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House Prices, Mortgage Debt Dynamics and Economic Fluctuations in France: A Semi-Structural Approach

Bove Guillaume, Stephane Dees () and Thubin Camille

Working papers from Banque de France

Abstract: We develop a model of house prices and household indebtedness and include it in the Banque de France's semi-structural macroeconomic model in order to analyse the implications of mortgage debt dynamics on economic fluctuations and financial stability in France. Our results show that accounting for household financial vulnerability in the distribution of loans is key to prevent large credit and house price fluctuations from reinforcing each other in the long term. Moreover, our model shows that measures constraining the indebtedness of households (regarding the maturity of loans or borrower-based caps) helps reducing short- to medium-term financial instability dynamics.

Keywords: Semi-structural Models; House Prices; Mortgage Debt (search for similar items in EconPapers)
JEL-codes: E51 E47 C51 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2020
New Economics Papers: this item is included in nep-mac and nep-ure
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