Lending Pro-Cyclicality and Macro-Prudential Policy: Evidence from Japanese LTV Ratios

Arito Ono, Hirofumi Uchida, Gregory Udell () and Iichiro Uesugi

No 41, HIT-REFINED Working Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: Using a unique micro dataset compiled from the real estate registry in Japan, we examine more than 400,000 loan-to-value (LTV) ratios for business loans to draw implications for the efficacy of caps on LTV ratios as a macro-prudential policy measure. We find that the LTV ratio exhibits counter-cyclicality through the business cycle. We also find that borrowers obtaining high-LTV loans performed no worse ex-post than those with lower LTV loans. Our findings imply that a fixed cap on LTV ratios might not only be ineffective in curbing loan volume in boom periods but also inhibit well-performing firms from borrowing.

Keywords: loan-to-value (LTV) ratios; pro-cyclicality; macro-prudential policy; bubble (search for similar items in EconPapers)
JEL-codes: G21 G28 G32 R33 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2016-02
New Economics Papers: this item is included in nep-ban, nep-cba and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/27736/wp041.pdf

Related works:
Journal Article: Lending pro-cyclicality and macroprudential policy: Evidence from Japanese LTV ratios (2021)
Working Paper: Lending Pro-Cyclicality and Macro-Prudential Policy: Evidence from Japanese LTV Ratios (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hit:remfce:41

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