[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/bca/bocawp/16-41.html
   My bibliography  Save this paper

The Impact of Macroprudential Housing Finance Tools in Canada: 2005–10

Author

Listed:
  • Jason Allen
  • Timothy Grieder
  • Brian Peterson
  • Tom Roberts
Abstract
This paper combines loan-level administrative data with household-level survey data to analyze the impact of recent macroprudential policy changes in Canada using a microsimulation model of mortgage demand of first-time homebuyers. Policies targeting the loan-to-value ratio are found to have a larger impact than policies targeting the debt-service ratio, such as amortization. This is because there are more wealth-constrained borrowers than income-constrained borrowers entering the housing market.

Suggested Citation

  • Jason Allen & Timothy Grieder & Brian Peterson & Tom Roberts, 2016. "The Impact of Macroprudential Housing Finance Tools in Canada: 2005–10," Staff Working Papers 16-41, Bank of Canada.
    • Handle: RePEc:bca:bocawp:16-41
    as

    Download full text from publisher

    File URL: https://www.bankofcanada.ca/wp-content/uploads/2016/08/swp2016-41.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Douglas Kiarelly Godoy de Araujo & João Barata Ribeiro Blanco Barroso & Rodrigo Barbone Gonzalez, 2016. "Loan-To-Value Policy and Housing Loans: effects on constrained borrowers," Working Papers Series 445, Central Bank of Brazil, Research Department.
    2. Morris A. Davis, 2010. "housing and the business cycle," The New Palgrave Dictionary of Economics,, Palgrave Macmillan.
    3. Kuttner, Kenneth N. & Shim, Ilhyock, 2016. "Can non-interest rate policies stabilize housing markets? Evidence from a panel of 57 economies," Journal of Financial Stability, Elsevier, vol. 26(C), pages 31-44.
    4. Jason Allen & Robert Clark & Jean-François Houde, 2014. "Price Dispersion in Mortgage Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 62(3), pages 377-416, September.
    5. Lambertini, Luisa & Mendicino, Caterina & Teresa Punzi, Maria, 2013. "Leaning against boom–bust cycles in credit and housing prices," Journal of Economic Dynamics and Control, Elsevier, vol. 37(8), pages 1500-1522.
    6. Marcelo Fuenzalida & Jaime Ruiz-Tagle, 2011. "Household Financial Vulnerability," Central Banking, Analysis, and Economic Policies Book Series, in: Rodrigo Alfaro (ed.),Financial Stability, Monetary Policy, and Central Banking, edition 1, volume 15, chapter 10, pages 299-326, Central Bank of Chile.
    7. repec:wil:wileco:2013-20 is not listed on IDEAS
    8. Cerutti, Eugenio & Claessens, Stijn & Laeven, Luc, 2017. "The use and effectiveness of macroprudential policies: New evidence," Journal of Financial Stability, Elsevier, vol. 28(C), pages 203-224.
    9. Paolo Angelini & Stefano Neri & Fabio Panetta, 2011. "Monetary and macroprudential policies," Temi di discussione (Economic working papers) 801, Bank of Italy, Economic Research and International Relations Area.
    10. Gabriele Galati & Richhild Moessner, 2013. "Macroprudential Policy – A Literature Review," Journal of Economic Surveys, Wiley Blackwell, vol. 27(5), pages 846-878, December.
    11. Ms. Deniz O Igan & Mr. Heedon Kang, 2011. "Do Loan-To-Value and Debt-To-Income Limits Work? Evidence From Korea," IMF Working Papers 2011/297, International Monetary Fund.
    12. Jason Allen & Robert Clark & Jean-Fran?ois Houde, 2014. "The Effect of Mergers in Search Markets: Evidence from the Canadian Mortgage Industry," American Economic Review, American Economic Association, vol. 104(10), pages 3365-3396, October.
    13. Lawrence L. Schembri, 2014. "Housing Finance in Canada: Looking Back to Move Forward," National Institute Economic Review, National Institute of Economic and Social Research, vol. 230(1), pages 45-57, November.
    14. repec:zbw:bofrdp:2007_005 is not listed on IDEAS
