The policy-driven boom and bust in the housing market: Evidence from Mongolia

Doojav, Gan-Ochir and Damdinjav, Davaasukh (2019): The policy-driven boom and bust in the housing market: Evidence from Mongolia.

Abstract

This paper examines the effects of a mortgage interest rate subsidy on boom and bust in the housing market by exploiting the Housing Mortgage (HM) program implemented in Mongolia. Main results are (i) the recent housing boom occurred from 2012Q2 to 2014Q1, while the housing bust lasted four years, (ii) both house-specific factors and macroeconomic variables have a significant influence on the housing price dynamics, (iii) mortgage interest rate semi-elasticity and real household income elasticity for Mongolia are estimated as -3.0 and 1.4, respectively, and (iv) dynamic analysis of the estimated VECMs suggests that the policy intervention in the mortgage market (i.e., introducing an interest rate subsidy on mortgage loans for buying residential properties with below 80 square meters) has driven the recent housing boom in Mongolia.

• Item Type: MPRA Paper
• Language: English
• Keywords: House prices, Booms and busts, Mortgage interest-rate subsidy,Mongolia
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C53 - Forecasting and Prediction Methods ; Simulation Methods; D - Microeconomics > D1 - Household Behavior and Family Economics > D14 - Household Saving; Personal Finance; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply ; Credit ; Money Multipliers; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R21 - Housing Demand; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R31 - Housing Supply and Markets

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