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The aim of this paper is to analyse, using a vector error-correction model (VECM), the dynamic interaction between house prices and loans for house purchase in Spain. The results show that both variables are interdependent in the long run: loans for house purchase depend positively on house prices, while house prices adjust when this credit aggregate departs from the level implied by its long-run determinants. In contrast, disequilibria in house prices are corrected only through changes in this variable. As for short-run dynamics, the results show that the two variables have a positive contemporaneous impact on each other, indicating the existence of mutally reinforcing cycles in both variables.

This paper analyses the impact of alternative measures of …rms' …nancial health on their investment and employment decisions. Using disaggregated data, we …nd that corporate …nancial position a¤ects business activity and this impact is more intense when …nancial pressure exceeds a certain threshold. Composite indicators that summarize this non-linear impact suggest that specially in episodes where the …nancial pressure on a signi…cant number of …rms reaches levels at which it has a pronounced in ‡uence on real activity, indicators based on aggregate data may not reliably re ‡ect the system's …nan-cial soundness since they do not adequately re ‡ect the vulnerability of the most fragile companies.JEL Codes: C33, E22, G32, J23.

Financing obstacles and growth an analysis For euro area non-Financial corporationswo r k i n g pa p e r s e r i e s n o 9 9 7 / Ja n ua ry 2 0 0 9 Abstract 4 Non-technical summary 5 WO R K I N G PA PE R S E R I E SN