Exploring the implications of different loan-to-value macroprudential policy designs

Sandra Gomes and Rita Basto

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: 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 financial 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 effects but the short-run recessionary impact is attenuated by the monetary policy response.

JEL-codes: E58 E61 F42 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec and nep-mac
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https://www.bportugal.pt/sites/default/files/anexos/papers/wp201823.pdf

Related works:
Journal Article: Exploring the implications of different loan-to-value macroprudential policy designs (2019)
Working Paper: Exploring the implications of di erent loan-to-value macroprudential policy designs (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ptu:wpaper:w201823

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