Take It to the limit? The effects of household leverage caps

Sjoerd Van Bekkum, Marc Gabarro, Rustom M. Irani and Jose-Luis Peydro

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We analyze the effects of borrower-based macroprudential policy at the household-level. For identification, we exploit administrative Dutch tax-return and property data linked to the universe of housing transactions, and an introduction of loan-to-value regula- tion. The regulation reduces overall household leverage, with bunching in its limit. Ex- ante more-affected households substantially reduce leverage and debt servicing costs. Rather than buying cheaper homes or taking lightly-regulated loans, households con- sume greater liquidity to satisfy the regulation. Improvements in household solvency result in less financial distress and, given negative idiosyncratic shocks, better liquidity management. However, fewer households transition from renting into ownership. These effects are stronger among liquidity-constrained households.

Keywords: Macroprudential policy; financial regulation; residential mortgages; household finance; household leverage; loan-to-value ratio (search for similar items in EconPapers)
JEL-codes: D14 D31 E21 E58 G21 G28 (search for similar items in EconPapers)
Date: 2019-11, Revised 2022-02
New Economics Papers: this item is included in nep-ban, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Take it to the Limit? The Effects of Household Leverage Caps (2019)
Working Paper: Take It to the Limit? The Effects of Household Leverage Caps (2019)
Working Paper: Take It to the Limit? The Effects of Household Leverage Caps (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1682

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