Multiple Credit Constraints and Time-Varying Macroeconomic Dynamics

Marcus Mølbak Ingholt

Journal of Economic Dynamics and Control, 2022, vol. 143, issue C

Abstract: I explore the implications of borrowers facing both loan-to-value (LTV) and debt-service-to-income (DTI) limits, using an estimated DSGE model. I identify when each constraint dominated over the period 1985-2021: The LTV constraint initially dominates, due to loose DTI standards, as well as low house prices around recessions. From 2012, tighter DTI standards and growing house prices have kept the DTI constraint binding. Whether a constraint binds shapes macroeconomic outcomes and the effectiveness of macroprudential tools. Finally, county panel data attest to multiple credit constraints as a source of nonlinear dynamics.

Keywords: Multiple credit constraints; Nonlinear estimation of DSGE models; State-dependent credit origination (search for similar items in EconPapers)
JEL-codes: C33 D58 E32 E44 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:143:y:2022:i:c:s0165188922002081

DOI: 10.1016/j.jedc.2022.104504

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