Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/202878
Authors: 
Cokayne, Graeme
Year of Publication: 
2019
Series/Report no.: 
Danmarks Nationalbank Working Papers 138
Abstract: 
Following the global financial crisis, many countries have introduced or tightened macroprudential policies. Using an agentbased model (ABM), this paper seeks to measure the impact on house price cycles of two distinct borrower-based macroprudential instruments, namely loan-to-income and loan-to-value ratios. The use of an ABM allows for the consideration of the effects of these policies on the distribution of heterogeneous households. The paper shows that the relation between tightening an instrument and its effect on house price fluctuations may be highly non-linear, depending on the distribution of households for which the instrument becomes binding. Furthermore, the paper demonstrates that the marginal effect of tightening one instrument generally depends on the calibration of the other instrument. From a policy perspective, these findings highlight the importance of using granular data - preferably at the household level - when calibrating borrower- based macroprudential instruments. Likewise, the findings demonstrate the importance of macroprudential authorities establishing a coherent framework where the effects of different measures are evaluated together.
Subjects: 
Housing
Agent-based model
Macro-prudential Policies
Regulation
JEL: 
D1
D31
E58
G18
G21
R2
R21
R31
Document Type: 
Working Paper

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