Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/336755 
Year of Publication: 
2026
Series/Report no.: 
CFS Working Paper Series No. 740
Publisher: 
Goethe University Frankfurt, Center for Financial Studies (CFS), Frankfurt a. M.
Abstract: 
We calibrate a lifecycle portfolio-choice model of homeowners facing uninsurable income risk to show that tax deductions for mortgage interest payments and voluntary pension contributions have sizable effects on household portfolios and macroprudential risks. The deductions reduce the after-tax cost of debt and increase the after-tax return of pension savings so that the mortgage incidence increases and portfolios shift from home equity and liquid assets towards pension savings. Because the consumption responses to a house-price decline are heterogeneous, the distribution of household debt shapes the quantitative effect of the tax deductions on the homeowners' resilience after a house price bust.
Subjects: 
Mortgage amortization
Tax incentives
Household consumption
Portfolio choice
Housing busts
Economic stability
Macroprudential policy
JEL: 
D14
D15
D31
E21
G11
G21
H24
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.