How can the risk from the mismatch between inflation rates in mortgage and labor markets be mitigated?

MARTIN GRANDES; DAMIAN GALINSKY

Ecos de Economia: a Latin American Journal of Applied Economics

Universidad Eafit-Revistas Académicas

Lugar: Medellin; Año: 2017 vol. 1

1657-4206

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.