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The impact of macroprudential housing finance tools in canada

Author

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  • Allen, Jason
  • Grieder, Timothy
  • Peterson, Brian
  • Roberts, Tom

Abstract

This paper combines loan-level administrative data with household-level survey data to analyze the impact of recent macroprudential policy changes in Canada using a microsimulation model of mortgage demand of first-time homebuyers. Policies targeting the loan-to-value ratio are found to have a larger impact on demand than policies targeting the debt-service ratio, such as amortization. In addition, we show that loan-to-value policies have a larger role to play in reducing default than income-based policies.

Suggested Citation

  • Allen, Jason & Grieder, Timothy & Peterson, Brian & Roberts, Tom, 2020. "The impact of macroprudential housing finance tools in canada," Journal of Financial Intermediation, Elsevier, vol. 42(C).
  • Handle: RePEc:eee:jfinin:v:42:y:2020:i:c:s1042957317300529
    DOI: 10.1016/j.jfi.2017.08.004
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    Cited by:

    1. Robert Clark & Shaoteng Li, 2020. "The strategic response of banks to macroprudential policies: Evidence from mortgage stress tests in Canada," Working Paper 1445, Economics Department, Queen's University.
    2. Leonardo Gambacorta & Andrés Murcia, 2019. "The impact of macroprudential policies and their interaction with monetary policy: an empirical analysis using credit registry data," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Are post-crisis statistical initiatives completed?, volume 49, Bank for International Settlements.
    3. Jason Allen & Shaoteng Li, 2020. "Dynamic Competition in Negotiated Price Markets," Staff Working Papers 20-22, Bank of Canada.
    4. Stanga, Irina & Vlahu, Razvan & de Haan, Jakob, 2020. "Mortgage arrears, regulation and institutions: Cross-country evidence," Journal of Banking & Finance, Elsevier, vol. 118(C).
    5. Scalco, Paulo R. & Tabak, Benjamin M. & Teixeira, Anderson M., 2021. "Prudential measures and their adverse effects on bank competition: The case of Brazil," Economic Modelling, Elsevier, vol. 100(C).
    6. Lars E. O. Svensson, 2018. "Monetary policy and macroprudential policy: Different and separate?," Canadian Journal of Economics, Canadian Economics Association, vol. 51(3), pages 802-827, August.
    7. Gambacorta, Leonardo & Murcia, Andrés, 2020. "The impact of macroprudential policies in Latin America: An empirical analysis using credit registry data," Journal of Financial Intermediation, Elsevier, vol. 42(C).
    8. Basto, R. & Gomes, S. & Lima, D., 2019. "Exploring the implications of different loan-to-value macroprudential policy designs," Journal of Policy Modeling, Elsevier, vol. 41(1), pages 66-83.
    9. Thibaut Duprey & Alexander Ueberfeldt, 2018. "How to Manage Macroeconomic and Financial Stability Risks: A New Framework," Staff Analytical Notes 2018-11, Bank of Canada.
    10. 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.
    11. Marina Tiunova, 2019. "Commodity and Financial Cycles in Resource-based Economies," Russian Journal of Money and Finance, Bank of Russia, vol. 78(3), pages 38-70, September.
    12. Stefanie Behncke, 2020. "Effects of macroprudential policies on bank lending and credit risks," Working Papers 2020-06, Swiss National Bank.
    13. Robert McKeown, 2017. "How Vulnerable Is The Canadian Banking System To Fire-sales?," Working Paper 1381, Economics Department, Queen's University.
    14. Karpestam, Peter & Johansson, Sebastian, 2019. "Interest-only-mortgages and housing market fluctuations in Denmark," Journal of Housing Economics, Elsevier, vol. 46(C).
    15. Mr. Adrian Alter & Elizabeth M. Mahoney, 2020. "Household Debt and House Prices-at-risk: A Tale of Two Countries," IMF Working Papers 2020/042, International Monetary Fund.

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    More about this item

    Keywords

    Macroprudential policy; Household finance; Microsimulation models;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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