© 2006 International Monetary Fund

Abstract

© 2006 International Monetary Fund

Title Page

© 2006 International Monetary Fund

July 2006

IMF Country Report No. 06/284

Kingdom of the Netherlands—Netherlands: Selected Issues

This Selected Issues paper for the Kingdom of the Netherlands—Netherlands was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on July 5, 2006. The views expressed in this document are those of the staff team and do not necessarily reflect the views of the government of the Kingdom of the Netherlands—Netherlands or the Executive Board of the IMF.

The policy of publication of staff reports and other documents by the IMF allows for the deletion of market-sensitive information.

To assist the IMF in evaluating the publication policy, reader comments are invited and may be sent by e-mail to publicationpolicy@imf.org.

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INTERNATIONAL MONETARY FUND

KINGDOM OF THE NETHERLANDS—NETHERLANDS

Selected Issues

Prepared by Wendly Daal, Francisco Nadal De Simone, and Sibel Yelten (all EUR)

Approved by the European Department

July 5, 2006

Contents

  • I. Potential Growth and Total Factor Productivity in the Netherlands

    • A. Overview and Introduction

    • B. Production Function Specification and Data Properties

    • C. Econometric Estimation

    • D. Trend Growth

    • E. What Happened to TFP Growth?

    • F. Concluding Remarks

    • References

  • II. House Prices In the Netherlands: Determinants, Concerns, and Considerations Related to Phasing Out the Tax Deductibility of Mortgage Interest Payments

    • A. Introduction

    • B. What is the Current Situation in the Housing Market in the Netherlands?

    • C. How does the Situation in the Netherlands Compare to Other Industrialized Countries?

    • D. Is There a Reason to be Concerned?

    • E. Policy Issues

    • F. The Experience of Other Countries that Phased Out the Tax Deductibility of Mortgage Interest Payments

    • G. When and How to Phase out Mortgage Interest Deductibility in the Netherlands?

    • H. Concluding Remarks

    • Appendix I: Estimations for the United Kingdom

    • References

  • III. Volatility of Tax Revenues in the Netherlands

    • A. Introduction

    • B. Tax Revenue Volatility in the Netherlands and in other EU-15 Countries

    • C. Determinants of Tax Revenue Volatility in the Netherlands

    • D. Concluding Remarks

    • Appendix I: Factors Determining Tax Revenue Volatility: Pension Contributions and Business Cycle

    • References

  • Figures

  • I.1 Trend GDP and TFP Growth

  • I.2 Labor Indicators

  • II.1 Percentage of Newly Provided Loans with LTV>100%

  • II.2 Inflation-Adjusted Residential Property Prices

  • II.3 Real House Prices vs. Fitted Values from Estimation

  • II.4 United Kingdom: Limit on Deductibility Became Binding Over Time

  • II.5 United Kingdom: Tax Deduction, House Prices, and Key Economic Developments

  • II.6 Sweden: Real House Prices and Some Variables That Impact House Prices

  • II.7 Average House Price Forecast Assuming Normal Economic Growth

  • III.1 Conditional Volatility of Personal Income Tax (PIT) Revenues, 1970–2005

  • III.2 Coefficient of Variation of Personal Income Tax and Social Contributions

  • III.3 Coefficient of Variation of Corporate Income Tax

  • III.4 Coefficient of Variation of Indirect Taxes

  • III.5 Output Gap in the Netherlands

  • III.6 Trade Openness of EU Economies

  • Tables

  • I.1a Elliot, Rothenberg, and Stock Test for Unit Roots, 1980–2004

  • I.1b Kwiatkowsky, Phillips, Schmidt, and Shin Stationarity Test, 1980–2004

  • I.1c Shimotsu and Phillips Exact Local Whittle Estimation of Fractional Integration, 1980–2004

  • I.2a The Johansen-Juselius Maximum Likelihood Test for Cointegration, 1979–2004

  • I.2b The Johansen-Juselius Maximum Likelihood Test for Cointegration, 1979–2004

  • I.3 Parameter Estimates of the Cobb-Douglas Production Function with TFP as a Latent Variable, 1979–2004

  • I.4 Unadjusted Solow Residual, TFP, and Potential Growth, 1984–2004

  • I.5 TFP Growth Decomposition, 2000–04

  • I.6 TFP Growth and Institutional Variables, 1984–2001

  • II.1 Accumulated Inflation-Adjusted House Price Increases

  • II.2 Mortgage Debt in 2004

  • II.3 Regression Results, 1970–2005

  • II.4 United Kingdom: The Gradual Phase-Out of Tax Deductibility of Mortgage Interest Payments

  • II.5 United Kingdom: Regression Results

  • II.6 Household Categories

  • II.7 Price Impact of Phasing Out Tax Deductibility

  • III.1 Coefficient of Variation of Tax Revenues (Share of GDP) in the Netherlands, Quarterly

  • III.2 Coefficient of Variation of Tax Revenues (Share of GDP) in the Netherlands, Annual

  • III.3 Coefficient of Variation of Tax Revenues (Share of GDP) in EU Countries, Annual

  • III.4 Output Gap Volatility

  • III.5 Average Absolute Deviation From the Unconditional Mean

  • III.6 Tax Ratios’ Correlation with Pension Premiums in the Netherlands

  • Collapse
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Kingdom of the Netherlands—Netherlands: Selected Issues
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