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Borrower based measures analysis via a new agent based model of the Italian real estate sector

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  • Gennaro Catapano

    (Bank of Italy)

Abstract

This paper presents a new agent-based model (ABM) of the real estate and credit sectors. The main purpose of the model is to study the effects of introducing a borrower-based macroprudential policy on the banking system, households, and the real estate market. The paper describes a comprehensive set of policy experiments simulating the effects of introducing different loan-to-value (LTV) caps on newly issued mortgages. The analysis sheds light on the relevance of the degree of heterogeneity in household indebtedness tolerance and its mean level. Moreover, it studies the impact of the phase-in period length and of the timing of the introduction of such a measure. While generally effective in reducing credit risk and curbing both house prices and household indebtedness growth, these measures may also have transitory negative side effects on banks’ balance sheets and real estate markets. The results suggest the scenarios, calibration, and timing under which the introduction of an LTV cap might have the most favorable outcomes.

Suggested Citation

  • Gennaro Catapano, 2023. "Borrower based measures analysis via a new agent based model of the Italian real estate sector," Questioni di Economia e Finanza (Occasional Papers) 822, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_822_23
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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2023-0822/QEF_822_23.pdf
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    References listed on IDEAS

    as
    1. Gennaro Catapano & Francesco Franceschi & Valentina Michelangeli & Michele Loberto, 2021. "Macroprudential Policy Analysis via an Agent Based Model of the Real Estate Sector," Temi di discussione (Economic working papers) 1338, Bank of Italy, Economic Research and International Relations Area.
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    More about this item

    Keywords

    agent based model; housing market; macroprudential policy;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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