Macroprudential Policy and Household Wealth Inequality

KU Leuven Discussion Paper Series DPS17.06

41 Pages Posted: 20 Jun 2017

See all articles by Jean-Francois Carpantier

Jean-Francois Carpantier

Universite du Luxembourg

Javier Olivera

LISER; KU Leuven, Department of Economics

Philippe Van Kerm

Luxembourg Institute of Socio-Economic Research (LISER)

Date Written: June 2, 2017


Macroprudential policies, such as caps on loan-to-value (LTV) ratios, have become part of the policy paradigm in emerging markets and advanced countries alike. Given that housing is the most important asset in household portfolios, relaxing or tightening access to mortgages may affect the distribution of household wealth in the country. In a stylised model we show that the final level of wealth inequality depends on the size of the LTV ratio, housing prices, credit cost and the strength of a bequest motive; ultimately with no unequivocal effect of LTV ratios on wealth inequality. These trade-offs are illustrated with estimations of "Gini Recentered Influence Function" regressions on household survey data from 12 eurozone countries that participated in the first wave of the Household Finance and Consumption Survey (HFCS). The results show that, among the households with active mortgages, high LTV ratios at the time of acquisition are related to high contributions to wealth inequality today, while house price increases are negatively related to inequality contributions. A proxy for the strength of bequest motives tends to be negatively related with wealth inequality, but credit cost does not show a significant link to the distribution of wealth.

Keywords: Household Finance, Macroprudential policy, Inequality, LTV ratio, Wealth distribution

JEL Classification: D31, E5, E21, G21

Suggested Citation

Carpantier, Jean-Francois and Olivera, Javier and Van Kerm, Philippe, Macroprudential Policy and Household Wealth Inequality (June 2, 2017). KU Leuven Discussion Paper Series DPS17.06, Available at SSRN: or

Jean-Francois Carpantier (Contact Author)

Universite du Luxembourg ( email )

L-1511 Luxembourg
00324666446305 (Phone)

HOME PAGE: http://

Javier Olivera

LISER ( email )

11 Porte des Sciences Campus Belval
Maison des Sciences Humaines
Esch-sur-Alzette, L-4366

HOME PAGE: http://

KU Leuven, Department of Economics ( email )

Naamsestraat 69
Leuven, B-3000

Philippe Van Kerm

Luxembourg Institute of Socio-Economic Research (LISER) ( email )

11, Porte des Sciences
Esch-sur-Alzette, L-4366

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