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

By Pavol Jurca, Ján Klacso, Eugen Tereanu, Marco Forletta, Marco Gross

July 17, 2020

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Pavol Jurca, Ján Klacso, Eugen Tereanu, Marco Forletta, and Marco Gross. The Effectiveness of Borrower-Based Macroprudential Measures: A Quantitative Analysis for Slovakia, (USA: International Monetary Fund, 2020) accessed December 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

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.

Subject: Bank soundness, Financial institutions, Financial sector policy and analysis, Financial statements, Loans, Mortgages, National accounts, Personal income, Public financial management (PFM)

Keywords: Bank soundness, Behavior assumption, Borrower, Borrower leverage, Borrower-based macroprudential policy, Financial statements, Global, Growth path, HFCS data mortgage, Household micro data, Household portfolio, Lending, Loan, Loans, Macro-financial linkages, Mortgage borrower, Mortgage lending, Mortgages, Payment obligation, Personal income, Policy instrument, Policy measure, WP

Publication Details

Pages:

37
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2020/134
Stock No:

WPIEA2020134
ISBN:

9781513550503
ISSN:

1018-5941

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