Journal de l'économie mondiale

A Time Series Analysis of Spanish Judicial Foreclosures

Abstract

Daniel Armeanu

The global financial crisis, Spain experienced an unprecedented wave of foreclosures and evictions. The Great Recession that followed had serious economic, social, and environmental consequences. The frequency of permanent shocks in foreclosure quarterly rates is investigated in this paper. We investigate whether the foreclosure rate is a stationary series, a unit root, or stationary around a process with structural breaks. This analysis clearly shows that not all shocks have transitory effects on the foreclosure rate. The percentage of unit root rejections is around 40%, indicating both stationarity around occasional shocks with long-term effects and a unit root in which all shocks have a long-term effect on the foreclosure rate. We also look for r unit roots that permit the presence of one or two structural breaks .The majority of structural breaks are positive, and the majority of them occur after 2008, coinciding with the financial crisis and the subsequent collapse of the Spanish housing bubble. We also discover a later decrease in foreclosures in some regions, which can be attributed to the effectiveness of the 2012 Code of Good Practice for banks and financial institutions. In any case, the level of the foreclosure rate time series has not returned to levels.