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 language | English |
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| Publication date | 2014 |
| Number of pages | 24 |
| Publication status | Published - 2014 |
| Event | European Economic Association & Econometric Society 2014 Parallel Meetings - Toulouse, France Duration: 25 Aug 2014 → 29 Aug 2014 http://www.eea-esem.com/EEA-ESEM/2014 |
Conference
| Conference | European Economic Association & Econometric Society 2014 Parallel Meetings |
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| Country/Territory | France |
| City | Toulouse |
| Period | 25/08/2014 → 29/08/2014 |
| Internet address |