Do Loan-To-Value and Debt-To-Income Limits Work? Evidence From Korea

December 1, 2011

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Format: Chicago

Deniz O Igan, and Heedon Kang. Do Loan-To-Value and Debt-To-Income Limits Work? Evidence From Korea, (USA: International Monetary Fund, 2011) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

With another real estate boom-bust bringing woes to the world economy, a quest for a better policy toolkit to deal with these boom-busts has begun. Macroprudential measures could be in such a toolkit. Yet, we know very little about their impact. This paper takes a step to fill this gap by analyzing the Korean experience with these measures. We find that loan-to-value and debt-to-income limits are associated with a decline in house price appreciation and transaction activity. Furthermore, the limits alter expectations, which play a key role in bubble dynamics.

Subject: Financial institutions, Financial sector policy and analysis, Housing, Housing prices, Loans, Macroprudential policy instruments, Mortgages, National accounts, Prices

Keywords: Appreciation rate, DTI limit, DTI regulation, Global, House price, Housing, Housing markets, Housing prices, Loans, Macroprudential policy instruments, Macroprudential regulation, Mortgage, Mortgages, Price appreciation, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/297
Stock No:

WPIEA2011297
ISBN:

9781463927837
ISSN:

1018-5941

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