Události

Frantisek Masek, Ph.D.

Czech National Bank

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Meeting number: 2741 274 1838
Meeting password: 486340

Authors: Frantisek Masek and Kalin Nikolov

Abstract: Using a New Keynesian model with housing and macroprudential policy, this paper shows that different borrower-based measures (BBMs) used as structural backstop caps can have very distinct consequences over the credit cycle. While a loan-to-value (LTV) cap is relatively ineffective in dampening the rise in house prices and the associated credit cycle, a debt-to-income (DTI) constraint curbs the boom phase and smooths the cycle more than LTV. We point to a key mechanism behind this difference: the collateral premium. As housing serves as collateral for debt, an LTV constraint mainly changes the tightness of the collateral constraint without removing the role of housing in generating borrowing capacity, and can hence leave the collateral premium channel largely intact or even strengthen it. DTI dampens the role of the collateral premium in the cycle and smooths house prices and credit dynamics more effectively.