A Model-Based Comparison of Macroprudential Tools

Eyno Rots and Barnabas Szekely ()
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Barnabas Szekely: Goethe University

No 2021/3, MNB Working Papers from Magyar Nemzeti Bank (Central Bank of Hungary)

Abstract: We develop a DSGE model to analyze a macroprudential policy framework. We use it to describe the Hungarian economy and the key regulatory constraints implemented there: the loan-to-value and the debt-service-to-income caps imposed on mortgage borrowers and the minimum capital requirement imposed on banks. Our model is novel in the way it treats the borrowing caps as soft constraints, which makes it easy to analyze multiple non-redundant borrowing constraints. We also show an estimation strategy that involves a variation of impulse-response matching and accounts for the lack of historical data concerning the conduct of macroprudential policy, a common problem.

Keywords: DSGE; macroprudential; DSTI; LTV; capital requirement; Covid†19. (search for similar items in EconPapers)
JEL-codes: E37 E44 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2021
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge, nep-fdg, nep-isf, nep-mac and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:mnb:wpaper:2021/3

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