Do Loan-To-Value and Debt-To-Income Limits Work? Evidence From Korea

Deniz Igan and Heedon Kang

No 2011/297, IMF Working Papers from International Monetary Fund

Abstract: With another real estate boom-bust bringing woes to the world economy, a quest for a better policy toolkit to deal with these boom-busts has begun. Macroprudential measures could be in such a toolkit. Yet, we know very little about their impact. This paper takes a step to fill this gap by analyzing the Korean experience with these measures. We find that loan-to-value and debt-to-income limits are associated with a decline in house price appreciation and transaction activity. Furthermore, the limits alter expectations, which play a key role in bubble dynamics.

Keywords: WP; house price; DTI limit; DTI regulation; price appreciation; appreciation rate; housing markets; mortgage; macroprudential regulation; Housing prices; Mortgages; Housing; Macroprudential policy instruments; Loans; Global (search for similar items in EconPapers)
Pages: 35
Date: 2011-12-01
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Citations: View citations in EconPapers (211)

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