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On the Long-Term Effect of Recent Housing Policies in Korea

Author

Listed:
  • Byoung Hoon Seok

    (Ewha Womans University)

  • Hye Mi You

    (Hanyang University)

Abstract

This paper explores the long-term effect of recent housing policies in Korea. Using a twosector 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.

Suggested Citation

  • Byoung Hoon Seok & Hye Mi You, 2021. "On the Long-Term Effect of Recent Housing Policies in Korea," Korean Economic Review, Korean Economic Association, vol. 37, pages 199-223.
    • Handle: RePEc:kea:keappr:ker-20210701-37-2-01
    as

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    File URL: http://keapaper.kea.ne.kr/RePEc/kea/keappr/KER-20210701-37-2-01.pdf
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    References listed on IDEAS

    as
    1. Jack Favilukis & Sydney C. Ludvigson & Stijn Van Nieuwerburgh, 2017. "The Macroeconomic Effects of Housing Wealth, Housing Finance, and Limited Risk Sharing in General Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 125(1), pages 140-223.
    2. Fernández-Villaverde, Jesús & Krueger, Dirk, 2011. "Consumption And Saving Over The Life Cycle: How Important Are Consumer Durables?," Macroeconomic Dynamics, Cambridge University Press, vol. 15(5), pages 725-770, November.
    3. Campbell, Jeffrey R. & Hercowitz, Zvi, 2009. "Welfare implications of the transition to high household debt," Journal of Monetary Economics, Elsevier, vol. 56(1), pages 1-16, January.
    4. Kamila Sommer & Paul Sullivan, 2018. "Implications of US Tax Policy for House Prices, Rents, and Homeownership," American Economic Review, American Economic Association, vol. 108(2), pages 241-274, February.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. La, Jung Joo, 2023. "Macroeconomic effects of basic income funded by land holding tax," MPRA Paper 116151, University Library of Munich, Germany.

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    More about this item

    Keywords

    Housing Policies; House Prices; Household Debt; Heterogeneous Agents;
    All these keywords.

    JEL classification:

    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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