Macroeconomic Policies and Housing Market in Taiwan

Abstract

This paper develops a dynamic stochastic general equilibrium (DSGE) model that analyzes the transmission mechanisms of a real estate transfer tax and other macroeconomic policies on Taiwan`s housing market. Our model matches the volatility of Taiwan`s housing prices and housing transactions during 2011–2015, when the loan-to-value ratio was reduced and a transfer tax along with a property tax were collected. The calibration results indicate that imposing a residential property tax or raising interest rates effectively curbs speculative housing transactions and has prolonged effects on taming housing prices over time. Transfer tax imposition or a decrease in the loan-to-value ratio has short-lived effects on moderating housing markets.