Abstract
This paper explores the long-term effect of recent housing policies in Korea. Using a two-sector general equilibrium model with heterogeneous agents, we conduct three policy experiments: i) a reduction in the loan-to-value (LTV) ratio; ii) an increase in the house acquisition tax rate; iii) an increase in the property tax rate. We find that all three policies increase the relative price of housing structures in the long run, yet their quantitative effect is small, and that the reduced LTV ratio is effective in reducing the household debt. Heterogeneous responses to these policies depending on household wealth are crucial in these results.
| Original language | English |
|---|---|
| Pages (from-to) | 199-223 |
| Number of pages | 25 |
| Journal | Korean Economic Review |
| Volume | 37 |
| Issue number | 2 |
| DOIs | |
| State | Published - 2021 |
Bibliographical note
Funding Information:* We thank the editor and two anonymous referees for their extremely insightful comments and suggestions. This work was supported by the research fund of Hanyang University (HY-2017). This paper was also supported financially by the Bank of Korea. The views expressed in this paper are those of the authors and do not necessarily reflect the views of the Bank of Korea. ** First Author, Associate Professor, Department of Economics, Ewha Womans University, Email: [email protected] *** Corresponding Author, Associate Professor, College of Economics and Finance, Hanyang University, Email: [email protected] 1 The figure shows the house transaction price index published by the Korea Appraisal Board, deflated by the consumer price index. This index is 1 in November 2017.
Publisher Copyright:
© 2021, Korean Economic Association. All rights reserved.
Keywords
- Heterogeneous Agents
- House Prices
- Household Debt
- Housing Policies