scholarly journals House Prices, Credit Growth, and Excess Volatility: Implications for Monetary and Macroprudential Policy

2013 ◽  
pp. 01-49 ◽  
Author(s):  
Paolo Gelain ◽  
◽  
Kevin J. Lansing ◽  
Caterina Mendicino ◽  
◽  
...  
Keyword(s):  
House Prices ◽  
Macroprudential Policy ◽  
Credit Growth ◽  
Excess Volatility

scholarly journals The Impact of Seven Macroprudential Policy Instruments on Financial Stability in Six Euro Area Economies

2021 ◽  
Vol 21 (3) ◽  
pp. 259-290
Author(s):  
Eva Lorenčič ◽  
Mejra Festić
Keyword(s):  
Growth Rate ◽  
Euro Area ◽  
Financial Stability ◽  
Policy Instruments ◽  
Macroprudential Policy ◽  
Credit Growth ◽  
Leverage Ratio ◽  
Maturity Mismatch ◽  
Degree Of Maturity ◽  
Solvency Ratio

Abstract The aim of this paper is to investigate whether macroprudential policy instruments can influence the credit growth rate and hence financial stability. We use a fixed effects panel regression model to test the following hypothesis for six euro area economies (Austria, Finland, Germany, Italy, Netherlands and Spain) during time span 2010 Q3 to 2018 Q4: “Macroprudential policy instruments (degree of maturity mismatch; interbank loans as a percentage of total loans; leverage ratio; non-deposit funding as a percentage of total funding; loan-to-value ratio; loan-to-deposit ratio; solvency ratio) enhance financial stability, as measured by credit growth”. Our empirical results suggest that the degree of maturity mismatch, non-deposit funding as a percentage of total funding, loan-to-value ratio and loan-to-deposit ratio exhibit the predicted impact on the credit growth rate and therefore on financial stability. On the other hand, interbank loans as a percentage of total loans, leverage ratio, and solvency ratio do not exhibit the expected impact on the response variable. Since only four regressors (out of seven) have the signs predicted by our hypothesis, we can only partly confirm it.

scholarly journals A Toolkit to Assess the Consistency Between Real Sector and Financial Sector Forecasts

2017 ◽  
Vol 17 (09) ◽  
Author(s):  
Sophia Chen ◽  
Paola Ganum ◽  
Pau Rabanal
Keyword(s):  
Low Income ◽  
House Prices ◽  
Financial Sector ◽  
Low Income Countries ◽  
Real Sector ◽  
Credit Growth ◽  
Advanced Economies ◽  
Financial Account ◽  
Empirical Regularities ◽  
The Relationship

e develop a toolkit to assess the consistency between real sector and financial sector forecasts. The toolkit draws upon empirical regularities on real sector and financial sector outcomes for 182 economies from 1980 to 2015. We show that credit growth is positively correlated with real sector performance, in particular when credit growth is unusually high or low. However, the relationship between credit growth and inflation is weak. These results hold for different country groups, including advanced economies, emerging markets and low-income countries. Combining credit growth with other variables such as house prices and the output gap helps to understand real sector outcomes. But including the financial account balance does not make a difference.

Housing Finance in Canada: Looking Back to Move Forward

2014 ◽  
Vol 230 ◽  
pp. R45-R57 ◽  
Author(s):  
Lawrence L. Schembri
Keyword(s):  
Global Financial Crisis ◽  
House Prices ◽  
Housing Finance ◽  
Private Label ◽  
Macroprudential Policy ◽  
Mortgage Insurance ◽  
The Government ◽  
The Global Financial Crisis ◽  
The Right ◽  
Looking Back

The Canadian system of housing finance proved to be resilient and efficient during the global financial crisis and its aftermath. The system's effectiveness is the result of a rigorous prudential regulatory and supervisory regime coupled with targeted government guarantees of mortgage insurance and securitisation products. In the post-crisis period, household debt levels and house prices have risen, owing, in part, to accommodative monetary conditions necessary to support the economic recovery. These vulnerabilities were mitigated by tightening macroprudential policy, specifically mortgage insurance rules, and strengthening mortgage-underwriting standards. Looking ahead, the housing finance framework needs to be adjusted and strengthened by rebalancing the risk exposures away from the government towards the private sector participants in the housing finance market. Although some measures have already been taken for this purpose, more adjustments may be needed to create the right incentives and achieve a sustainable rebalancing in risk exposures. Measures should also be considered to promote a liquid private-label mortgage securitisation market in Canada.

scholarly journals A Simple Model of Subprime Borrowers and Credit Growth

2016 ◽  
Vol 106 (5) ◽  
pp. 543-547 ◽  
Author(s):  
Alejandro Justiniano ◽  
Giorgio E. Primiceri ◽  
Andrea Tambalotti
Keyword(s):  
Simple Model ◽  
Interest Rates ◽  
Low Income ◽  
Great Recession ◽  
House Prices ◽  
Credit Growth ◽  
Geographic Locations ◽  
The Great Recession ◽  
Interest Payments

The surge in credit and house prices that preceded the Great Recession was particularly pronounced in ZIP codes with a higher fraction of subprime borrowers (Mian and Sufi, 2009). We present a simple model with prime and subprime borrowers distributed across geographic locations, which can reproduce this stylized fact as a result of an expansion in the supply of credit. Due to their low income, subprime households are constrained in their ability to meet interest payments and hence sustain debt. As a result, when the supply of credit increases and interest rates fall, they take on disproportionately more debt than their prime counterparts, who are not subject to that constraint.

scholarly journals Comparing Housing Booms and Mortgage Supply in the Major OECD Countries

2014 ◽  
Vol 230 ◽  
pp. R3-R15 ◽  
Author(s):  
Angus Armstrong ◽  
E. Philip Davis
Keyword(s):  
House Prices ◽  
House Price ◽  
Macroprudential Policy ◽  
Marked Rise ◽  
Commercial Property ◽  
The Past ◽  
Housing Boom ◽  
Per Se ◽  
Compare And Contrast ◽  
Boom Period

The house price and lending boom of the 2000s is widely considered to be the main cause of the financial crisis that began in 2007. However, looking to the past, we find a similar boom in the late 1980s which did not lead directly to a global systemic banking crisis – there were widespread banking difficulties in the early 1990s but these were linked mainly to commercial property exposures. This raises the question whether the received wisdom is incorrect, and other factors than the housing boom caused the crisis, while macroprudential policy is overly targeted at the control of house prices and lending per se.Accordingly, in this paper we compare and contrast the cycles in house prices over 1985–94 with 2002–11. There are more similarities than contrasts between the booms. Stylised facts include a similar rise in real house prices where booms took place, and a marked rise in the real mortgage stock along with real incomes. The aftermath periods are also comparable in terms of house price changes. Econometrically, determinants of house prices are similar in size and sign from the 1980s to date.There remain some contrasts. Leverage rose far more in the later episode and did not contract in the aftermath. Mean reversion of house prices is greater in the earlier period. The earlier boom period showed differences with average house price behaviour which was not mirrored in the most recent boom and inflation was higher. Despite the contrasts, on balance we reject the idea that the recent boom was in some way unique and hence the key cause of the crisis. There is a need for further research to capture distinctive structural and conjunctural factors underlying the recent crisis which differ from the earlier boom and some suggestions are made.

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