## How Effective is Macroprudential Policy? Evidence from Lending Restriction Measures in EU Countries

_IMF Working Papers, March 1, 2019_

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## Bibliographic details
- Authors: Tigran Poghosyan
- Published: March 1, 2019
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498300872.001

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### Summary and main findings
- Paper assesses the effectiveness of lending restriction measures, such as loan-to-value and debt-service-to-income ratios, in affecting developments in house prices and credit.
- Uses data on 99 lending standard restrictions implemented in 28 EU countries over 1990–2018.
- Key empirical findings:
  - Lending restriction measures are generally effective in curbing house prices and credit.
  - The impact is delayed and reaches its peak only after three years.
  - The impact is asymmetric: tightening measures have weaker association with target variables compared to loosening measures.
  - The association is stronger in countries outside of euro area and for legally-binding measures and measures involving sanctions.
- Practical implication: Results have practical implications for macroprudential authorities.

### Data and scope
- Number of lending standard restrictions analyzed: 99
- Number of countries: 28 EU countries
- Time period covered: 1990–2018
- Policy instruments examined: loan-to-value ratios, debt-service-to-income ratios, and other lending restriction measures.

### Policy-relevant conclusions
- Timing: Authorities should consider that effects of lending restrictions are delayed and peak after three years when designing and evaluating macroprudential interventions.
- Asymmetry: Loosening measures may produce stronger associations with house prices and credit than tightening measures; policy calibration should reflect this asymmetry.
- Design and enforcement: Legally-binding measures and measures involving sanctions are associated with stronger effects, suggesting enforcement and legal design matter for effectiveness.
- Cross-country variation: Effects are stronger outside the euro area, indicating country-specific institutional and policy frameworks influence outcomes.

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_Source: https://www.imf.org/en/publications/wp/issues/2019/03/01/how-effective-is-macroprudential-policy-evidence-from-lending-restriction-measures-in-eu-46640_