBarcelonaSpain

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