Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/237706 
Year of Publication: 
2021
Series/Report no.: 
ECB Working Paper No. 2567
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
Borrower-based macroprudential (MP) policies - such as caps on loan-to-value (LTV) ratios and debt-service-to-income (DSTI) limits - contain the build-up of systemic risk by reducing the probability and conditional impact of a crisis. While LTV/DSTI limits can increase inequality at introduction, they can dampen the increase in inequality under adverse macroeconomic conditions. The relative size of these opposing effects is an empirical question. We conduct counterfactual simulations under different macroeconomic and macroprudential policy scenarios using granular income and wealth data from the Households Finance and Consumption Survey (HFCS) for Ireland, Italy, Netherlands and Portugal. Simulation results show that borrower-based measures have a moderate negative welfare impact in terms of wealth inequality and a negligible impact on income inequality.
Subjects: 
macroprudential policy
inequality
household debt
JEL: 
G21
G28
G51
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-4753-4
Document Type: 
Working Paper

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