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Another Look at the Capitalization of Interest Subsidies: Evidence from SwedenTommy BergerUppsala University - Institute for Housing and Urban Research Peter EnglundStockholm School of Economics - Department of Economics Patric H. HendershottUniversity of Aberdeen - Centre for Property Research; National Bureau of Economic Research (NBER) Bengt TurnerUppsala University - Institute for Housing and Urban Research January 1998 NBER Working Paper No. w6365 Abstract: 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.
Number of Pages in PDF File: 26 working papers seriesDate posted: July 14, 2000Suggested CitationContact Information
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