The Effects of Macro-prudential Policies on House Prices Using Real Transaction Data: Evidence from Korea (in Korean)

Hosung Jung () and Jieun Lee ()
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Hosung Jung: Economic Research Institute, The Bank of Korea
Jieun Lee: Economic Research Institute, The Bank of Korea

No 2016-10, Working Papers from Economic Research Institute, Bank of Korea

Abstract: We investigate the effects of macro-prudential policies on house prices using event study approaches and dynamic panel models. We construct a unique dataset with house price index based on real transactions and newly estimated loan-to-value (LTV) and debt-to-income (DTI) limits for a monthly panel of 98 districts across Seoul, the Gyeonggi Province and six metropolitan cities covering the period from March 2006 to June 2015. We show that DTI limits appear to be more effective in stabilizing house prices than LTV limits. Both tightening and loosening DTI and only loosening LTV limits are effective. Overall, the results indicate that macro-prudential policies could be a useful tool in curbing excessive household debts and the subsequent house price bubbles. This is the first study to estimate LTV and DTI limits at the district level and analyze the effects of macro-prudential policies on house prices. Our study would provide important lessons for the policy authorities that are implementing LTV and DTI regulations with an aim to cope with a surge in house prices and credit extension.

Keywords: Macro-prudential policies; Household debt; House prices; LTV; DTI (search for similar items in EconPapers)
JEL-codes: E30 E44 E58 G28 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2016-07-15
New Economics Papers: this item is included in nep-ban, nep-mac and nep-ure
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:bok:wpaper:1610

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