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Assessing the efficacy of borrower-based macroprudential policy using an integrated micro-macro model for European households

Author

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  • Gross, Marco
  • Población García, Francisco Javier

Abstract

We develop an integrated micro-macro model framework that is based on household survey data for a subset of the EU countries that the Household Finance and Consumption Survey (HFCS) contains. The model can be used for conducting scenario and sensitivity analyses with regard to the factors that drive households' income and expenses as well as their asset values and hence the structure of their balance sheet. Moreover, we use it for the purpose of assessing the efficacy of borrower-based macroprudential instruments, namely loan-to-value (LTV) ratio and debt service to income (DSTI) ratio caps. The simulation results from the model can be attached to bank balance sheets and their risk parameters to derive the impact of the policy measures on their capital position. The model framework also allows quantifying the macroeconomic feedback effects that would result from the policy-induced reduction of demand for mortgage loans. The model allows answering the question as to which of the two measures JEL Classification: C33, E58, G18

Suggested Citation

  • Gross, Marco & Población García, Francisco Javier, 2016. "Assessing the efficacy of borrower-based macroprudential policy using an integrated micro-macro model for European households," Working Paper Series 1881, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20161881
    Note: 3098116
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    Cited by:

    1. Carpantier, Jean-Francois & Olivera, Javier & Van Kerm, Philippe, 2018. "Macroprudential policy and household wealth inequality," Journal of International Money and Finance, Elsevier, vol. 85(C), pages 262-277.
    2. Gross, Marco & Población, Javier, 2017. "Assessing the efficacy of borrower-based macroprudential policy using an integrated micro-macro model for European households," Economic Modelling, Elsevier, vol. 61(C), pages 510-528.
    3. Giordana, Gastón & Ziegelmeyer, Michael, 2020. "Stress testing household balance sheets in Luxembourg," The Quarterly Review of Economics and Finance, Elsevier, vol. 76(C), pages 115-138.
    4. Muellbauer, John, 2016. "Macroeconomics and Consumption," CEPR Discussion Papers 11588, C.E.P.R. Discussion Papers.
    5. Jan Klacso & Eva Stulrajterova, 2021. "Determinants of labour market flows in Slovakia," Working and Discussion Papers WP 5/2021, Research Department, National Bank of Slovakia.
    6. Lukáš Fiala & Petr Teplý, 2021. "The Use of Borrower-based Measures within Macroprudential Policy: Evidence from the European Economic Area," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2021(1), pages 71-91.
    7. Cabral, Inês & Detken, Carsten & Fell, John & Henry, Jérôme & Hiebert, Paul & Kapadia, Sujit & Pires, Fatima & Salleo, Carmelo & Constâncio, Vítor & Nicoletti Altimari, Sergio, 2019. "Macroprudential policy at the ECB: Institutional framework, strategy, analytical tools and policies," Occasional Paper Series 227, European Central Bank.
    8. Chen, Yunping & Chen, Huanhuan & Li, Guorong & Jiao, Dongdan & Xu, Xiangyun, 2021. "Time-varying effect of macro-prudential policies on household credit growth: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 241-254.

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    More about this item

    Keywords

    household balance sheets; macro-financial linkages; macroprudential policy; stress-testing;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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