Depreciation: a Dangerous Affair
Auteur(s)
Guido Cozzi
Accéder
Description
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.
Institution partenaire
Langue
English
Date
2017
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