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Impact of Fiscal Policy on Residential Investment in France

  • Antipa, P.
  • Schalck, C.

The present paper assesses the impact of fiscal policy on residential investment in France. The analysis is conducted in the framework of a VECM, since this allows accounting for endogeneity between the variables. Our results imply that a long term relationship between investment and subsidies exists, making subsidies an adequate measure to influence residential investment and hence the business cycle. In addition, a disaggregated approach taking into account several different types of fiscal measures highlights that tax and interest rate subsidies are the most efficient fiscal tool for influencing residential investment. When accounting for financial factors by means of households' borrowing capacity, we find that the latter also impacts residential investment positively. Moreover, this alternative specification underlines the robustness of the above mentioned results, as it confirms subsidies as the most efficient measure to influence residential investment.

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Paper provided by Banque de France in its series Working papers with number 270.

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Length: 30 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:bfr:banfra:270
Contact details of provider: Postal: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
Web page: http://www.banque-france.fr/
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  1. Morris A. Davis, 2010. "housing and the business cycle," The New Palgrave Dictionary of Economics, Palgrave Macmillan.
  2. Paul van den Noord, 2005. "Tax Incentives and House Price Volatility in the Euro Area: Theory and Evidence," Economie Internationale, CEPII research center, issue 101, pages 29-45.
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  8. John Muellbauer & Anthony Murphy, 2008. "Housing markets and the economy: the assessment," Oxford Review of Economic Policy, Oxford University Press, vol. 24(1), pages 1-33, spring.
  9. António AFONSO & Ricardo SOUSA, . "Fiscal Policy, Housing and Stock Prices," EcoMod2010 259600005, EcoMod.
  10. Chu-Chia Lin & Sue-Jing Lin, 1999. "An Estimation of Elasticities of Consumption Demand and Investment Demand for Owner-Occupied Housing in Taiwan : A Two-Period Model," International Real Estate Review, Asian Real Estate Society, vol. 2(1), pages 110-125.
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