Assessing the Macroeconomic Costs and Benefits of Borrower Based Measures (Evidence From Ireland)

Michael Wosser, Niall McInerney and Angelos Athanasopoulos
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Michael Wosser: Central Bank of Ireland
Niall McInerney: Central Bank of Ireland
Angelos Athanasopoulos: Central Bank of Ireland

No 14/RT/25, Research Technical Papers from Central Bank of Ireland

Abstract: We examine the costs and benefits of LTV and LTI borrower based measures (BBM) changes on future consumption growth rates. Costs are established using a semi-structural model of the Irish economy, which quantifies how macroprudential policy changes affect forecasts for expected consumption growth. Benefits appear in the form of changes to the tail risk to consumption growth, at the 5th percentile, over a forecast horizon of up to 4 years, given the same macroprudential policy change within a novel consumption at risk framework. We find that policy tightening actions involving LTV and LTI are associated with dampened central, or expected, consumption growth rates but appear broadly correlated with less adverse consumption growth tail risk. The timing of BBM adjustments is shown to be highly important, taking the phase of the financial cycle into account.

Keywords: Macroprudential Policy; Borrower Based Measures; Consumption Growth; Costs and Benefits Study; LTV; LTI; Financial Cycle; Policymaker Preferences. (search for similar items in EconPapers)
JEL-codes: E5 G01 G17 G28 R39 (search for similar items in EconPapers)
Date: 2025-09
New Economics Papers: this item is included in nep-cba and nep-eur
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