Mortgage interest tax deduction can increase market volatility – DNB paper
Deductibility of interest payments raises household debt level and chances of default, researcher says
High rates of tax deduction for interest payments on housing loans can significantly increase economic volatility, a working paper published by the Netherlands Bank argues.
In Macroeconomic effects of mortgage interest deduction, Cenkhan Sahin presents a general equilibrium model, based on data from the US housing market featuring tax-deductible interest payments on mortgages.
A higher deduction rate leads to higher house prices, and higher debt levels among households, the author argues, as
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