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House Prices, Mortgage Debt Dynamics and Economic Fluctuations in France: A Semi-Structural Approach

Author

Listed:
  • Bove Guillaume
  • Dees Stéphane
  • Thubin Camille

Abstract

We develop a model of house prices and household indebtedness and include it in the Banque de France's semi-structural macroeconomic model in order to analyse the implications of mortgage debt dynamics on economic fluctuations and financial stability in France. Our results show that accounting for household financial vulnerability in the distribution of loans is key to prevent large credit and house price fluctuations from reinforcing each other in the long term. Moreover, our model shows that measures constraining the indebtedness of households (regarding the maturity of loans or borrower-based caps) helps reducing short- to medium-term financial instability dynamics.

Suggested Citation

  • Bove Guillaume & Dees Stéphane & Thubin Camille, 2020. "House Prices, Mortgage Debt Dynamics and Economic Fluctuations in France: A Semi-Structural Approach," Working papers 787, Banque de France.
    • Handle: RePEc:bfr:banfra:787
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    References listed on IDEAS

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    More about this item

    Keywords

    Semi-structural Models; House Prices; Mortgage Debt;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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