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Martin Grandes Damián Galinsky

Abstract

This paper proposes a financial instrument to mitigate the risk of a mismatch between inflation and wage variations that would affect the repayment of inflation-indexed mortgages in relatively high inflation economies, where housing finance is at an incipient phase of its development. In particular, using the Argentine experience in 2016-2017, and the empirical evidence of the two preceding decades, three swap/insurance options are proposed and simulated that would allow the debtors to limit their exposure to inflation.

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Abstract

This paper proposes a financial instrument to mitigate the risk of a mismatch between inflation and wage variations that would affect the repayment of inflation-indexed mortgages in relatively high inflation economies, where housing finance is at an incipient phase of its development. In particular, using the Argentine experience in 2016-2017, and the empirical evidence of the two preceding decades, three swap/insurance options are proposed and simulated that would allow the debtors to limit their exposure to inflation.

Article Details

How to Cite
GRANDES, Martin; GALINSKY, Damián. How can the risk from the mismatch between inflation rates in mortgage and labor markets be mitigated?. Ecos de Economía: A Latin American Journal of Applied Economics, [S.l.], v. 21, n. 45, dec. 2017. ISSN 2462-8107. Available at: <http://publicaciones.eafit.edu.co/index.php/ecos-economia/article/view/4881>. Date accessed: 19 jan. 2018. doi: https://doi.org/10.17230/ecos.2017.45.3.
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