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

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Title: Economic effects of a debt-to-income constraint in Finland : Evidence from Aino 3.0 model
Author: Kärkkäinen, Samu ; Nyholm, Juho
Organization: Bank of Finland
Series: BoF Economics Review
Series number: 1/2021
Year of publication: 2021
Publication date: 28.4.2021
Pages: 31
Subject (yso): taloudelliset mallit; asuntolainat; bruttokansantuote
Keywords: Suomen Pankki; Aino 3.0; DSGE; mallit; Suomi
Other keywords: mortgage-to-GDP ratio; debt-to-income constraint; DTI
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 potentially reduce the volatility of several variables associated with the housing markets.
Rights: https://helda.helsinki.fi/bof/copyright


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