How do Housing Prices and Business Cycles Interact in Spain? An Empirical Analysis

We analyze the relationship between business cycles and housing price cycles in Spain over the 1971-1Q/2016-1Q period. Specifically, the question that we want to address is: do the features of the Spanish business cycles and the housing price cycles confer a synchronized nature on them? The study follows three steps. First, we identify the turning points of both cycles. Second, we focus on synchronization and causality indicators. Finally, we document the economic facts that lie behind the relationship found. Overall, business cycles are longer than housing price cycles, although this is more evident in expansion than in contraction phases. Furthermore, housing price cycles seem to be more sensitive to shocks than business cycle.