House Prices and Public Debt

Mads Gjedsted Nielsen, Aleksandra Rzeznik

Research output: Contribution to conferencePaperResearchpeer-review

Abstract

By using the 2002 case of fraud in the Danish municipality Farum by then mayor Peter Brixtofte as an exogenous shock to public debt of 1 billion DKK, I estimate the effect of public debt on house prices. I find that the average home ownership lost about 570,000 DKK or as much as 29% of the average house price in the municipality. Furthermore, I document that the aggregate house price loss of 2.1 billion DKK greatly exceeds the increase in public debt of 1 billion DKK. I find that the drop in house prices is sustained 1 year, indicating that the housing market initially overreacts but the overreactions is dampened over time.
Original languageEnglish
Publication date2014
Number of pages24
Publication statusPublished - 2014
EventEuropean Economic Association & Econometric Society 2014 Parallel Meetings - Toulouse, France
Duration: 25 Aug 201429 Aug 2014
http://www.eea-esem.com/EEA-ESEM/2014

Conference

ConferenceEuropean Economic Association & Econometric Society 2014 Parallel Meetings
CountryFrance
CityToulouse
Period25/08/201429/08/2014
Internet address

Cite this

Gjedsted Nielsen, M., & Rzeznik, A. (2014). House Prices and Public Debt. Paper presented at European Economic Association & Econometric Society 2014 Parallel Meetings, Toulouse, France.
Gjedsted Nielsen, Mads ; Rzeznik, Aleksandra. / House Prices and Public Debt. Paper presented at European Economic Association & Econometric Society 2014 Parallel Meetings, Toulouse, France.24 p.
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abstract = "By using the 2002 case of fraud in the Danish municipality Farum by then mayor Peter Brixtofte as an exogenous shock to public debt of 1 billion DKK, I estimate the effect of public debt on house prices. I find that the average home ownership lost about 570,000 DKK or as much as 29{\%} of the average house price in the municipality. Furthermore, I document that the aggregate house price loss of 2.1 billion DKK greatly exceeds the increase in public debt of 1 billion DKK. I find that the drop in house prices is sustained 1 year, indicating that the housing market initially overreacts but the overreactions is dampened over time.",
keywords = "Difference-in-differences, Property value, Hedonic, Natural experiment, Public debt",
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Gjedsted Nielsen, M & Rzeznik, A 2014, 'House Prices and Public Debt' Paper presented at, Toulouse, France, 25/08/2014 - 29/08/2014, .

House Prices and Public Debt. / Gjedsted Nielsen, Mads; Rzeznik, Aleksandra.

2014. Paper presented at European Economic Association & Econometric Society 2014 Parallel Meetings, Toulouse, France.

Research output: Contribution to conferencePaperResearchpeer-review

TY - CONF

T1 - House Prices and Public Debt

AU - Gjedsted Nielsen, Mads

AU - Rzeznik, Aleksandra

PY - 2014

Y1 - 2014

N2 - By using the 2002 case of fraud in the Danish municipality Farum by then mayor Peter Brixtofte as an exogenous shock to public debt of 1 billion DKK, I estimate the effect of public debt on house prices. I find that the average home ownership lost about 570,000 DKK or as much as 29% of the average house price in the municipality. Furthermore, I document that the aggregate house price loss of 2.1 billion DKK greatly exceeds the increase in public debt of 1 billion DKK. I find that the drop in house prices is sustained 1 year, indicating that the housing market initially overreacts but the overreactions is dampened over time.

AB - By using the 2002 case of fraud in the Danish municipality Farum by then mayor Peter Brixtofte as an exogenous shock to public debt of 1 billion DKK, I estimate the effect of public debt on house prices. I find that the average home ownership lost about 570,000 DKK or as much as 29% of the average house price in the municipality. Furthermore, I document that the aggregate house price loss of 2.1 billion DKK greatly exceeds the increase in public debt of 1 billion DKK. I find that the drop in house prices is sustained 1 year, indicating that the housing market initially overreacts but the overreactions is dampened over time.

KW - Difference-in-differences

KW - Property value

KW - Hedonic

KW - Natural experiment

KW - Public debt

M3 - Paper

ER -

Gjedsted Nielsen M, Rzeznik A. House Prices and Public Debt. 2014. Paper presented at European Economic Association & Econometric Society 2014 Parallel Meetings, Toulouse, France.