Mortgage Market Development, Savings, and Growth

Author/Editor:

Xiaowei Li

Publication Date:

March 1, 2001

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Jappelli and Pagano (1994) argues that tightening the borrowing constraints in the mortgage markets promotes savings. Employing a six-period overlapping generations model with endogenous growth and a method of simulation calibrated on the Middle East, this paper demonstrates that the above argument is tenable only if consumers do not alter their tenure choices. Consumers do, however, postpone or forsake the purchase of a house under severely restrictive borrowing constraints, causing the savings and growth rates to fall. Therefore, for countries with scarce mortgage availability like those in the Middle East, expanding the mortgage markets to some extent is conducive to savings and growth.

Series:

Working Paper No. 2001/036

Subject:

Asset and liability management Consumption Financial institutions Housing Housing prices Liquidity Mortgages National accounts Prices

English

Publication Date:

March 1, 2001

ISBN/ISSN:

9781451845457/1018-5941

Stock No:

WPIEA0362001

Pages:

27

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