Taxation of housing and savings affects household debt

17.11.2020
According to Professor of Macroeconomics Niku Määttänen, solutions related to taxation may be better suited to reducing risks associated with household debt compared to mortgage regulation.

What are your research topics?

At the moment I am investigating how the current interest rates, which are very low compared to the recent past, should be taken into consideration in the taxation of savings and housing.

Low interest rates increase the price of housing and the debt incurred by households, a trend associated with concerns related to macroeconomic stability. Some of these concerns apply to banks, others to households.

One of them is that a sudden drop in housing prices during a recession could make debt-ridden households in particular abruptly cut down on their spending, which would deepen the recession.

Compared to current mortgage regulation, solutions related to taxation may be better suited to reducing risks associated with household debt and rising property prices.

Where and how does the topic of your research have an impact?

The taxation of housing and savings has some kind of an effect on nearly all citizens.

The same goes for mortgage regulation, which is used to restrict the size of home loans. Most of us take out a home loan at some point in our lives, which is why it is far from inconsequential which grounds and what knowledge are used in making decisions on housing taxation or mortgage regulation.

What is particularly inspiring in your field right now?

The environment for economic policy in the Eurozone has changed considerably in the last 10 years or so.

Among the biggest transformations is that the decrease in interest rates has caused a collision between conventional monetary policy and what is known as the zero bound on interest rates. The central bank is no longer able to lower the interest rates it has set, as they are already almost zero.

It is very interesting to consider with students how a new situation such as this should be taken into account in, for example, financial policy.

Niku Määttänen is a professor of macroeconomics at the Helsinki Graduate School of Economics.

Watch Niku Määttänen’s inaugural lecture as a new professor on YouTube.

Read about the other newly appointed professors here.