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The Effects of Borrower-Based Macroprudential Policy: An Empirical Application to Korea

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  • Thorsten Franz

    (Deutsche Bundesbank)

Abstract

The effects of borrower-based macroprudential policy (BBMaPP) measures in the form of mandatory caps on loanto-value (LTV) and debt-service-to-income (DSTI) ratios in the Korean real estate market are investigated using a sign-identified structural vector autoregressive (SVAR) model. Sign restrictions are drawn from a small open-economy dynamic stochastic general equilibrium (DSGE) model with collateralizable housing. While empirical results suggest only moderate effects of monetary policy on house prices in Korea, BBMaPP measures have been successful in curbing real household credit and real house price growth. A historical decomposition also emphasizes the advantages of a targeted approach toward macroprudential regulation.

Suggested Citation

  • Thorsten Franz, 2020. "The Effects of Borrower-Based Macroprudential Policy: An Empirical Application to Korea," International Journal of Central Banking, International Journal of Central Banking, vol. 16(5), pages 1-47, October.
    • Handle: RePEc:ijc:ijcjou:y:2020:q:4:a:1
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    Cited by:

    1. Josef Bajzik & Jan Janku & Simona Malovana & Klara Moravcova & Ngoc Anh Ngo, 2023. "Monetary Policy Has a Long-Lasting Impact on Credit: Evidence from 91 VAR Studies," Working Papers 2023/19, Czech National Bank.
    2. Suh, Hyunduk, 2023. "Regionally heterogeneous housing cycles and housing market stabilization policies: Evidence from Korea," Economic Modelling, Elsevier, vol. 120(C).
    3. Aicha Kharazi & Francesco Ravazzolo, 2023. "Regulatory Collateral Requirements and Delinquency Rate in a Two-Agent New Keynesian Model," Working Paper series 23-03, Rimini Centre for Economic Analysis.

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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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