It is a great pleasure to have the opportunity to offer my comments on the paper "The Drivers of Housing Cycles in Spain" by Oriol Aspachs-Bracons and Pau Rabanal. The authors address an important and timely question. The sharp contraction in the housing sector is a key feature of the economic downturns in the US, UK, Ireland and Spain. The authors tackle a particularly complex issue as several factors, including monetary policy, the compression of risk premia and financial innovation, are all

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... ikely to have played a role. Understanding the role played by low interest rates is of first order importance for policy makers at central banks. In my opinion, the model the authors set up is a good starting point for studying the spillovers from the housing market to the rest of the economy. However, other important features, such as nominal wage rigidities and indexation and credit supply, should be considered in order to enhance the ability of the model to fit the data and to shed light, in particular, on the role of monetary policy in the last housing market cycle in Spain. Overall, I find the empirical analysis presented in the paper valuable and interesting. Overview of the paper Aspachs and Rabanal rely on a two-country, two-sector New Keynesian model of the European Monetary Union in which one country represents Spain and the other the I wish to thank Oriol and Pau for providing me with the time series of the innovations to the housing demand shock. The views expressed in this discussion do not reflect those of the Banca d'Italia.