Macroprudential policy and household wealth inequality: Evidence from China

Abstract

The influence of LTV ceiling on household wealth inequality is not constant. This paper finds that when the return on housing investment is higher than the return on liquid assets, the LTV ceiling generally has a negative impact on household wealth inequality; otherwise, it is more likely to be positive. Increasing the LTV ceiling can significantly alleviate household wealth inequality in China. Housing price and the number of houses purchased are important channels, and the house purchase preference (savings rate and house purchase intention) plays a key role in regulating wealth distribution through the LTV ceiling.