Open AccessPolicy-Driven Boom and Bust in the Housing Market: Evidence from Mongolia
Author(s) -
GanOchir Doojav,
Davaasukh Damdinjav
Publication year - 2021
Publication title -
asian development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.487
H-Index - 23
eISSN - 1996-7241
pISSN - 0116-1105
DOI - 10.1142/s0116110521500050
Subject(s) - boom , bust , interest rate , economics , subsidy , quarter (canadian coin) , monetary economics , labour economics , market economy , geography , archaeology , environmental engineering , engineering
This paper examines the effects of a mortgage interest rate subsidy on booms and busts in the housing market by analyzing the Housing Mortgage program in Mongolia. We find that the most recent housing boom in Mongolia occurred from the second quarter (Q2) of 2012 to first quarter (Q1) of 2014, and that the subsequent housing bust lasted 4 years. Both house-specific factors and macroeconomic variables had a significant influence on housing price dynamics. Mortgage interest rate semielasticity and real household income elasticity were estimated as −3 and 1.4, respectively. Dynamic analysis of the estimated vector error correction models suggests that the country’s policy intervention in the mortgage market—introducing an interest rate subsidy on mortgage loans for residential properties of up to 80 square meters—drove the recent housing boom in Mongolia.