With Great Power Comes Great Responsibility: Macroprudential Tools at Work in Canada

39 Pages Posted: 3 Jun 2014

See all articles by Ivo Krznar

Ivo Krznar

International Monetary Fund (IMF)

James Morsink

International Monetary Fund (IMF) - Research Department

Date Written: May 2014

Abstract

The goal of this paper is to assess the effectiveness of the policy measures taken by Canadian authorities to address the housing boom. We find that the the last three rounds of macroprudential policies implemented since 2010 were associated with lower mortgage credit growth and house price growth. The international experience suggests that - in addition to tighter loan-to-value limits and shorter amortization periods - lower caps on the debt-to-income ratio and higher risk weights could be effective if the housing boom were to reignite. Over the medium term, the authorities could consider structural measures to further improve the soundness of housing finance.

Keywords: Macroprudential Policy, Canada, Housing, Credit expansion, Housing prices, housing market, mortgage insurance, macroprudential regulation, mortgages, mortgage credit, mortgage loans, housing finance, residential mortgage, mortgage insurers, housing loans, private mortgage, private mortgage insurers, mortgage lending, mortgage lenders, mortgage market, underwriting, home equity, mortgage-backed securities, residential mortgages, mortgage interest, housing markets, mortgage bonds, home equity loans, housing credit, variable rate mortgages, mortgage markets, housing finance reform, insurance products, insurance premiums, second mortgage, mortgage refinancing, mortgage rate, mortgage rates, mort

JEL Classification: G21, G28, R20

Suggested Citation

Krznar, Ivo and Morsink, James, With Great Power Comes Great Responsibility: Macroprudential Tools at Work in Canada (May 2014). IMF Working Paper No. 14/83, Available at SSRN: https://ssrn.com/abstract=2445469

Ivo Krznar (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

James Morsink

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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