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Housing regulation and bubbles

Author

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  • Chevallier, Claire Océane
  • El Joueidi, Sarah

Abstract

This paper develops a dynamic general equilibrium model in infinite horizon, in which deterministic rational housing bubbles may emerge. Borrowers are constrained by two macroprudential regulations: DTI and LTV limits. The study investigates whether housing bubbles can arise under these regulatory constraints and identifies the specific conditions for their emergence. Our findings show that: (1) with LTV regulations, the equilibrium may feature a housing bubble; (2) when agents face an LTV regulation, two equilibria may emerge: a bubbleless and a housing bubble equilibria; (3) tighter LTV regulations exacerbate the growth of housing bubbles.

Suggested Citation

  • Chevallier, Claire Océane & El Joueidi, Sarah, 2025. "Housing regulation and bubbles," Journal of Housing Economics, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:jhouse:v:67:y:2025:i:c:s1051137725000051
    DOI: 10.1016/j.jhe.2025.102046
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    More about this item

    Keywords

    Dynamic general equilibrium; Housing bubbles; Infinitely-lived agents; Loan-to-Value;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • G1 - Financial Economics - - General Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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