The real effects of borrower-based macroprudential policy: Evidence from administrative household-level data

Sjoerd van Bekkum, Marc Gabarro, Rustom M. Irani and Jose-Luis Peydro

Journal of Monetary Economics, 2024, vol. 147, issue S

Abstract: We analyze the effects of borrower-based macroprudential policy at the household level. We exploit administrative Dutch tax and housing records in conjunction with the introduction of a mortgage loan-to-value (LTV) limit. We find that the regulation sharply reduces mortgage leverage with bunching at the LTV limit. While (regulation) affected households reduce total leverage and interest expenses, they also decrease cash balances to satisfy the LTV limit, generating an important solvency-liquidity trade-off. Nevertheless, affected households experience less financial distress after the introduction of the LTV regulation. Moreover, these households experience better liquidity management and smoother consumption following income loss. Overall, our results highlight the key financial stability and real effects of borrower-based macroprudential policy.

Keywords: Macroprudential policy; Mortgage; Household leverage; LTV; Solvency-liquidity trade-off; Consumption smoothing (search for similar items in EconPapers)
JEL-codes: E21 E58 G21 G28 G51 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:147:y:2024:i:s:s0304393224000278

DOI: 10.1016/j.jmoneco.2024.103574

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