On the Effectiveness of Loan‐to‐Value Regulation in a Multiconstraint Framework

Anna Grodecka-Messi

Journal of Money, Credit and Banking, 2020, vol. 52, issue 5, 1231-1270

Abstract: Models in the infinite horizon macro‐housing literature often assume that borrowers are constrained exclusively by the loan‐to‐value (LTV) ratio. Motivated by the Swedish microdata, I explore an alternative arrangement where borrowers are constrained by a collateral constraint and by a debt‐service‐to‐income ratio. While stricter LTV limits are often considered as a measure to tackle the rise in household indebtedness, I find that policy designed to lower the maximum permissible LTV ratio may actually leave the debt‐to‐GDP ratio unchanged and increase housing prices in equilibrium if borrowers are bound by two constraints at the same time.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/jmcb.12623

Related works:
Working Paper: On the effectiveness of loan-to-value regulation in a multiconstraint framework (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:52:y:2020:i:5:p:1231-1270

Access Statistics for this article

Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley Content Delivery ().