A DSGE-based assessment of nonlinear loan-to-Value policies: Evidence from Hong Kong

Michael Funke and Michael Paetz

Quantitative Macroeconomics Working Papers from Hamburg University, Department of Economics

Abstract: In the wake of the 2008-2009 global financial crisis, the macroeconom-ic discussion has returned to the topic of proactive macroprudential policies. One proactive approach, the use of loan-to-value (LTV) policies to curb booming proper-ty markets, has long been used by Hong Kong’s monetary authorities to actively manage and mitigate the potential fallout from housing price bubbles. Here, we ana-lyse the merits of this countercyclical macroprudential policy in a New Keynesian DSGE model. We conclude that nonlinear LTV policy rules implemented in reaction to episodes of high property price inflation can limit transmission of housing price cycle effects to the real economy.

Keywords: DSGE models; housing; open economy; Hong Kong (search for similar items in EconPapers)
JEL-codes: D91 E21 E44 F41 (search for similar items in EconPapers)
Date: 2012-04
New Economics Papers: this item is included in nep-dge
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Citations: View citations in EconPapers (31)

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Working Paper: A DSGE-based assessment of nonlinear loan-to-Value policies: Evidence from Hong Kong (2012)
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