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The effect of warnings published in a financial stability report on loan-to-value ratios

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  • Alegría, Andrés
  • Alfaro, Rodrigo
  • Córdova, Felipe

Abstract

This paper shows how central bank communications can play a role in macroprudential supervision. We document how specific warnings about real estate markets, published in the Central Bank of Chile's Financial Stability Reports of 2012, affected bank lending policies. We provide empirical evidence of a rebalancing in the characteristics of mortgage loans granted, which led to a reduction in the number of mortgage loans with high loan-to-value ratio.

Suggested Citation

  • Alegría, Andrés & Alfaro, Rodrigo & Córdova, Felipe, 2021. "The effect of warnings published in a financial stability report on loan-to-value ratios," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 2(4).
    • Handle: RePEc:eee:lajcba:v:2:y:2021:i:4:s2666143821000211
    DOI: 10.1016/j.latcb.2021.100041
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    References listed on IDEAS

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    1. Jason Allen & Robert Amano & David P. Byrne & Allan W. Gregory, 2009. "Canadian city housing prices and urban market segmentation," Canadian Journal of Economics, Canadian Economics Association, vol. 42(3), pages 1132-1149, August.
    2. Micco, Alejandro & Parrado, Eric & Piedrabuena, Bernardita & Rebucci, Alessandro, 2012. "Housing Finance in Chile: Instruments, Actors, and Policies," IDB Publications (Working Papers) 3965, Inter-American Development Bank.
    3. Gael Price, 2014. "How has the LVR restriction affected the housing market: a counterfactual analysis," Reserve Bank of New Zealand Analytical Notes series AN2014/03, Reserve Bank of New Zealand.
    4. Alejandro Micco & Eric Parrado & Bernardita Piedrabuena & Alessandro Rebucci, 2012. "Housing Finance in Chile: Instruments, Actors, and Policies," Research Department Publications 4779, Inter-American Development Bank, Research Department.
    5. Best, Michael Carlos & Cloyne, James & Ilzetzki, Ethan & Kleven, Henrik Jacobsen, 2015. "Interest rates, debt and intertemporal allocation: evidence from notched mortgage contracts in the United Kingdom," Bank of England working papers 543, Bank of England.
    6. Del Negro, Marco & Otrok, Christopher, 2007. "99 Luftballons: Monetary policy and the house price boom across U.S. states," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 1962-1985, October.
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    Cited by:

    1. Kurowski, Łukasz & Smaga, Paweł, 2023. "Analysing financial stability reports as crisis predictors with the use of text-mining," The Journal of Economic Asymmetries, Elsevier, vol. 28(C).

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