The Effectiveness of Borrower-Based Macroprudential Measures: A Quantitative Analysis for Slovakia

38 Pages Posted: 12 Aug 2020

See all articles by Pavol Jurča

Pavol Jurča

Národná banka Slovenska

Ján Klacso

Národná banka Slovenska

Eugen Tereanu

European Central Bank (ECB)

Marco Forletta

European Central Bank (ECB)

Marco Gross

International Monetary Fund (IMF); European Central Bank (ECB)

Date Written: July 2020

Abstract

We develop a semi-structural quantitative framework that combines micro and macroeconomic data to assess the effectiveness of combinations of borrower-based macroprudential measures in Slovakia. We expand on the integrated dynamic household balance sheet model of Gross and Población (2017) by introducing an endogenous loan granting feature, in turn to quantify the potential (ex-ante) impact of macroprudential measures on resilience parameters, compared with a counterfactual no-policy scenario, under adverse macroeconomic conditions. We conclude that (1) borrower-based measures can noticeably improve household and bank resilience to macroeconomic downturns, in particular when multiple measures are applied; (2) those measures tend to complement each other, as the impact of individual instruments is transmitted via different channels; and (3) the resilience benefits are more sizeable if the measures effectively limit the accumulation of risks before an economic downturn occurs, suggesting that an early, preemptive implementation of borrower-based measures is indeed warranted.

Keywords: Financial crises, Interest rates on loans, Macroprudential policies and financial stability, Interest rates, Cost of living, Borrower-based macroprudential policy, household micro data, macro-financial linkages, WP, PDs, microdata, LTV, resilience, mortgage lend

JEL Classification: C33, E58, G18, E01, G21, E52, E63, H63

Suggested Citation

Jurča, Pavol and Klacso, Ján and Tereanu, Eugen and Forletta, Marco and Gross, Marco, The Effectiveness of Borrower-Based Macroprudential Measures: A Quantitative Analysis for Slovakia (July 2020). IMF Working Paper No. 20/134, Available at SSRN: https://ssrn.com/abstract=3670614

Pavol Jurča (Contact Author)

Národná banka Slovenska ( email )

Bratislava
Slovakia

Ján Klacso

Národná banka Slovenska ( email )

Bratislava
Slovakia

Eugen Tereanu

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Marco Forletta

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Marco Gross

International Monetary Fund (IMF) ( email )

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

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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