Události

Frantisek Masek, Ph.D.

Czech National Bank

Authors: Frantisek Masek and Kalin Nikolov

Abstract: Using a New Keynesian model with housing and macroprudential policy, this paper shows that different borrower-based measures (BBMs) can have very distinct consequences over the credit cycle. While a loan-to-value (LTV) constraint can amplify the rise in house prices and generate a more volatile cycle, a debt-to-income (DTI) constraint curbs the boom phase and smooths the cycle relative to LTV. We point to a key mechanism behind the LTV amplification: the collateral premium. As housing serves as collateral for debt, an LTV constraint gives housing additional value through the borrowing capacity it provides, thereby amplifying housing demand and house prices. DTI does not feature this mechanism, as leverage is tied to income.