The Anatomy of the Transmission of Macroprudential Policies

56 Pages Posted: 4 Jun 2019 Last revised: 23 Apr 2020

See all articles by Viral V. Acharya

Viral V. Acharya

New York University - Leonard N. Stern School of Business; New York University (NYU) - Department of Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); National Bureau of Economic Research (NBER)

Katharina Bergant

International Monetary Fund, Research Department

Matteo Crosignani

Federal Reserve Banks - Federal Reserve Bank of New York

Tim Eisert

Erasmus University Rotterdam (EUR)

Fergal J. McCann

Central Bank of Ireland

Date Written: May 15, 2019

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. Consistent with constrained lenders adjusting their portfolio choice, more-affected banks drive this reallocation and 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

Acharya, Viral V. and Bergant, Katharina and Crosignani, Matteo and Eisert, Tim and McCann, Fergal J., The Anatomy of the Transmission of Macroprudential Policies (May 15, 2019). NYU Stern School of Business, Available at SSRN: https://ssrn.com/abstract=3388963 or http://dx.doi.org/10.2139/ssrn.3388963

Viral V. Acharya

New York University - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

HOME PAGE: http://pages.stern.nyu.edu/~sternfin/vacharya/public_html/~vacharya.htm

New York University (NYU) - Department of Finance

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Katharina Bergant

International Monetary Fund, Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Matteo Crosignani

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Tim Eisert (Contact Author)

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Fergal J. McCann

Central Bank of Ireland ( email )

P.O. Box 559
Dame Street
Dublin, 2
Ireland

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
212
Abstract Views
1,147
rank
169,185
PlumX Metrics