Do Loan-to-Value and Debt-to-Income Limits Work? Evidence from Korea
AbstractWith another real estate boom-bust bringing woes to the world economy, a quest for a better policy toolkit to deal with these boom-busts has begun. Macroprudential measures could be in such a toolkit. Yet, we know very little about their impact. This paper takes a step to fill this gap by analyzing the Korean experience with these measures. We find that loan-to-value and debt-to-income limits are associated with a decline in house price appreciation and transaction activity. Furthermore, the limits alter expectations, which play a key role in bubble dynamics.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 11/297.
Date of creation: 01 Dec 2011
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-18 (All new papers)
- NEP-MAC-2012-01-18 (Macroeconomics)
- NEP-URE-2012-01-18 (Urban & Real Estate Economics)
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