The macroeconomic channels of macroprudential mortgage policies

David Aikman, Robert Kelly, Fergal McCann and Fang Yao
Additional contact information
David Aikman: Central Bank of Ireland
Fergal McCann: Central Bank of Ireland
Fang Yao: Central Bank of Ireland

No 11/FS/21, Financial Stability Notes from Central Bank of Ireland

Abstract: Borrower-based macroprudential policies, such as limits to loan-to-value and loan-to-income ratios, have grown in popularity in the last decade globally. An understanding of their effects, both intended and unintended, is continuously evolving. In this Note, we discuss the macroeconomic channels though which such measures, like all economic policies, can both benefit and impose costs on the economy. System-wide benefits of such measures arise predominantly through the taming of housing-credit cycles, which lower both the probability and the severity of financial recessions, as well as avoiding resource misallocation. Such crises have been shown to have particularly harmful effects, are followed by slow recoveries and can have persistent adverse macroeconomic effects. The macroeconomic costs of such measures operate through liquidity constraints on renters, and reductions in consumption and construction activity that may arise through dampened house prices and expectations. These macroeconomic costs are more likely to be short-term, and less likely to affect the productive capacity of the economy in the long-run.

Date: 2021-10
New Economics Papers: this item is included in nep-cba, nep-cwa, nep-mac and nep-ure
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.centralbank.ie/docs/default-source/pub ... nd-yao).pdf?sfvrsn=4 (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:cbi:fsnote:11/fs/21

Access Statistics for this paper

More papers in Financial Stability Notes from Central Bank of Ireland Contact information at EDIRC.
Bibliographic data for series maintained by Fiona Farrelly ().