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Depreciation: a Dangerous Affair

Type
working paper
Date Issued
2017-03
Author(s)
Cozzi, Guido  
Abstract
What if the statutory fiscal depreciation of buildings was higher than their effective economic depreciation? This would imply that markets would value buildings more than their social fundamental value. I prove that this would allow house price bubbles to emerge and open the door to sudden crashes. This paper provides an example of how a misaligned fiscal policy measure could generate potentially destabilizing self-fulfilling prophecies even in an economy with fully rational and forward-looking individuals.
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Economic Policy
URL
https://www.alexandria.unisg.ch/handle/20.500.14171/102574
Subject(s)

economics

Division(s)

SEPS - School of Econ...

FGN - Institute of Ec...

Eprints ID
250650
File(s)
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Thumbnail Image

open.access

Name

MPRA_paper_77796[1].pdf

Size

163.8 KB

Format

Adobe PDF

Checksum (MD5)

069e9452d8a9ee2b2b2b1c50f526545f

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