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Loan-to-Value Policy as a Macroprudential Tool: The Case of Residential Mortgage Loans in Asia

Author

Listed:
  • Morgan, Peter

    () (Asian Development Bank Institute)

  • Regis, Paulo José

    () (Division of Economics, Xi'an Jiaotong-Liverpool University)

  • Salike, Nimesh

    () (Division of Economics, Xi'an Jiaotong-Liverpool University)

Abstract

Credit creation in the housing market has been a key source of systemic financial risk, and therefore is at the center of the debate on macroprudential policies. The loan-to-value (LTV) ratio is a widely-used macroprudential tool aimed at moderating mortgage loan creation, and its effectiveness needs to be estimated empirically. This paper is unique in that it analyzes the effect of LTV on mortgage lending, the direct channel of influence, using a large sample of banks in ten Asian countries. It uses estimation techniques to deal with the large presence of outliers in the data. Robust to outlier estimations show that countries with LTV polices have expanded residential mortgage loans by 6.7% per year while non-LTV countries have expanded by 14.6%, which suggests LTV policies have been effective.

Suggested Citation

  • Morgan, Peter & Regis, Paulo José & Salike, Nimesh, 2015. "Loan-to-Value Policy as a Macroprudential Tool: The Case of Residential Mortgage Loans in Asia," RIEI Working Papers 2015-03, Xi'an Jiaotong-Liverpool University, Research Institute for Economic Integration.
  • Handle: RePEc:xjt:rieiwp:2015-03
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    File URL: http://www.xjtlu.edu.cn/assets/files/publications/working-papers/riei/RIEI-WP_2015-03.pdf
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    References listed on IDEAS

    as
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    1. repec:eee:jfinin:v:37:y:2019:i:c:p:89-103 is not listed on IDEAS
    2. repec:bis:bisbpc:94-13 is not listed on IDEAS
    3. Janko Cizel & Jon Frost & Aerdt Houben & Peter Wierts, 2019. "Effective Macroprudential Policy: Cross‐Sector Substitution from Price and Quantity Measures," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(5), pages 1209-1235, August.
    4. Ely, Regis Augusto & Tabak, Benjamin Miranda & Teixeira, Anderson Mutter, 2019. "Heterogeneous effects of the implementation of macroprudential policies on bank risk," MPRA Paper 94546, University Library of Munich, Germany.
    5. repec:wsi:serxxx:v:63:y:2018:i:01:n:s0217590817440040 is not listed on IDEAS
    6. repec:mnb:finrev:v:17:y:2018:i:1:p:34-61 is not listed on IDEAS

    More about this item

    Keywords

    macroprudential policies; financial stability; robust to outliers regression; mortgage loan creation;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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