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Credit conditions in a boom and bust property market: Insights for macro-prudential policy

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  • McCarthy, Yvonne
  • McQuinn, Kieran

Abstract

The substantial role played by greater credit provision in the international house price boom between 1995 and 2007 has lead to an increase in the use of macro-prudential measures as a means of preventing future credit bubbles. Calibration of these measures can prove difficult, however, given the relative ‘newness’ of the macro-prudential field and the limited experience with the use of these measures. Micro-loan level data can contribute to this debate by providing detail on how these measures tend to evolve across different buyer types and at different points in the business cycle. This paper uses a sample of 400,000 loans to assess the evolution of mortgage credit conditions across borrower groups in Ireland during the 2000s. The Irish case is particularly interesting given the severity of its housing boom and bust during this period. Furthermore, controlling for demand-side factors, we use the granular loan level data to provide estimates of an index of mortgage credit availability over the same period for the Irish mortgage market.

Suggested Citation

  • McCarthy, Yvonne & McQuinn, Kieran, 2017. "Credit conditions in a boom and bust property market: Insights for macro-prudential policy," The Quarterly Review of Economics and Finance, Elsevier, vol. 64(C), pages 171-182.
    • Handle: RePEc:eee:quaeco:v:64:y:2017:i:c:p:171-182
    DOI: 10.1016/j.qref.2016.08.002
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    Citations

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    Cited by:

    1. O'Toole, Conor & Slaymaker, Rachel, 2020. "Review of the Rebuilding Ireland Home Loan scheme," Research Series, Economic and Social Research Institute (ESRI), number RS104.
    2. Kieran McQuinn & Teresa Monteiro & Conor O’Toole, 2021. "House Price Expectations, Labour Market Developments and the House Price to Rent Ratio: A User Cost of Capital Approach," The Journal of Real Estate Finance and Economics, Springer, vol. 62(1), pages 25-47, January.
    3. Corrigan, Eoin & O'Toole, Conor & Slaymaker, 2020. "Credit demand in the Irish mortgage market: What is the gap and could public lending help?," Papers WP671, Economic and Social Research Institute (ESRI).
    4. O’Toole, Conor & Slaymaker, Rachel, 2021. "Repayment capacity, debt service ratios and mortgage default: An exploration in crisis and non-crisis periods," Journal of Banking & Finance, Elsevier, vol. 133(C).
    5. Eoin Corrigan & Daniel Foley & Kieran McQuinn & Conor O’Toole & Rachel Slaymaker, 2019. "Exploring Affordability in the Irish Housing Market," The Economic and Social Review, Economic and Social Studies, vol. 50(1), pages 119-157.
    6. McInerney, Niall, 2019. "Macroprudential Policy, Banking and the Real Estate Sector," MPRA Paper 91777, University Library of Munich, Germany.
    7. Egan, Paul & McQuinn, Kieran, 2023. "Regime switching and the responsiveness of prices to supply: The case of the Irish housing market," The Quarterly Review of Economics and Finance, Elsevier, vol. 87(C), pages 82-94.
    8. McGinnity, Frances & Russell, Helen & Alamir, Anousheh, 2024. "17 years after the start of the global financial crisis (GFC), where are we now with credit and house prices in the Irish residential market?," Papers WP779, Economic and Social Research Institute (ESRI).
    9. Disch, Wendy & Egan, Paul & Kenny, Eoin & McQuinn, Kieran, 2024. "Contrasting housing supply in Ireland, Northern Ireland and the rest of the United Kingdom," Research Series, Economic and Social Research Institute (ESRI), number RS175.
    10. Gaffney, Edward, 2019. "Mortgage borrowers at the loan-to-income limit," Financial Stability Notes 11/FS/19, Central Bank of Ireland.

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    More about this item

    Keywords

    Credit; House prices; Income; Interest rates; Macro-prudential;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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