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The Anatomy of the Transmission of Macroprudential Policies

Author

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  • Viral V. Acharya
  • Katharina Bergant
  • Matteo Crosignani
  • Tim Eisert
  • Fergal McCann

Abstract

We analyze how regulatory constraints on household leverage—in the form of loan-to-income and loan-to-value limits—affect residential mortgage credit and house prices as well as other asset classes not directly targeted by the limits. Supervisory loan level data suggest that mortgage credit is reallocated from low-to high-income borrowers and from urban to rural counties. This reallocation weakens the feedback loop between credit and house prices and slows down house price growth in “hot” housing markets. Consistent with constrained lenders adjusting their portfolio choice, more-affected banks drive this reallocation and substitute their risk-taking into holdings of securities and corporate credit.

Suggested Citation

  • Viral V. Acharya & Katharina Bergant & Matteo Crosignani & Tim Eisert & Fergal McCann, 2020. "The Anatomy of the Transmission of Macroprudential Policies," IMF Working Papers 2020/058, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2020/058
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    More about this item

    Keywords

    WP; lending limit; Macroprudential Regulation; Household Leverage; Residential Mortgage Credit; House Prices; credit reallocation; mortgage credit; mortgage issuance; house price growth; bank portfolio choice; Housing prices; Mortgages; Credit; Personal income; Residential mortgages; Loans;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • 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
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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