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How Effective is Macroprudential Policy? Evidence from Lending Restriction Measures in EU Countries
Author:
Mr. Tigran Poghosyan
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Series:
IMF Working Papers
Volume/Issue:
Volume 2019: Issue 045
Language:
English
Publication Date:
01 Mar 2019
DOI:
https://doi.org/10.5089/9781498300872.001
ISBN:
9781498300872
ISSN:
1018-5941
Pages:
42
Keywords:
WP; macroprudential regulation; financial stability; credit; house prices; monetary policy rate; restriction measure; target variable; house price growth; lending restriction measure; number of observation; property price growth; credit growth; Housing prices; Central bank policy rate; Macroprudential policy instruments; Foreign banks; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper assesses the effectiveness of lending restriction measures, such as loan-to-value and debt-service-to-income ratios, in affecting developments in house prices and credit. We use data on 99 lending standard restrictions implemented in 28 EU countries over 1990–2018. The results suggest that lending restriction measures are generally effective in curbing house prices and credit. However, the impact is delayed and reaches its peak only after three years. In addition, the impact is asymmetric, with tightening measures having weaker association with target variables compared to loosening measures. The association is stronger in countries outside of euro area and for legally-binding measures and measures involving sanctions. The results have practical implications for macroprudential authorities.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund