The Anatomy of the Transmission of Macroprudential Policies

Viral Acharya, Katharina Bergant, Matteo Crosignani, Tim Eisert, Fergal McCann

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Abstract

We analyze how regulatory constraints on household leverage---in the form of loan-to-income and loan-to-value limits---affect residential mortgage credit and house prices as well as other asset classes not directly targeted by the limits. Supervisory loan level data suggest that mortgage credit is reallocated from low- to high-income borrowers and from urban to rural counties. This reallocation weakens the feedback loop between credit and house prices and slows down house price growth in ``hot'' housing markets. Banks whose lending to households is more affected by the regulatory constraint drive this stabilizing reallocation; these same banks, however, substitute their risk-taking into holdings of securities and corporate credit.
Original languageEnglish
Pages (from-to)2533
Number of pages2575
JournalJournal of Finance
Volume77
Issue number5
DOIs
Publication statusPublished - Oct 2022

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