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

Peter Morgan, Paulo Regis and Nimesh Salike ()

No 2015-03, RIEI Working Papers from Xi'an Jiaotong-Liverpool University, Research Institute for Economic Integration

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 ten Asian countries. It uses estimation techniques to deal with the large presence of outliers in the data. Robust to outlier estimations show that countries with LTV polices have expanded residential mortgage loans by 6.7% per year while non-LTV countries have expanded by 14.6%, which suggests LTV policies have been effective.

Keywords: macroprudential policies; financial stability; robust to outliers regression; mortgage loan creation (search for similar items in EconPapers)
JEL-codes: C23 E58 G21 G28 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2015-08-25
New Economics Papers: this item is included in nep-ban, nep-ger, nep-mac, nep-rmg and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Working Paper: Loan-to-Value Policy as a Macroprudential Tool: The Case of Residential Mortgage Loans in Asia (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:xjt:rieiwp:2015-03

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