Download This PaperThe Anatomy of the Transmission of Macroprudential Policies
70 Pages Posted: 4 Jun 2019 Last revised: 16 Nov 2021
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The Anatomy of the Transmission of Macroprudential Policies
The Anatomy of the Transmission of Macroprudential Policies
Date Written: November 12, 2021
Abstract
We analyze how regulatory constraints on household leverage—in the form of loan-to-income and loan-to-value limits—affect residential mortgage credit and house prices as well as other asset classes not directly targeted by the limits. Supervisory loan-level data suggest that mortgage credit is reallocated from low- to high-income borrowers and from urban to rural counties. This reallocation weakens the feedback loop between credit and house prices and slows down house price growth in “hot” housing markets. Banks whose lending to households is more affected by the regulatory constraint drive this stabilizing reallocation; these same banks, however, substitute their risk-taking into holdings of securities and corporate credit.
Keywords: Macroprudential Regulation, Household Leverage, Residential Mortgage Credit, House Prices
JEL Classification: G21, E21, E44, E58, R21
Suggested Citation: Suggested Citation
Viral V. Acharya
New York University (NYU) - Leonard N. Stern School of Business ( email )
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HOME PAGE: http://www.stern.nyu.edu/~vacharya
New York University (NYU) - Department of Finance ( email )
Stern School of Business
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New York, NY 10012-1126
United States
European Corporate Governance Institute (ECGI) ( email )
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Belgium
Matteo Crosignani
Federal Reserve Banks - Federal Reserve Bank of New York ( email )
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United States
