Download Impact - Banque de France

The Impact of Fiscal Policy on
Residential Investment in France
Pamfili Antipa, Christophe Schalck
The Macroeconomics of Housing Markets
Paris, 3rd of December 2009
Outline of the presentation
1.
Fiscal intervention on the French housing
market
2.
Methodology
3.
Empirical results
4.
Conclusive remarks
Overview of the housing market (1)
Overview of the housing market (2)
Housing subsidies
• Subsidies’ growth rate
fluctuates with
residential investment
• Declining GDP /
investment share
• Three categories: tax,
interest rate and
financial subsidies
Overview of the housing market (3)
Housing taxes
•
Cyclical pattern
•
Increasing GDP/
investment share
•
Two categories:
indirect and property
taxes
The methodology (1)
• Data:
– National accounts and French ministry of housing.
– 1984 – 2006 period.
• Considered variables:
– Endogenous: residential investment, permanent income,
households’ borrowing capacity, fiscal variables
– Exogenous: housing prices, interest rates
The methodology (2)
VECM
• Partly accounts for endogeneity
• Allows for more than one error correction mechanism
Estimation procedure as in Lütkepohl (2004)
• All series are first order integrated
• Number of lags fixed by AIC
• Determination of cointegration rank (whole system and
pairs of variables)
1 cointegration relationship
Empirical results (1)
Standard Specification
Long run
Short run
Empirical results (2)
Standard Specification
Empirical results (3)
What about the borrowing capacity?
Empirical results (4)
Which type of subsidy to use?
Conclusive remarks
•
Subsidies (especially tax subsidies) can play a role for the
stabilisation of residential investment and hence the business cycle
 should be the main tool of fiscal policy;
•
Taxes are not significant in the long run;
•
These results are robust over different specifications, including
when households’ borrowing capacity is taken on board;
•
Results should nonetheless be interpreted cautiously, as data
sample is relatively short.