    15. Elliot Anenberg & Patrick Bayer, 2013. "Endogenous Sources of Volatility in Housing Markets: The Joint Buyer-Seller Problem," NBER Working Papers 18980, National Bureau of Economic Research, Inc.
    16. Allan Crawford, 2015. "Building Stable Mortgage Markets: Lessons from Canada's Experience," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(S1), pages 81-86, March.
    17. Rhys R. Mendes & Stephen Murchison, 2014. "Should Forward Guidance Be Backward-Looking?," Bank of Canada Review, Bank of Canada, vol. 2014(Autumn), pages 12-22.
    18. Eugenio Cerutti & Stijn Claessens & Luc Laeven, 2016. "The use and effectiveness of macroprudential policies," BIS Papers chapters, in: Bank for International Settlements (ed.), Macroprudential policy, volume 86, pages 95-102, Bank for International Settlements.
    19. Brueckner, Jan K., 1994. "The Demand for Mortgage Debt: Some Basic Results," Journal of Housing Economics, Elsevier, vol. 3(4), pages 251-262, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Stefanie Behncke, 2023. "Effects of Macroprudential Policies on Bank Lending and Credit Risks," Journal of Financial Services Research, Springer;Western Finance Association, vol. 63(2), pages 175-199, April.
    2. Lu Han & Chandler Lutz & Benjamin Sand & Derek Stacey, 2018. "Do Financial Constraints Cool a Housing Boom?," Working Papers 073, Toronto Metropolitan University, Department of Economics.
    3. Robert Clark & Shaoteng Li, 2022. "The Strategic Response of Banks to Macroprudential Policies: Evidence from Mortgage Stress Tests in Canada [LIBOR manipulation?]," Review of Finance, European Finance Association, vol. 26(1), pages 187-216.
    4. Gambacorta, Leonardo & Murcia, Andrés, 2020. "The impact of macroprudential policies in Latin America: An empirical analysis using credit registry data," Journal of Financial Intermediation, Elsevier, vol. 42(C).
    5. Lars E. O. Svensson, 2018. "Monetary policy and macroprudential policy: Different and separate?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 51(3), pages 802-827, August.
    6. Jason Allen & Shaoteng Li, 2020. "Dynamic Competition in Negotiated Price Markets," Staff Working Papers 20-22, Bank of Canada.
    7. Stanga, Irina & Vlahu, Razvan & de Haan, Jakob, 2020. "Mortgage arrears, regulation and institutions: Cross-country evidence," Journal of Banking & Finance, Elsevier, vol. 118(C).
    8. Basto, R. & Gomes, S. & Lima, D., 2019. "Exploring the implications of different loan-to-value macroprudential policy designs," Journal of Policy Modeling, Elsevier, vol. 41(1), pages 66-83.
    9. Yavuz Arslan and Christian Upper, 2017. "Macroprudential frameworks: implementation and effectiveness," BIS Papers chapters, in: Bank for International Settlements (ed.), Macroprudential frameworks, implementation and relationship with other policies, volume 94, pages 25-47, Bank for International Settlements.
    10. Kinghan, Christina & McCarthy, Yvonne & O’Toole, Conor, 2022. "How do macroprudential loan-to-value restrictions impact first time home buyers? A quasi-experimental approach," Journal of Banking & Finance, Elsevier, vol. 138(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Allen, Jason & Grieder, Timothy & Peterson, Brian & Roberts, Tom, 2020. "The impact of macroprudential housing finance tools in canada," Journal of Financial Intermediation, Elsevier, vol. 42(C).
    2. Nitzan Tzur-Ilan, 2019. "Macroprudential Policy: Implementation, Effects, And Lessons," Israel Economic Review, Bank of Israel, vol. 17(1), pages 39-71.
    3. Jung, Hosung & Lee, Jieun, 2017. "The effects of macroprudential policies on house prices: Evidence from an event study using Korean real transaction data," Journal of Financial Stability, Elsevier, vol. 31(C), pages 167-185.
