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Effects of a Mortgage Interest Rate Subsidy: Evidence from Colombia

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Listed:
  • Marc Hofstetter
  • Jorge Tovar
  • Miguel Urrutia

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.

Suggested Citation

  • Marc Hofstetter & Jorge Tovar & Miguel Urrutia, 2011. "Effects of a Mortgage Interest Rate Subsidy: Evidence from Colombia," Research Department Publications 4718, Inter-American Development Bank, Research Department.
  • Handle: RePEc:idb:wpaper:4718
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    References listed on IDEAS

    as
    1. Nicolás Cuervo & Samuel Jaramillo, 2009. "Dos décadas de política de vivienda en Bogotá apostando por el mercado," DOCUMENTOS CEDE 006651, UNIVERSIDAD DE LOS ANDES-CEDE.
    2. Arturo José Galindo & Marc Hofstetter, 2008. "Mortgage Interest Rates, Country Risk and Maturity Matching in Colombia," DOCUMENTOS CEDE 004544, UNIVERSIDAD DE LOS ANDES-CEDE.
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    Cited by:

    1. Vanessa Cediel Sánchez & Carlos Velásquez Vega, 2015. "¿Hay una burbuja inmobiliaria en Bogotá? Un estudio por segmentos de mercado," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 17(32), pages 233-357, January-J.
    2. Juan Esteban Carranza, 2011. "La indexación de los saldos hipotecarios y la crisis colombiana de final de siglo XX," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE, May.

    More about this item

    JEL classification:

    • N96 - Economic History - - Regional and Urban History - - - Latin America; Caribbean
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R28 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Government Policy

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