EconPapers    
Economics at your fingertips  
 

Mortgage Credit: Lending and Borrowing Constraints in a DSGE Model

Elmer Sánchez León
Additional contact information
Elmer Sánchez León: Banco Central de Reserva del Perú

No 125, Working Papers from Peruvian Economic Association

Abstract: This paper develops a Dynamic Stochastic General Equilibrium (DSGE) model that evaluates the relative importance of the easing of lending and borrowing constraints in mortgage credit markets for business cycle fluctuations in a small open emerging economy. Credit markets are characterized by partial dollarization and are subject to demand shocks, innovations to stochastic loan-to-value ratios (borrowing constraints) imposed on borrowers, and supply shocks, innovations to stochastic bank capital-to-asset ratios (lending constraints) imposed on financial intermediaries. In addition, the model features a set of real and nominal domestic shocks to demand, productivity, and fiscal and monetary policy, as well as foreign shocks. A historical decomposition conducted on household leverage ratios reveals that these variables’ cyclical dynamics were mainly driven by borrowing constraint shocks or credit demand shifts, while lending constraint shocks played a residual role.

Keywords: Financial frictions; DSGE model; banking sector (search for similar items in EconPapers)
JEL-codes: E37 E44 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2018-07
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://perueconomics.org/wp-content/uploads/2018/07/WP-125.pdf Application/pdf

Related works:
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:apc:wpaper:125

Access Statistics for this paper

More papers in Working Papers from Peruvian Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Nelson Ramírez-Rondán ().

 
Page updated 2019-02-13
Handle: RePEc:apc:wpaper:125