How Effective is Macroprudential Policy? Evidence from Lending Restriction Measures in EU Countries

March 1, 2019

Preview Citation

Format: Chicago

Tigran Poghosyan. How Effective is Macroprudential Policy? Evidence from Lending Restriction Measures in EU Countries, (USA: International Monetary Fund, 2019) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper assesses the effectiveness of lending restriction measures, such as loan-to-value and debt-service-to-income ratios, in affecting developments in house prices and credit. We use data on 99 lending standard restrictions implemented in 28 EU countries over 1990–2018. The results suggest that lending restriction measures are generally effective in curbing house prices and credit. However, the impact is delayed and reaches its peak only after three years. In addition, the impact is asymmetric, with tightening measures having weaker association with target variables compared to loosening measures. The association is stronger in countries outside of euro area and for legally-binding measures and measures involving sanctions. The results have practical implications for macroprudential authorities.

Subject: Central bank policy rate, Credit, Financial institutions, Financial sector policy and analysis, Financial services, Foreign banks, Housing prices, Macroprudential policy instruments, Money, Prices

Keywords: Central bank policy rate, Credit, Credit growth, Financial stability, Foreign banks, Global, House price growth, House prices, Housing prices, Lending restriction measure, Macroprudential policy instruments, Macroprudential regulation, Monetary policy rate, Number of observation, Property price growth, Restriction measure, Target variable, WP

Publication Details

Pages:

42
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/045
Stock No:

WPIEA2019045
ISBN:

9781498300872
ISSN:

1018-5941

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