Loan-to-Value Policy as a Macroprudential Tool: The Case of Residential Mortgage Loans in Asia

Peter Morgan, Paulo Regis and Nimesh Salike ()

No 528, ADBI Working Papers from Asian Development Bank Institute

Abstract: Credit creation in the housing market has been a key source of systemic financial risk, and therefore is at the center of the debate on macroprudential policies. The loan-to-value (LTV) ratio is a widely used macroprudential tool aimed at moderating mortgage loan creation, and its effectiveness needs to be estimated empirically. This paper is unique in that it analyzes the effect of LTV on mortgage lending, the direct channel of influence, using a large sample of banks in 10 Asian economies. It uses estimation techniques to deal with the large presence of outliers in the data. Robust-to-outlier estimations show that economies with LTV polices have expanded residential mortgage loans by 6.7% per year, while non-LTV economies have expanded by 14.6%, which suggests LTV policies have been effective.

Keywords: loan-to-value policy; residential mortgage loans; macroprudential policy; financial risk (search for similar items in EconPapers)
JEL-codes: C23 E58 G21 G28 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2015-06-24
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac, nep-rmg, nep-sea and nep-ure
References: View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://www.adb.org/sites/default/files/publication/160057/adbi-wp528.pdf Full text (application/pdf)

Related works:
Working Paper: Loan-to-Value Policy as a Macroprudential Tool: The Case of Residential Mortgage Loans in Asia (2015)
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:ris:adbiwp:0528

Access Statistics for this paper

More papers in ADBI Working Papers from Asian Development Bank Institute Kasumigaseki Building 8F, 3-2-5, Kasumigaseki, Chiyoda-ku, Tokyo 100-6008, Japan. Contact information at EDIRC.
Bibliographic data for series maintained by ADB Institute ().