Towards Understanding Macrofinancial Impacts of Loan‐To‐Value Ratio Policy in New Zealand: A General Equilibrium Perspective

33 Pages Posted: 2 Mar 2018

See all articles by Martin Fukac

Martin Fukac

New Zealand Treasury

Lucy Greig

Reserve Bank of New Zealand

Daniel Snethlage

The New Zealand Treasury

Date Written: March 2018

Abstract

We use a dynamic stochastic general equilibrium model as a framework for thinking about the transmission mechanism of loan‐to‐value macroprudential policy. We analyse the key channels through which the caps on loan‐to‐value ratios work to limit the speed of asset and credit cycles. We further analyse the mechanisms through which the caps support financial system resilience during asset price downturns that are of sufficient magnitude to cause financial and macroeconomic instability.

Suggested Citation

Fukac, Martin and Greig, Lucy and Snethlage, Daniel, Towards Understanding Macrofinancial Impacts of Loan‐To‐Value Ratio Policy in New Zealand: A General Equilibrium Perspective (March 2018). Australian Economic Review, Vol. 51, Issue 1, pp. 99-131, 2018. Available at SSRN: https://ssrn.com/abstract=3132793 or http://dx.doi.org/10.1111/1467-8462.12256

Martin Fukac (Contact Author)

New Zealand Treasury ( email )

1 The Terrace
PO Box 3724
Wellington, 6140
New Zealand

Lucy Greig

Reserve Bank of New Zealand

2 The Terrace
PO Box 2498
Wellington, 6140
New Zealand

Daniel Snethlage

The New Zealand Treasury

1 The Terrace
PO Box 3724
Wellington, 6140
New Zealand

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