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Optimal Macroprudential Policies and House Prices in Korea

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  • Yongseung Jung
  • Soyoung Kim
  • Doo Yong Yang

Abstract

This article investigates the impacts of the macroprudential policy of limitation on credit growth in housing market on Korean economy to find empirical and theoretical implications. Empirical results based on VAR models show that macroprudential policies like LTV and DTI in Korea have significant and persistent effect on real household credit and real house price. This article further addresses implications of optimal macroprudential and monetary policy in Korea by employing a standard DSGE model. The results suggest that the time-varying macroprudential policy responding to the borrower’s debt to income ratio is most effective in stabilizing household debt among the macroprudential policy rules considered, but produces a moderate downturn of the economy.

Suggested Citation

  • Yongseung Jung & Soyoung Kim & Doo Yong Yang, 2017. "Optimal Macroprudential Policies and House Prices in Korea," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(11), pages 2419-2439, November.
    • Handle: RePEc:mes:emfitr:v:53:y:2017:i:11:p:2419-2439
    DOI: 10.1080/1540496X.2017.1322503
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    Citations

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    Cited by:

    1. Xing Zhang & Fengchao Li & Zhen Li & Yingying Xu, 2018. "Macroprudential Policy, Credit Cycle, and Bank Risk-Taking," Sustainability, MDPI, vol. 10(10), pages 1-18, October.
    2. Victor Pontines, 2021. "The real effects of loan-to-value limits: empirical evidence from Korea," Empirical Economics, Springer, vol. 61(3), pages 1311-1350, September.
    3. Kim, Jihae & Kim, Soyoung & Mehrotra, Aaron, 2019. "Macroprudential policy in Asia," Journal of Asian Economics, Elsevier, vol. 65(C).
    4. Kim, Soyoung & Oh, Junbeom, 2020. "Macroeconomic effects of macroprudential policies: Evidence from LTV and DTI policies in Korea," Japan and the World Economy, Elsevier, vol. 53(C).
    5. Hu, Zhining, 2022. "Six types of government policies and housing prices in China," Economic Modelling, Elsevier, vol. 108(C).
    6. Aditya Anta Taruna & Cicilia Anggadewi Harun & Raquela Renanda Nattan, 2020. "Macroprudential Liquidity Stress Test: An Application to Indonesian Banks," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 9(special i), pages 165-187.

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