Effects of a Mortgage Interest Rate Subsidy: Evidence from Colombia

45 Pages Posted: 7 Jun 2011

See all articles by Marc Hofstetter

Marc Hofstetter

Universidad de los Andes

Jorge Tovar

Universidad de los Andes, Colombia - Department of Economics

Miguel Urrutia

Universidad de los Andes, Colombia - Department of Economics

Date Written: May 2011

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

Hofstetter, Marc and Tovar, Jorge and Urrutia, Miguel, Effects of a Mortgage Interest Rate Subsidy: Evidence from Colombia (May 2011). IDB Working Paper No. IDB-WP-257, Available at SSRN: https://ssrn.com/abstract=1858065 or http://dx.doi.org/10.2139/ssrn.1858065

Marc Hofstetter (Contact Author)

Universidad de los Andes ( email )

Carrera Primera # 18A-12
Bogota, DC D.C. 110311
Colombia

Jorge Tovar

Universidad de los Andes, Colombia - Department of Economics ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia

HOME PAGE: http://economia.uniandes.edu.co/profesores/planta/tovar_jorge

Miguel Urrutia

Universidad de los Andes, Colombia - Department of Economics ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia

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