The Costs of Macroprudential Deleveraging in a Liquidity Trap
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We examine the effects of various borrower-based macroprudential tools in a New Keynesian environment where both real and nominal interest rates are low. Our model features long-term debt, housing transaction costs and a zero-lower bound constraint on policy rates. We find that the long-term costs, in terms of forgone consumption, of all the macroprudential tools we consider are moderate. Even so, the short-term costs differ dramatically between alternative tools. Specifically, a loan-to-value tightening is more than twice as contractionary compared to loan-to-income tightening when debt is high and monetary policy cannot accommodate.
2018 ◽
Vol 40
(3)
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pp. 301-334
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2016 ◽
Vol 106
(5)
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pp. 39-42
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2018 ◽
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2014 ◽
Vol 104
(10)
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pp. 3154-3185
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2020 ◽
Vol 12
(2)
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pp. 310-350
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2006 ◽
Vol 28
(2)
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pp. 171-185
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