How Effective is Macroprudential Policy? Evidence from Lending Restriction Measures in EU Countries

Tigran Poghosyan

No 2019/045, IMF Working Papers from International Monetary Fund

Abstract: This paper assesses the effectiveness of lending restriction measures, such as loan-to-value and debt-service-to-income ratios, in affecting developments in house prices and credit. We use data on 99 lending standard restrictions implemented in 28 EU countries over 1990–2018. The results suggest that lending restriction measures are generally effective in curbing house prices and credit. However, the impact is delayed and reaches its peak only after three years. In addition, the impact is asymmetric, with tightening measures having weaker association with target variables compared to loosening measures. The association is stronger in countries outside of euro area and for legally-binding measures and measures involving sanctions. The results have practical implications for macroprudential authorities.

Keywords: WP; macroprudential regulation; financial stability; credit; house prices; monetary policy rate; restriction measure; target variable; house price growth; lending restriction measure; number of observation; property price growth; credit growth; Housing prices; Central bank policy rate; Macroprudential policy instruments; Foreign banks; Global (search for similar items in EconPapers)
Pages: 42
Date: 2019-03-01
New Economics Papers: this item is included in nep-ban, nep-mac and nep-mon
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Citations: View citations in EconPapers (18)

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Journal Article: How effective is macroprudential policy? Evidence from lending restriction measures in EU countries (2020)
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