Economic effects of a debt-to-income constraint in Finland: Evidence from Aino 3.0 model

Samu Kärkkäinen and Juho Nyholm

No 1/2021, BoF Economics Review from Bank of Finland

Abstract: We analyze the economic effects of a debt-to-income constraint for the Finnish economy. Our benchmark is a DSGE model which is designed to capture the most prominent features of the Finnish economy and is calibrated using Finnish macroeconomic data. The baseline model incorporates a loan-to-value type of constraint for new mortgage loans. We study the effects of replacing this with a neutral DTI constraint, neutral meaning that the level of the constraint is set so that it would not alter the mortgage loans-to-GDP ratio in the long run. We find that the replacement would have only small long run effects on the economy, and it would poten-tially reduce the volatility of several variables associated with the housing markets.

Keywords: Suomen Pankki; Aino 3.0; DSGE; mallit; Suomi (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-dge, nep-mac and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofecr:12021

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