{
  "title": "Household Debt and Borrower-Based Measures in Finland: Insights from a Heterogeneous Agent Model",
  "publication": "IMF Working Papers, December 15, 2023",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2023/12/15/household-debt-and-borrower-based-measures-in-finland-insights-from-a-heterogeneous-agent-542425",
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  "summary": "We analyze the effects of borrower-based macroprudential tools in Finland. To evaluate the efficiency of the tools, we construct a heterogeneous agent model in which households endogenously determine their housing size and liquid asset levels under two types of borrowing constraints: (i) a loan-to-v",
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    {
      "heading": "Summary and research question",
      "content": "- The paper analyzes the effects of borrower-based macroprudential tools in Finland using a heterogeneous agent model.\n- Households endogenously determine housing size and liquid asset levels under two borrowing constraints:\n  - (i) a loan-to-value (LTV) limit\n  - (ii) a debt-to-income (DTI) limit\n- The study assesses how these tools affect consumption dynamics following an unexpected negative income shock."
    },
    {
      "heading": "Main findings",
      "content": "- Under an unexpected negative income shock, a larger and more persistent drop in consumption is observed under the LTV limit compared to the DTI limit.\n- DTI caps, while unpopular with lower income households because they limit borrowing amounts, are beneficial on distributional grounds for stabilizing consumption.\n- DTI caps mitigate the consumption decline in recessions by restricting high leverage.\n- DTI caps can usefully complement LTV caps."
    },
    {
      "heading": "Policy implications",
      "content": "- Implementing DTI caps can stabilize aggregate consumption in downturns by constraining excessive household leverage.\n- Policymakers should consider using DTI caps alongside existing LTV limits to improve macroprudential resilience and distributional outcomes."
    },
    {
      "heading": "Model and mechanism (methodology)",
      "content": "- A heterogeneous agent framework where households choose housing size and liquid assets subject to borrowing constraints.\n- Two constraint regimes are compared directly: an LTV limit versus a DTI limit.\n- The primary shock analyzed is an unexpected negative income shock and its impact on consumption dynamics under each constraint.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2023/12/15/household-debt-and-borrower-based-measures-in-finland-insights-from-a-heterogeneous-agent-542425"
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    "Authors: Fumitaka Nakamura",
    "Published: December 15, 2023",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798400263132.001",
    "The paper analyzes the effects of borrower-based macroprudential tools in Finland using a heterogeneous agent model.",
    "Households endogenously determine housing size and liquid asset levels under two borrowing constraints:",
    "The study assesses how these tools affect consumption dynamics following an unexpected negative income shock.",
    "Under an unexpected negative income shock, a larger and more persistent drop in consumption is observed under the LTV limit compared to the DTI limit.",
    "DTI caps, while unpopular with lower income households because they limit borrowing amounts, are beneficial on distributional grounds for stabilizing consumption.",
    "DTI caps mitigate the consumption decline in recessions by restricting high leverage.",
    "DTI caps can usefully complement LTV caps.",
    "Implementing DTI caps can stabilize aggregate consumption in downturns by constraining excessive household leverage.",
    "Policymakers should consider using DTI caps alongside existing LTV limits to improve macroprudential resilience and distributional outcomes.",
    "A heterogeneous agent framework where households choose housing size and liquid assets subject to borrowing constraints.",
    "Two constraint regimes are compared directly: an LTV limit versus a DTI limit.",
    "The primary shock analyzed is an unexpected negative income shock and its impact on consumption dynamics under each constraint.",
    "**Working Paper**"
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