Macroprudential Policy and Household Wealth Inequality

Jean-François Carpantier, Javier Olivera and Philippe Van Kerm

No 2017-09, LISER Working Paper Series from Luxembourg Institute of Socio-Economic Research (LISER)

Abstract: Macroprudential policies, such as caps on loan-to-value (LTV) ratios, have become part of the policy paradigm in emerging markets and advanced countries alike. Given that housing is the most important asset in household portfolios, relaxing or tightening access to mortgages may affect the distribution of household wealth in the country. In a stylised model we show that the final level of wealth inequality depends on the size of the LTV ratio, housing prices, credit cost and the strength of a bequest motive; ultimately with no unequivocal effect of LTV ratios on wealth inequality. These trade-offs are illustrated with estimations of "Gini Recentered Influence Function" regressions on household survey data from 12 Eurozone countries that participated in the first wave of the Household Finance and Consumption Survey (HFCS). The results show that, among the households with active mortgages, high LTV ratios at the time of acquisition are related to high contributions to wealth inequality today, while house price increases are negatively related to inequality contributions. A proxy for the strength of bequest motives tends to be negatively related with wealth inequality, but credit cost does not show a significant link to the distribution of wealth.

Keywords: Macroprudential policiy; Wealth distribution; Household finance; LTV ratio; Inequality (search for similar items in EconPapers)
JEL-codes: D31 E50 G21 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2017-06
New Economics Papers: this item is included in nep-eur, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Macroprudential policy and household wealth inequality (2018)
Working Paper: Macroprudential policy and household wealth inequality (2018)
Working Paper: Macroprudential policy and household wealth inequality (2017)
Working Paper: Macroprudential Policy and Household Wealth Inequality (2017)
Working Paper: Macroprudential policy and household wealth inequality (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:irs:cepswp:2017-09

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