Depreciation: a Dangerous Affair
Type
working paper
Date Issued
2017-03
Author(s)
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
Subject(s)
Eprints ID
250650
File(s)![Thumbnail Image]()
Name
MPRA_paper_77796[1].pdf
Size
163.8 KB
Format
Adobe PDF
Checksum (MD5)
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