The Anatomy of the Transmission of Macroprudential Policies

58 Pages Posted: 10 Jun 2020

See all articles by Viral Acharya

Viral Acharya

affiliation not provided to SSRN

Katharina Bergant

International Monetary Fund, Research Department

Matteo Crosignani

Federal Reserve Banks - Federal Reserve Bank of New York

Tim Eisert

Erasmus University Rotterdam (EUR); Centre for Economic Policy Research (CEPR)

Fergal McCann

Central Bank of Ireland

Date Written: May 2020

Abstract

We analyze how regulatory constraints on household leverage-in the form of loan-to-income and loan-to-value limits-a?ect 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-a?ected banks drive this reallocation and substitute their risk-taking into holdings of securities and corporate credit.

Keywords: Financial crises, Macroprudential policies and financial stability, Bank credit, Central banks, Economic conditions, Macroprudential Regulation, Household Leverage, Residential Mortgage Credit, House Prices, WP, mortgage credit, reallocation, borrower, LTV, central bank of Ireland

JEL Classification: G21, E21, E44, E58, R21, E01, E52, D4, G01

Suggested Citation

Acharya, Viral and Bergant, Katharina and Crosignani, Matteo and Eisert, Tim and McCann, Fergal, The Anatomy of the Transmission of Macroprudential Policies (May 2020). IMF Working Paper No. 20/58, Available at SSRN: https://ssrn.com/abstract=3623875

Viral Acharya (Contact Author)

affiliation not provided to SSRN

No Address Available

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

Erasmus University Rotterdam (EUR) ( email )

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

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Fergal McCann

Central Bank of Ireland ( email )

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

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