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Housing Taxation and Financial Intermediation

Author

Listed:
  • Hamed Ghiaie

    (Département d'économique, Université de Cergy-Pontoise)

  • Jean-François Rouillard

    () (Département d'économique, Université de Sherbrooke)

Abstract

Through the lens of a multi-agent dynamic general equilibrium model, we examine the effects of four permanent changes in housing taxes and deductions on macroeconomic aggregates and welfare. Our main result is that the presence of borrowing-constrained bankers dampen the negative consequences of housing taxation on output. The long-run tax multipliers found range from -1.02 to -0.6. The reduction in the deduction of mortgage interest payments delivers the lowest multiplier. We also implement revenue-neutral tax reforms and find that the repeal of mortgage deductibility is the only policy that generates gains in output.

Suggested Citation

  • Hamed Ghiaie & Jean-François Rouillard, 2018. "Housing Taxation and Financial Intermediation," Cahiers de recherche 18-01, Departement d'Economique de l'École de gestion à l'Université de Sherbrooke, revised Nov 2018.
  • Handle: RePEc:shr:wpaper:18-01
    as

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    File URL: http://gredi.recherche.usherbrooke.ca/wpapers/GREDI-1801.pdf
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    References listed on IDEAS

    as
    1. Gervais, Martin, 2002. "Housing taxation and capital accumulation," Journal of Monetary Economics, Elsevier, vol. 49(7), pages 1461-1489, October.
    2. Matteo Iacoviello, 2005. "House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle," American Economic Review, American Economic Association, vol. 95(3), pages 739-764, June.
    3. Alpanda, Sami & Zubairy, Sarah, 2017. "Addressing household indebtedness: Monetary, fiscal or macroprudential policy?," European Economic Review, Elsevier, vol. 92(C), pages 47-73.
    4. Satyajit Chatterjee & Burcu Eyigungor, 2015. "A Quantitative Analysis of the US Housing and Mortgage Markets and the Foreclosure Crisis," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(2), pages 165-184, April.
    5. Edward L. Glaeser & Jesse M. Shapiro, 2003. "The Benefits of the Home Mortgage Interest Deduction," NBER Chapters,in: Tax Policy and the Economy, Volume 17, pages 37-82 National Bureau of Economic Research, Inc.
    6. Matteo Iacoviello, 2015. "Financial Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(1), pages 140-164, January.
    7. Òscar Jordà & Moritz Schularick & Alan M. Taylor, 2016. "The great mortgaging: housing finance, crises and business cycles," Economic Policy, CEPR;CES;MSH, vol. 31(85), pages 107-152.
    8. Rosen, Harvey S., 1979. "Housing decisions and the U.S. income tax : An econometric analysis," Journal of Public Economics, Elsevier, vol. 11(1), pages 1-23, February.
    9. Zheng Liu & Pengfei Wang & Tao Zha, 2013. "Land‐Price Dynamics and Macroeconomic Fluctuations," Econometrica, Econometric Society, vol. 81(3), pages 1147-1184, May.
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    11. Floetotto, Max & Kirker, Michael & Stroebel, Johannes, 2016. "Government intervention in the housing market: Who wins, who loses?," Journal of Monetary Economics, Elsevier, vol. 80(C), pages 106-123.
    12. James Poterba & Todd Sinai, 2008. "Tax Expenditures for Owner-Occupied Housing: Deductions for Property Taxes and Mortgage Interest and the Exclusion of Imputed Rental Income," American Economic Review, American Economic Association, vol. 98(2), pages 84-89, May.
    13. Poterba, James M, 1992. "Taxation and Housing: Old Questions, New Answers," American Economic Review, American Economic Association, vol. 82(2), pages 237-242, May.
    14. Chambers, Matthew & Garriga, Carlos & Schlagenhauf, Don E., 2009. "Housing policy and the progressivity of income taxation," Journal of Monetary Economics, Elsevier, vol. 56(8), pages 1116-1134, November.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Housing Taxation and Financial Intermediation
      by Christian Zimmermann in NEP-DGE blog on 2018-07-30 15:56:45

    More about this item

    Keywords

    Housing taxation; banking; dynamic general equilibrium.;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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