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The real effects of borrower-based macroprudential policy: Evidence from administrative household-level data

Author

Listed:
  • van Bekkum, Sjoerd
  • Gabarro, Marc
  • Irani, Rustom M.
  • Peydró, José-Luis

Abstract

We analyze the effects of borrower-based macroprudential policy at the household level. We exploit administrative Dutch tax and housing records in conjunction with the introduction of a mortgage loan-to-value (LTV) limit. We find that the regulation sharply reduces mortgage leverage with bunching at the LTV limit. While (regulation) affected households reduce total leverage and interest expenses, they also decrease cash balances to satisfy the LTV limit, generating an important solvency-liquidity trade-off. Nevertheless, affected households experience less financial distress after the introduction of the LTV regulation. Moreover, these households experience better liquidity management and smoother consumption following income loss. Overall, our results highlight the key financial stability and real effects of borrower-based macroprudential policy.

Suggested Citation

  • van Bekkum, Sjoerd & Gabarro, Marc & Irani, Rustom M. & Peydró, José-Luis, 2024. "The real effects of borrower-based macroprudential policy: Evidence from administrative household-level data," Journal of Monetary Economics, Elsevier, vol. 147(S).
    • Handle: RePEc:eee:moneco:v:147:y:2024:i:s:s0304393224000278
    DOI: 10.1016/j.jmoneco.2024.103574
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    Cited by:

    1. Castellanos, Juan & Hannon, Andrew & Paz-Pardo, Gonzalo, 2025. "How tightening mortgage credit raises rents and increases inequality in the housing market," Research Bulletin, European Central Bank, vol. 127.

    More about this item

    Keywords

    Macroprudential policy; Mortgage; Household leverage; LTV; Solvency-liquidity trade-off; Consumption smoothing;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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