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Another Look at the Capitalization of Interest Subsidies: Evidence from Sweden

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  • Tommy Berger
  • Peter Englund
  • Patric H. Hendershott
  • Bengt Turner

Abstract

We analyze by far the most extensive data base yet employed in estimating capitalization" of below-market interest rates into asset prices: nearly 300,000 sales of owner-occupied homes in" Sweden from 1981 to 1993 with 40,000 including government subsidized interest rates. Our" estimates indicates very clearly that interest subsidies are capitalized into house prices. The" below-market financing parameter is consistently significantly negative in all model" specifications, irrespective of assumptions about the degree of foresight structure and interest rate measure for all ten regions that we have studied. In our favored model" specification the estimated capitalization coefficients center on minus unity capitalization.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6365.

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Date of creation: Jan 1998
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Publication status: published as Journal of Money, Credit and Banking (May 2000).
Handle: RePEc:nbr:nberwo:6365

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  1. Englund, Peter & Quigley, John M. & Redfearn, Christian L., 1998. "Improved Price Indexes for Real Estate: Measuring the Course of Swedish Housing Prices," Journal of Urban Economics, Elsevier, vol. 44(2), pages 171-196, September.
  2. Englund, Peter, 1990. "Financial deregulation in Sweden," European Economic Review, Elsevier, Elsevier, vol. 34(2-3), pages 385-393, May.
  3. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
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