Aggregate Lending Standards and Inequality

Vanessa Schmidt and Hannah Seidl

No 71, Berlin School of Economics Discussion Papers from Berlin School of Economics

Abstract: We study the effects of movements in aggregate lending standards on macroeconomic aggregates and inequality. We show in a New Keynesian model with heterogeneous households and housing that a looser loan-to-value (LTV) ratio stimulates housing demand, nondurable consumption, and output. Our model implies that the LTV shock transmits to macroeconomic aggregates through higher household liquidity and a general-equilibrium increase in house prices and labor income. We also show that a looser LTV ratio redistributes housing wealth from the top 10% of the housing wealth distribution to the bottom 50%, indicating an overall decrease in inequality.

Keywords: Heterogeneous Agents; Incomplete Markets; Housing; Macroprudential Policies (search for similar items in EconPapers)
JEL-codes: E12 E21 E44 E52 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2025-08-12
New Economics Papers: this item is included in nep-cba, nep-dge, nep-eur, nep-fdg and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:bdp:dpaper:0071

DOI: 10.48462/opus4-5915

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