    4. Dilyana Dimova & Ms. Piyabha Kongsamut & Mr. Jerome Vandenbussche, 2016. "Macroprudential Policies in Southeastern Europe," IMF Working Papers 2016/029, International Monetary Fund.
    5. Michael Funke & Petar Mihaylovski & Adrian Wende, 2018. "Out of Sync Subnational Housing Markets and Macroprudential Policies," CESifo Working Paper Series 6887, CESifo.
    6. Michael Funke & Petar Mihaylovski & Adrian Wende, 2021. "Out of Sync Subnational Housing Markets and Macroprudential Policies in the UK," De Economist, Springer, vol. 169(4), pages 445-467, November.
    7. Christophe André, 2016. "Household debt in OECD countries: stylised facts and policy issues," Chapters from NBP Conference Publications, in: Hanna Augustyniak & Jacek Łaszek & Krzysztof Olszewski & Joanna Waszczuk (ed.), Papers presented during the Narodowy Bank Polski Workshop: Recent trends in the real estate market and its analysis - 2015 edition, chapter 2, pages v1, 33-85, Narodowy Bank Polski.
    8. Auer, Raphael & Matyunina, Alexandra & Ongena, Steven, 2022. "The countercyclical capital buffer and the composition of bank lending," Journal of Financial Intermediation, Elsevier, vol. 52(C).
    9. Yavuz Arslan and Christian Upper, 2017. "Macroprudential frameworks: implementation and effectiveness," BIS Papers chapters, in: Bank for International Settlements (ed.), Macroprudential frameworks, implementation and relationship with other policies, volume 94, pages 25-47, Bank for International Settlements.
    10. Andrea Ferrero & Richard Harrison & Benjamin Nelson, 2024. "House Price Dynamics, Optimal LTV Limits and the Liquidity Trap," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(2), pages 940-971.
    11. Lilit Popoyan, 2020. "Macroprudential Policy: a Blessing or a Curse?," Review of Economics and Institutions, Università di Perugia, vol. 11(1-2).
    12. Carpantier, Jean-Francois & Olivera, Javier & Van Kerm, Philippe, 2018. "Macroprudential policy and household wealth inequality," Journal of International Money and Finance, Elsevier, vol. 85(C), pages 262-277.
    13. Nitzan Tzur-Ilan, 2018. "LTV Limits and Borrower Risk," Bank of Israel Working Papers 2018.12, Bank of Israel.
    14. Kinghan, Christina & McCarthy, Yvonne & O’Toole, Conor, 2022. "How do macroprudential loan-to-value restrictions impact first time home buyers? A quasi-experimental approach," Journal of Banking & Finance, Elsevier, vol. 138(C).
    15. Kelly, Robert & McCann, Fergal & O’Toole, Conor, 2018. "Credit conditions, macroprudential policy and house prices," Journal of Housing Economics, Elsevier, vol. 41(C), pages 153-167.
    16. Zoe Venter, 2020. "The Interaction Between Macroprudential Policy and Financial Stability," Working Papers REM 2020/0123, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    17. Gambacorta, Leonardo & Murcia, Andrés, 2020. "The impact of macroprudential policies in Latin America: An empirical analysis using credit registry data," Journal of Financial Intermediation, Elsevier, vol. 42(C).
    18. Ioanna Kokores, 2015. "Lean-Against-the-Wind Monetary Policy: The Post-Crisis Shift in the Literature," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 65(3-4), pages 66-99, july-Dece.
    19. Mr. Thierry Tressel & Ms. Yuanyan S Zhang, 2016. "Effectiveness and Channels of Macroprudential Instruments: Lessons from the Euro Area," IMF Working Papers 2016/004, International Monetary Fund.
    20. Ghosh, Atish R. & Ostry, Jonathan D. & Qureshi, Mahvash S., 2018. "Taming the Tide of Capital Flows: A Policy Guide," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262037165, April.

    More about this item

    Keywords

    Financial system regulation and policies;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bca:bocawp:16-41. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/bocgvca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.