OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.


Betting the house in Denmark

The Danish financial sector is big and there is a high degree of inter-connectedness between banks, mortgage institutions and pension funds. Danish households have large balance sheets and high levels of gross debt. Even though the high debt levels are matched by large assets, notably in form of pension savings, there are feedback loops with the housing market and households’ balance sheets contributing to macroeconomic volatility. Currently, the very low interest rate environment may contribute to the building up of risks, notably in the housing market. Given the on-going recovery of the housing market, it is an opportune time to eliminate the debt-bias in taxation, which would strengthen the automatic stabilisers of the fiscal system. In addition, further liberalising the private rental market would help create a more dynamic housing market overall and reduce the need to meet housing needs primarily with the owner occupancy segment.


English

Keywords: mortgages, monetary policy, household debt, financial risk, rental market, housing

JEL:
E21: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Macroeconomics: Consumption; Saving; Wealth;
D1: Microeconomics / Household Behavior and Family Economics;
G21: Financial Economics / Financial Institutions and Services / Banks; Depository Institutions; Micro Finance Institutions; Mortgages;
G28: Financial Economics / Financial Institutions and Services / Financial Institutions and Services: Government Policy and Regulation;
R21: Urban, Rural, Regional, Real Estate, and Transportation Economics / Household Analysis / Urban, Rural, Regional, Real Estate, and Transportation Economics: Housing Demand