TY - JOUR
T1 - The real effects of borrower-based macroprudential policy
T2 - Evidence from administrative household-level data
AU - van Bekkum, Sjoerd
AU - Gabarro, Marc
AU - Irani, Rustom M.
AU - Peydró, José Luis
N1 - Publisher Copyright:
© 2024 The Author(s)
PY - 2024/10
Y1 - 2024/10
N2 - We analyze the effects of borrower-based macroprudential policy at the household level. We exploit administrative Dutch tax and housing records in conjunction with the introduction of a mortgage loan-to-value (LTV) limit. We find that the regulation sharply reduces mortgage leverage with bunching at the LTV limit. While (regulation) affected households reduce total leverage and interest expenses, they also decrease cash balances to satisfy the LTV limit, generating an important solvency-liquidity trade-off. Nevertheless, affected households experience less financial distress after the introduction of the LTV regulation. Moreover, these households experience better liquidity management and smoother consumption following income loss. Overall, our results highlight the key financial stability and real effects of borrower-based macroprudential policy.
AB - We analyze the effects of borrower-based macroprudential policy at the household level. We exploit administrative Dutch tax and housing records in conjunction with the introduction of a mortgage loan-to-value (LTV) limit. We find that the regulation sharply reduces mortgage leverage with bunching at the LTV limit. While (regulation) affected households reduce total leverage and interest expenses, they also decrease cash balances to satisfy the LTV limit, generating an important solvency-liquidity trade-off. Nevertheless, affected households experience less financial distress after the introduction of the LTV regulation. Moreover, these households experience better liquidity management and smoother consumption following income loss. Overall, our results highlight the key financial stability and real effects of borrower-based macroprudential policy.
KW - Consumption smoothing
KW - Household leverage
KW - LTV
KW - Macroprudential policy
KW - Mortgage
KW - Solvency-liquidity trade-off
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U2 - 10.1016/j.jmoneco.2024.103574
DO - 10.1016/j.jmoneco.2024.103574
M3 - Article
AN - SCOPUS:85189079575
SN - 0304-3932
VL - 147
JO - Journal of Monetary Economics
JF - Journal of Monetary Economics
M1 - 103574
ER -