Exploring the implications of different loan-to-value macroprudential policy designs

• Autor(a) principal: Basto, R.
• Data de Publicação: 2019
• Outros Autores: Gomes, S., Lima, D.
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: https://doi.org/10.1016/j.jpolmod.2018.10.001
• topic: Financial frictions; Loan-to-value ratio; Macroprudential policy; Economics and Econometrics

We evaluate the macroeconomic effects of changes in loan-to-value ratios in a multi-country model with financial frictions and a banking sector. Main findings suggest that a permanent LTV tightening in a small euro area economy leads to a long-run decline in lending to the private sector. The short-run impact depends crucially on the policy design, being less pronounced when the measure is phased-in. This is consistent with policy goals of curbing credit growth but avoiding an abrupt immediate contraction. A euro area wide measure implies larger long-run effects but the short-run recessionary impact is attenuated by the monetary policy response.