Elisabetta Marzano, Paolo Piselli and Roberta Rubinacci
The purpose of this paper is to provide a dating system for the Italian residential real estate market from 1927 to 2019 and investigate its interaction with credit and business…
Abstract
Purpose
The purpose of this paper is to provide a dating system for the Italian residential real estate market from 1927 to 2019 and investigate its interaction with credit and business cycles.
Design/methodology/approach
To detect the local turning point of the Italian residential real estate market, the authors apply the honeycomb cycle developed by Janssen et al. (1994) based on the joint analysis of house prices and the number of transactions. To this end, the authors use a unique historical reconstruction of house price levels by Baffigi and Piselli (2019) in addition to data on transactions.
Findings
This study confirms the validity of the honeycomb model for the last four decades of the Italian housing market. In addition, the results show that the severe downsizing of the housing market is largely associated with business and credit contraction, certainly contributing to exacerbating the severity of the recession. Finally, preliminary evidence suggests that whenever a price bubble occurs, it is coincident with the start of phase 2 of the honeycomb cycle.
Originality/value
To the best of the authors’ knowledge, this is the first time that the honeycomb approach has been tested over such a long historical period and compared to the cyclic features of financial and real aggregates. In addition, even if the honeycomb cycle is not a model for detecting booms and busts in the housing market, the preliminary evidence might suggest a role for volume/transactions in detecting housing market bubbles.
Details
Keywords
Silvana Bartoletto, Bruno Chiarini, Elisabetta Marzano and Paolo Piselli
This paper aims to focus on the banking crises recorded in Italy in the period 1861-2016 and to propose a novel classification based upon the timing of the crisis with respect to…
Abstract
Purpose
This paper aims to focus on the banking crises recorded in Italy in the period 1861-2016 and to propose a novel classification based upon the timing of the crisis with respect to the business cycle.
Design/methodology/approach
A simple and objective rule to distinguish between slowdown and inner-banking crises is introduced. The real impact of banking crises is evaluated by integrating the narrative approach with an empirical vector autoregression analysis.
Findings
First, banking crises are not always associated to economic downturns. Especially in Italy, (but this analysis can be easily extended to other countries), they have often limited their negative effects within the financial system (“inner” crises). Second, the simultaneity of macroeconomic effects (credit contraction and GDP recession) leave the causal link undetermined. Third, the empirical and narrative analyses performed testify that boom–bust mechanisms are an exception in the panorama of (Italian) banking crises; although when the economy experiences such episodes, the economic and social consequences are not only severe but also enduring.
Research limitations/implications
To classify historically recognized banking crisis episodes, the authors look at credit and GDP dynamics (and their ratio) around crisis years. Relying on a single definition of crisis is avoided. The classification provides an empirical rule to determine in what way banking crises differ. The classification is mostly based on the synchronization with the business cycle and, using the documented evolution of macroeconomic aggregates, it permits to highlight the fact that a variety of interactions occur between financial and real aggregates during and around banking crises.
Originality/value
As to the concept of systemic banking crisis, a qualitative judgment is often adopted to select relevant episodes, thus confirming the absence of a quantitative rule in classification criteria (Chaudron and de Haan, 2014). This paper proposes a simple and objective rule to distinguish between slowdown and inner-banking crises; the former occur close to a GDP contraction, whereas the latter appear to spread their effects with no substantial evidence of output loss.