Do Loan-To-Value and Debt-To-Income Limits Work? Evidence From Korea
December 1, 2011
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Summary
With another real estate boom-bust bringing woes to the world economy, a quest for a better policy toolkit to deal with these boom-busts has begun. Macroprudential measures could be in such a toolkit. Yet, we know very little about their impact. This paper takes a step to fill this gap by analyzing the Korean experience with these measures. We find that loan-to-value and debt-to-income limits are associated with a decline in house price appreciation and transaction activity. Furthermore, the limits alter expectations, which play a key role in bubble dynamics.
Subject: Financial institutions, Financial sector policy and analysis, Housing, Housing prices, Loans, Macroprudential policy instruments, Mortgages, National accounts, Prices
Keywords: appreciation rate, DTI limit, DTI regulation, Global, house price, Housing, housing markets, Housing prices, Loans, Macroprudential policy instruments, macroprudential regulation, mortgage, Mortgages, price appreciation, WP
Pages:
35
Volume:
2011
DOI:
Issue:
297
Series:
Working Paper No. 2011/297
Stock No:
WPIEA2011297
ISBN:
9781463927837
ISSN:
1018-5941
