Borrower based measures analysis via a new agent based model of the Italian real estate sector

Gennaro Catapano ()
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Gennaro Catapano: Bank of Italy

No 822, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper presents a new agent-based model (ABM) of the real estate and credit sectors. The main purpose of the model is to study the effects of introducing a borrower-based macroprudential policy on the banking system, households, and the real estate market. The paper describes a comprehensive set of policy experiments simulating the effects of introducing different loan-to-value (LTV) caps on newly issued mortgages. The analysis sheds light on the relevance of the degree of heterogeneity in household indebtedness tolerance and its mean level. Moreover, it studies the impact of the phase-in period length and of the timing of the introduction of such a measure. While generally effective in reducing credit risk and curbing both house prices and household indebtedness growth, these measures may also have transitory negative side effects on banks’ balance sheets and real estate markets. The results suggest the scenarios, calibration, and timing under which the introduction of an LTV cap might have the most favorable outcomes.

Keywords: agent based model; housing market; macroprudential policy (search for similar items in EconPapers)
JEL-codes: D1 D31 E58 R2 R21 R31 (search for similar items in EconPapers)
Date: 2023-12
New Economics Papers: this item is included in nep-cba, nep-cmp, nep-hme and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_822_23

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