The effects of macroprudential policies on house prices: Evidence from an event study using Korean real transaction data
Hosung Jung and
Jieun Lee
Journal of Financial Stability, 2017, vol. 31, issue C, 167-185
Abstract:
This study analyzes the impact on housing price growth of targeted macroprudential policies—specifically limits on the loan-to-value (LTV) and debt-to-income (DTI) ratios in Korea, one of the few developed countries with relatively long and successful experience in implementing these policies. Using an event study methodology with real-transaction data for a monthly panel of 73 districts, we find that DTI limits play important roles in stabilizing housing prices than LTV limits. The loosening of both DTI and LTV limits boosts house price growth whereas the tightening only of DTI limits reverses it. After factors other than implementation of these regulations are controlled for, the results are robust except for the cases of LTV loosening. Furthermore, we uncover that the levels of and extents of changes LTV limits are important factors that can amplify or reduce the regulation effects. Overall, the results suggest that macroprudential policies, especially DTI limits, can be useful tools for curbing excessive household debt and subsequent house price bubbles.
Keywords: House prices; Macroprudential policies; LTV; DTI; Event study (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 G18 G28 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (9)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1572308917304758
Full text for ScienceDirect subscribers only
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:31:y:2017:i:c:p:167-185
DOI: 10.1016/j.jfs.2017.07.001
Access Statistics for this article
Journal of Financial Stability is currently edited by I. Hasan, W. C. Hunter and G. G. Kaufman
More articles in Journal of Financial Stability from Elsevier
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).