This paper examines the effects of a mortgage interest rate subsidy on booms and busts in the housing market by … analyzing the Housing Mortgage program in Mongolia. We find that the most recent housing boom in Mongolia occurred from the …-specific factors and macroeconomic variables had a significant influence on housing price dynamics. Mortgage interest rate …

externalities induced by a collateral constraint. Limiting the loan-to-value ratio benefits only few unconstrained borrowers and … reduces ex-ante social welfare. A Pigouvianstyle symmetric debt tax (that subsidizes savings) raises collateral prices and … social welfare. Overall, collateral effects are of minor importance and interest rate rather than asset price responses are …