Macroprudential Policies in the EAGLE FLI Model Calibrated for Hungary

Gabor Fukker () and Lorant Kaszab

No 2019/1, MNB Working Papers from Magyar Nemzeti Bank (Central Bank of Hungary)

Abstract: In this paper we develop the Hungarian version of the EAGLE FLI (Euro Area GLobal Economy model with Financial LInkages) model which is the EAGLE model enriched with financial frictions and country-specific banking sector. The EAGLE FLI features the intermediation of loanable funds (ILF) view in banking whereby the creation of new loans requires banks to collect additional deposits. Households and firms borrow in the model using housing as collateral. We find that macroprudential policies such as an increase in capital requirements, decreases in the loan-to-value ratio or loan-to-income ratio of borrower households (and firms) limits banks’ credit creation with negative spillover effects to the real economy due to the financial accelerator mechanism in the model. On the other hand, these policies strengthen banks’ capital and limit the vulnerability of households and firms to negative financial shocks.

Keywords: macroprudential policy; multi-country DSGE; capital requirements; loan-to-value ratio; loan-to-income ratio (search for similar items in EconPapers)
JEL-codes: E12 E13 E52 E58 F11 F41 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2019
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge, nep-eec, nep-mac and nep-tra
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mnb.hu/letoltes/mnb-wp-2019-1-final-1.pdf (application/pdf)

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:mnb:wpaper:2019/1

Access Statistics for this paper

More papers in MNB Working Papers from Magyar Nemzeti Bank (Central Bank of Hungary) Contact information at EDIRC.
Bibliographic data for series maintained by Lorant Kaszab ( this e-mail address is bad, please contact ).