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Effects of a Mortgage Interest Rate Subsidy: Evidence from Colombia

Author

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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    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,Facultad de Economía, CEDE.
    3. Gan-Ochir Doojav & Davaasukh Damdinjav, 2021. "Policy-Driven Boom and Bust in the Housing Market: Evidence from Mongolia," Asian Development Review (ADR), World Scientific Publishing Co. Pte. Ltd., vol. 38(02), pages 279-317, September.

    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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