Abstract
© 2006 International Monetary Fund
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© 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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Frontmatter Page
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