The Anatomy of the Transmission of Macroprudential Policies

Author/Editor:

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

Publication Date:

May 22, 2020

Electronic Access:

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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—a?ect 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-a?ected banks drive this reallocation and substitute their risk-taking into holdings of securities and corporate credit.

Series:

Working Paper No. 20/58

Subject:

English

Publication Date:

May 22, 2020

ISBN/ISSN:

9781513545158/1018-5941

Stock No:

WPIEA2020058

Format:

Paper

Pages:

57

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