The Anatomy of the Transmission of Macroprudential Policies

By Viral V. Acharya, Katharina Bergant, Matteo Crosignani, Tim Eisert, Fergal McCann

May 22, 2020

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Viral V. Acharya, Katharina Bergant, Matteo Crosignani, Tim Eisert, and Fergal McCann. The Anatomy of the Transmission of Macroprudential Policies, (USA: International Monetary Fund, 2020) accessed December 22, 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

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.

Subject: Financial institutions, Money, National accounts, Prices

Keywords: Bank portfolio choice, Credit, Credit reallocation, House price growth, House Prices, Household Leverage, Housing prices, Lending limit, Loans, Macroprudential Regulation, Mortgage credit, Mortgage issuance, Mortgages, Personal income, Residential Mortgage Credit, Residential mortgages, WP

Publication Details

Pages:

57
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2020/058
Stock No:

WPIEA2020058
ISBN:

9781513545158
ISSN:

1018-5941

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