The Anatomy of the Transmission of Macroprudential Policies
60 Pages Posted: 29 Jun 2020 Last revised: 16 Aug 2020
Date Written: June 2020
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: House Prices, household leverage, macroprudential regulation, Residential Mortgage Credit
JEL Classification: E21, E44, E58, G21, R21
Suggested Citation: Suggested Citation
Viral V. Acharya (Contact Author)
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
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The Anatomy of the Transmission of Macroprudential Policies
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