Macroeconomic effects of macroprudential policies: Evidence from LTV and DTI policies in Korea |
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| Affiliation: | 1. Seoul National University, South Korea;2. Hyundai Research Institute, South Korea;1. Samsung Economic Research Institute, Seoul, Republic of Korea;2. Department of Economics & SIRFE, Seoul National University, Seoul, Republic of Korea;1. Research Department, International Monetary Fund, 700 19th Street NW, Washington DC 20431, USA;2. Division of International Finance, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue, Washington DC 20551, USA;3. Directorate General Research, European Central Bank, Sonnemannstrasse 20, D-60314 Frankfurt am Main, Germany;1. Banco de Portugal, Financial Stability Department, Rua Castilho, 24 -2o., 1269-179, Lisbon, Portugal;2. Nova SBE, Portugal;3. Banco de Portugal, Economic Research Department, Av. Almirante Reis 71, 1150-012 Lisbon, Portugal;1. International Monetary Fund, IMF, 700 19th Street, NW, Washington DC, USA;2. Bruegel, Rue de la Charité 33, 1210 Saint-Josse-ten-Noode, Belgium;1. Seoul National University, South Korea;2. Bank for International Settlements, Switzerland;1. Research Institute for Economics and Business Administration, Kobe University; Asian Growth Research Institute; Institute of Social and Economic Research, Osaka University, Japan;2. National Bureau of Economic Research, USA;3. Doshisha University and Asian Growth Research Institute, Japan |
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| Abstract: | This study investigates the effects of loan-to-value (LTV) and debt-to-income (DTI) policies on macroeconomic variables such as commodity price index (CPI) and industrial production (IP) and financial variables such as house price and household bank loan in Korea by employing a structural vector autoregression (VAR) model. We use measures of LTV and DTI regulations that properly reflect changes in regulation coverage and intensity. Empirical results show that LTV and DTI shocks have significant effects not only on house price and household bank loan but also on CPI and IP, particularly when both policies are implemented together. The effects of DTI shocks are similar to those of monetary policy shocks, but LTV and DTI shocks tend to have a slower effect on CPI and IP but a faster effect on house price and household bank loan. |
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| Keywords: | Macroprudential policy Macroeconomic effect VAR LTV DTI |
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