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Assessing the impact of macroprudential measures

Author

Listed:
  • Cussen, Mary

    (Central Bank of Ireland)

  • O'Brien, Martin
  • Onorante, Luca

    (Central Bank of Ireland)

  • O'Reilly, Gerard

    (Central Bank of Ireland
    Central Bank of Ireland)

Abstract

This Letter attempts to assess the potential impact of implementing the recently proposed proportionate loan-to-value ratio on the wider housing market. Using a dual micro and macro simulation strategy, we find evidence for some moderate negative impacts of the LTV cap on house prices and mortgage interest rates, with a proportionately larger impact on housing supply. These can, however, be considered to be close to the maximum possible impacts given the conservative assumptions and empirical strategies underlying our analysis.

Suggested Citation

  • Cussen, Mary & O'Brien, Martin & Onorante, Luca & O'Reilly, Gerard, 2015. "Assessing the impact of macroprudential measures," Economic Letters 03/EL/15, Central Bank of Ireland.
    • Handle: RePEc:cbi:ecolet:03/el/15
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    File URL: https://centralbank.ie/docs/default-source/publications/economic-letters/economic-letter---vol-2015-no-3.pdf?sfvrsn=10
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    References listed on IDEAS

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    Cited by:

    1. Popoyan, Lilit & Napoletano, Mauro & Roventini, Andrea, 2017. "Taming macroeconomic instability: Monetary and macro-prudential policy interactions in an agent-based model," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 117-140.
    2. 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.
    3. Francesco Lamperti & Antoine Mandel & Mauro Napoletano & Alessandro Sapio & Andrea Roventini & Tomas Balint & Igor Khorenzhenko, 2017. "Taming macroeconomic instability," SciencePo Working papers Main hal-03399574, HAL.
    4. Dimitrios Laliotis & Alejandro Buesa & Miha Leber & Javier Población, 2020. "An agent-based model for the assessment of LTV caps," Quantitative Finance, Taylor & Francis Journals, vol. 20(10), pages 1721-1748, October.
    5. Kennedy, Gerard & Stuart, Rebecca, 2015. "Macro-prudential measures and the housing market," Economic Letters 04/EL/15, Central Bank of Ireland.
    6. Kelly, Jane & Le Blanc, Julia & Lydon, Reamonn, 2018. "Pockets of risk in European Housing Markets: then and now," Research Technical Papers 12/RT/18, Central Bank of Ireland.
    7. Lilit Popoyan, 2020. "Macroprudential Policy: a Blessing or a Curse?," Review of Economics and Institutions, Università di Perugia, vol. 11(1-2).
    8. Duffy, David & McQuinn, Kieran & Foley, Daniel, 2016. "Quarterly Economic Commentary, Autumn 2016," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC20163, June.
    9. Cronin, David & McQuinn, Kieran, 2016. "Credit availability, macroprudential regulations and the house price-to-rent ratio," Journal of Policy Modeling, Elsevier, vol. 38(5), pages 971-984.
    10. 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.
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    12. Arigoni, Filippo & McCann, Fergal & Yao, Fang, 2022. "Mortgage credit and house prices: evidence to inform macroprudential policy," Financial Stability Notes 11/FS/22, Central Bank of Ireland.
    13. repec:hal:spmain:info:hdl:2441/5bnglqth5987gaq6dhju3psjn3 is not listed on IDEAS
    14. Giannoulakis, Stelios & Forletta, Marco & Gross, Marco & Tereanu, Eugen, 2023. "The effectiveness of borrower-based macroprudential policies: a cross-country analysis using an integrated micro-macro simulation model," Working Paper Series 2795, European Central Bank.
    15. Buesa, Alejandro & De Quinto, Alicia & Población, Javier, 2022. "Risky mortgages, credit shocks and cross-border spillovers," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 717-733.
    16. Tae-Sub Yun & Il-Chul Moon, 2020. "Housing Market Agent-Based Simulation with Loan-To-Value and Debt-To-Income," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 23(4), pages 1-5.
    17. Lozej, Matija & Rannenberg, Ansgar, 2017. "The macroeconomic effects of the regulatory LTV and LTI ratios in the Central Bank of Ireland's DSGE model," Economic Letters 04/EL/17, Central Bank of Ireland.
    18. Tomas Reichenbachas, 2020. "Assessing the impact of macroprudential measures: The case of the LTV limit in Lithuania," Bank of Lithuania Working Paper Series 80, Bank of Lithuania.
    19. Daniel Abreu & Joana Passinhas, 2021. "Curb your enthusiasm: the aggregate short-run effects of a borrower-based measure," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    20. Gerth, Florian & Temnov, Grigory, 2021. "New Ways of Modeling Loan-to-Income Distributions and their Evolution in Time - A Probability Copula Approach," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 217-236.
    21. Duffy, David & Foley, Daniel & McQuinn, Kieran & Mc Inerney, Niall, 2016. "An Empirical Assessment of the Macroprudential Measures in the Irish Housing Market," Research Notes RN2016/3/1, Economic and Social Research Institute (ESRI).

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