Exploring the implications of different loan-to-value macroprudential policy designs

R. Basto, Sandra Gomes and D. Lima

Journal of Policy Modeling, 2019, vol. 41, issue 1, 66-83

Abstract: We evaluate the macroeconomic effects of changes in loan-to-value ratios in a multi-country model with financial frictions and a banking sector. Main findings suggest that a permanent LTV tightening in a small euro area economy leads to a long-run decline in lending to the private sector. The short-run impact depends crucially on the policy design, being less pronounced when the measure is phased-in. This is consistent with policy goals of curbing credit growth but avoiding an abrupt immediate contraction. A euro area wide measure implies larger long-run effects but the short-run recessionary impact is attenuated by the monetary policy response.

Keywords: Macroprudential policy; Loan-to-value ratio; Financial frictions (search for similar items in EconPapers)
JEL-codes: E58 E61 F42 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (10)

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Related works:
Working Paper: Exploring the implications of di erent loan-to-value macroprudential policy designs (2018)
Working Paper: Exploring the implications of different loan-to-value macroprudential policy designs (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:41:y:2019:i:1:p:66-83

DOI: 10.1016/j.jpolmod.2018.10.001

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