@article{ab234b5194c740fb984555341bda6237,
title = "The real effects of borrower-based macroprudential policy: Evidence from administrative household-level data",
abstract = "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.",
keywords = "Consumption smoothing, Household leverage, LTV, Macroprudential policy, Mortgage, Solvency-liquidity trade-off",
author = "{van Bekkum}, Sjoerd and Marc Gabarro and Irani, {Rustom M.} and Peydr{\'o}, {Jos{\'e} Luis}",
note = "This paper was previously circulated under the title “Take It to the Limit? The Effects of Household Leverage Caps.” We thank Aditya Aladangady, Jason Allen, Matteo Crosignani, Filippo De Marco, Anthony DeFusco, Janice Eberly, Andreas Fuster, Debroah Lucas, Christopher Palmer, Adriano Rampini, Lars Svensson, Annette Vissing-Jorgensen, and Paul Willen, as well as audience participants at the 2023 BdF-CEPR-ECB conference on “Monetary Policy Challenges for European Macroeconomies,” NBER Summer Institute, American Economic Association Annual Meetings, Federal Reserve Bank of New York, Virginia Tech (Pamplin), Erasmus Rotterdam, Hong Kong University, Hong Kong University of Science and Technology, City University of Hong Kong, Central Bank of Canada Annual Research Conference, Chicago Financial Institutions Conference, USC Fixed Income and Financial Institutions Conference, Financial Intermediation Research Society Conference, Wabash River Finance Conference at Purdue University, European Commission workshop on “Addressing Housing Market Imbalances,” the Banca d'Italia and ECB Workshop on “Macroprudential Policy: Effectiveness, Interactions and Spillovers,” and the International Banking, Economics, and Finance Association Annual Meetings. Results based on calculations by Erasmus University using non-public microdata from Statistics Netherlands. All results have been reviewed to ensure that no confidential information is disclosed. Project supported by a 2018 Leonardo Grant for Researchers and Cultural Creators, BBVA Foundation, by the PGC2018-102133-B-I00 (MCIU/AEI/FEDER, UE) grant and the Spanish Ministry of Economy and Competitiveness, through the Severo Ochoa Programme for Centres of Excellence in R&D (SEV-2015-0563), and by the European Research Council (ERC) under the European Union's Horizon 2020 research and innovation programme (grant agreement No 648398). This paper was previously circulated under the title “Take It to the Limit? The Effects of Household Leverage Caps.” We thank Aditya Aladangady, Jason Allen, Matteo Crosignani, Filippo De Marco, Anthony DeFusco, Janice Eberly, Andreas Fuster, Debroah Lucas, Christopher Palmer, Adriano Rampini, Lars Svensson, Annette Vissing-Jorgensen, and Paul Willen, as well as audience participants at the 2023 BdF-CEPR-ECB conference on “Monetary Policy Challenges for European Macroeconomies,” NBER Summer Institute, American Economic Association Annual Meetings, Federal Reserve Bank of New York, Virginia Tech (Pamplin), Erasmus Rotterdam, Hong Kong University, Hong Kong University of Science and Technology, City University of Hong Kong, Central Bank of Canada Annual Research Conference, Chicago Financial Institutions Conference, USC Fixed Income and Financial Institutions Conference, Financial Intermediation Research Society Conference, Wabash River Finance Conference at Purdue University, European Commission workshop on “Addressing Housing Market Imbalances,” the Banca d{\textquoteright}Italia and ECB Workshop on “Macroprudential Policy: Effectiveness, Interactions and Spillovers,” and the International Banking, Economics, and Finance Association Annual Meetings. Any opinions and conclusions expressed herein are those of the authors and do not necessarily represent the views of Statistics Netherlands. All results have been reviewed to ensure that no confidential information is disclosed. Project supported by a 2018 Leonardo Grant for Researchers and Cultural Creators, BBVA Foundation , by the PGC2018-102133-B-I00 (MCIU/AEI/FEDER, UE) grant and the Spanish Ministry of Economy and Competitiveness , through the Severo Ochoa Programme for Centres of Excellence in R&D ( SEV-2015-0563 ), and by the European Research Council (ERC) under the European Union{\textquoteright}s Horizon 2020 research and innovation programme (grant agreement No 648398 ).",
year = "2024",
month = oct,
doi = "10.1016/j.jmoneco.2024.103574",
language = "English (US)",
volume = "147",
journal = "Journal of Monetary Economics",
issn = "0304-3932",
publisher = "Elsevier B.V.",
}