Effects%20of%20a%20Mortgage%20Interest%20Rate%20Subsidy%3A%20Evidence%20from%20Colombia

Working Papers

Effects of a Mortgage Interest Rate Subsidy: Evidence from Colombia


CODE: IDB-WP-257
AUTHOR(s): Hofstetter, Marc , Tovar, Jorge , Urrutia, Miguel
PUBLISHED: May 2011
LANGUAGE: English
RELATED TOPICS: Microeconomics
DOWNLOAD FILE IN: English

Abstract:

Government intervention in the construction sector as a way to boost the economy has been a constant in Colombia for the past 90 years. This paper explicitly tests the impact of the most recent of such interventions: a subsidy to the mortgage interest rate. The results show that the subsidy boosted mortgage loans by around 38 percent. However, it is also found that real interest rates went up by 1.09 percent, i.e., there has been an incomplete pass-through of the subsidy to the consumer. The pass-through of this instance of intervention is estimated to be in the range of 65 percent to 74 percent.

Related Research by JEL Codes:
(or click here to find research by JEL Codes)
  • Housing Finance Policy under Dutch Disease Pressure: The Mortgage Market in Trinidad and Tobago
    Technical Notes
    IDB-TN-302 - December 2011

    This work analyzes housing finance in Trinidad and Tobago during the last 20 years. The period covered is influenced by an economic bonanza led by the energy sector. Housing prices in this period skyrocketed, but the demand for mortgage loans was low. The results suggest that this is explained by affordability problems in the dynamics of the new post-shock equilibrium, as housing prices increased ... (View publication)

  • Housing Demand in Brazil: Evidence from the Formal and Informal Sectors
    Working Papers
    IDB-WP-261 - October 2011

    This paper describes the determinants of housing demand in Brazil, with the intention of informing policy aimed at reducing the housing deficit and increasing home ownership. As price elasticity for renters is slightly higher, public policies that aim to influence the price of dwellings and/or the income of households are expected to affect renters more than owners. Given that rent is a pro-cyclic ... (View publication)

  • Argentina`s Housing Market in the 2000s
    Working Papers
    IDB-WP-262 - September 2011

    This study analyzes the main drivers of Argentina’s housing market, including demand and tenure choice, and relates them to the macroeconomic environment in order to advance a policy agenda for housing policy reform. Structural characteristics of the market include the high concentration of the urban population in a few large cities, the association of urban poverty with the housing deficit, and o ... (View publication)

Hello, Welcome to the IDB!

Please join our mailing list by simply entering your email below.