Exploring the implications of di erent loan-to-value macroprudential policy designs
Rita Basto (),
Sandra Gomes () and
Diana Lima ()
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Rita Basto: Banco de Portugal
Sandra Gomes: Banco de Portugal
Diana Lima: Banco de Portugal
No 113, GEE Papers from Gabinete de Estratégia e Estudos, Ministério da Economia
This paper evaluates the macroeconomic effects of macroprudential policy measures consisting of changes in loan-to-value ratios in the euro area. The analysis is carried out within a fully structural, multi-country model, that prominently includes nancial frictions and a banking sector. Our main findings suggest that a permanent LTV tightening in a small euro area economy leads to a long-run decline in lending to the private sector. The short-run impact depends crucially on the policy design, being less pronounced when the measure is phased-in. This is consistent with policy goals of curbing credit growth but avoiding an abrupt immediate contraction in lending. A policy measure introduced at the euro area level implies larger long-run e ects but the short-run recessionary impact is attenuated by the monetary policy response.
Keywords: Macroprudential policy; loan-to-value ratio; financial frictions (search for similar items in EconPapers)
JEL-codes: E58 E61 F42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-mac and nep-mon
Date: 2018-10, Revised 2018-10
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http://www.gee.gov.pt//RePEc/WorkingPapers/GEE_PAPERS_113.pdf First version, 2018 (application/pdf)
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Persistent link: https://EconPapers.repec.org/RePEc:mde:wpaper:0113
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