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Effects of LTV announcements in EU economies

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  • Mokas, Dimitris
  • Giuliodori, Massimo

Abstract

Earlier empirical studies on the effects of macroprudential policies focus on implementation dates and, in most cases, ignore potential anticipation effects. In this paper, we collect monthly data on announcements of loan-to-value (LTV) ratio restrictions covering 18 EU economies during the period 2000–2019. We show that announcements of LTV tightening policies can have a sizeable negative impact on household credit, house prices, and household durable goods consumption. We find that the estimated contractionary effects on household credit are driven by announcements with delayed implementation, whereas the effects on house prices are driven by announcements with quick implementation. We also show that the above contractionary effects are stronger following announcements of binding actions and actions without speed limits, suggesting that the design of macroprudential policies matters for their effectiveness.

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  • Mokas, Dimitris & Giuliodori, Massimo, 2023. "Effects of LTV announcements in EU economies," Journal of International Money and Finance, Elsevier, vol. 133(C).
    • Handle: RePEc:eee:jimfin:v:133:y:2023:i:c:s0261560623000396
    DOI: 10.1016/j.jimonfin.2023.102838
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    More about this item

    Keywords

    Macroprudential policy; Loan-to-value ratios; Cost of credit; Local projections;
    All these keywords.

    JEL classification:

    • 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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