Measuring the effects of borrower-based policies on new housing loans in Estonia

Merike Kukk, Natalia Levenko and Nicolas Reigl

No wp2023-4, Bank of Estonia Working Papers from Bank of Estonia

Abstract: The paper evaluates the outcomes of the borrower-based macroprudential policy measures that were introduced in Estonia in 2015. The core of the analysis is the response of the credit market in 2016–2021 to the upper limit on the debt serviceto-income ratio for new housing loans. The paper employs a novel approach based on the distribution of loan-level data, which allows the analysis to be made using only data from the post-treatment period. The average number of loans affected, meaning those that were rejected or taken in a smaller amount, is estimated to be on average around eleven per cent of the total number of new loans. The total stock of housing loans is on average around 1.7 per cent smaller. The losses in the volume of new loans due to the limit are fairly stable over the years despite the volume of housing loans growing in recent years.

Keywords: borrower-based policy measures; debt service-to-income ratio; housing loans; density distributions; extensive and intensive margin (search for similar items in EconPapers)
JEL-codes: D39 E58 G21 G51 (search for similar items in EconPapers)
Date: 2023-06-20, Revised 2023-06-20
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Citations: View citations in EconPapers (1)

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