Another Look at the Capitalization of Interest Subsidies: Evidence from Sweden
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.
|Date of creation:||Jan 1998|
|Date of revision:|
|Publication status:||published as Journal of Money, Credit and Banking (May 2000).|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Englund, Peter, 1990. "Financial deregulation in Sweden," European Economic Review, Elsevier, vol. 34(2-3), pages 385-393, May.
- 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.
- Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
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