Do Loan To Value And Debt To Income Limits Work Evidence From Korea

Author : Ms.Deniz Igan
Publisher : International Monetary Fund
ISBN 13 : 1463927835
Total Pages : 35 pages
Book Rating : 4.37/5 ( download)

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Download or read book Do Loan-To-Value and Debt-To-Income Limits Work? Evidence From Korea written by Ms.Deniz Igan and published by International Monetary Fund. This book was released on 2011-12-01 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: With another real estate boom-bust bringing woes to the world economy, a quest for a better policy toolkit to deal with these boom-busts has begun. Macroprudential measures could be in such a toolkit. Yet, we know very little about their impact. This paper takes a step to fill this gap by analyzing the Korean experience with these measures. We find that loan-to-value and debt-to-income limits are associated with a decline in house price appreciation and transaction activity. Furthermore, the limits alter expectations, which play a key role in bubble dynamics.

Author : Luis I. Jacome H.
Publisher : International Monetary Fund
ISBN 13 : 1513551442
Total Pages : 41 pages
Book Rating : 4.49/5 ( download)

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Download or read book LTV and DTI Limits—Going Granular written by Luis I. Jacome H. and published by International Monetary Fund. This book was released on 2015-07-15 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: There is increasing interest in loan-to-value (LTV) and debt-service-to-income (DTI) limits as many countries face a new round of rising house prices. Yet, very little is known on how these regulatory instruments work in practice. This paper contributes to fill this gap by looking closely at their use and effectiveness in six economies—Brazil, Hong Kong SAR, Korea, Malaysia, Poland, and Romania. Insights include: rapid growth in high-LTV loans with long maturities or in the number of borrowers with multiple mortgages can be signs of build up in systemic risk; monitoring nonperforming loans by loan characteristics can help in calibrating changes in the LTV and DTI limits; as leakages are almost inevitable, countries strive to address them at an early stage; and, in most cases, LTVs and DTIs were effective in reducing loan-growth and improving debt-servicing performances of borrowers, but not always in curbing house price growth.

Author : Erlend Nier
Publisher : International Monetary Fund
ISBN 13 : 1513509098
Total Pages : 45 pages
Book Rating : 4.99/5 ( download)

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Download or read book Debt Service and Default: Calibrating Macroprudential Policy Using Micro Data written by Erlend Nier and published by International Monetary Fund. This book was released on 2019-08-22 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide empirical evidence to support the calibration of a limit on household indebtedness levels, in the form of a cap on the debt-service-to-income (DSTI) ratio, in order to reduce the probability of borrower defaults in Romania. The analysis establishes two findings that are new to the literature. First, we show that the relationship between DSTI and probability of default is non-linear, with probability of default responding to increases in DSTI only after a certain threshold. Second, we establish that consumer loan defaults occur at lower levels of DSTI compared to mortgages. Our results support the recent regulation adopted by the National Bank of Romania, limiting the household DSTI at origination to 40 percent for new mortgages and consumer loans. Our counterfactual analysis indicates that had the limit been in place for all the loans in our sample, the probability of default (PD) would have been lower by 23 percent.

Author : International Monetary Fund. European Dept.
Publisher : International Monetary Fund
ISBN 13 : 1498330509
Total Pages : 53 pages
Book Rating : 4.03/5 ( download)

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Download or read book Switzerland written by International Monetary Fund. European Dept. and published by International Monetary Fund. This book was released on 2014-05-28 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: This 2014 Article IV Consultation outlines that the growth of the Swiss economy has gathered pace, but inflation remains close to zero. The recovery is expected to continue and inflation should rise gradually although the output gap will progressively close. The fiscal position is healthy, with a broadly neutral stance projected for 2014. Despite improved market confidence toward the euro area and tapering in the United States, the exchange rate has remained close to the floor. The authorities have taken several measures to contain risks, including raising the countercyclical capital buffer and adopting prudential measures to tighten lending standards and conditions.

Author : Erlend Nier
Publisher : International Monetary Fund
ISBN 13 : 1513512722
Total Pages : 45 pages
Book Rating : 4.23/5 ( download)

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Download or read book Debt Service and Default: Calibrating Macroprudential Policy Using Micro Data written by Erlend Nier and published by International Monetary Fund. This book was released on 2019-08-22 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide empirical evidence to support the calibration of a limit on household indebtedness levels, in the form of a cap on the debt-service-to-income (DSTI) ratio, in order to reduce the probability of borrower defaults in Romania. The analysis establishes two findings that are new to the literature. First, we show that the relationship between DSTI and probability of default is non-linear, with probability of default responding to increases in DSTI only after a certain threshold. Second, we establish that consumer loan defaults occur at lower levels of DSTI compared to mortgages. Our results support the recent regulation adopted by the National Bank of Romania, limiting the household DSTI at origination to 40 percent for new mortgages and consumer loans. Our counterfactual analysis indicates that had the limit been in place for all the loans in our sample, the probability of default (PD) would have been lower by 23 percent.

Author : Ms.Edda Zoli
Publisher : International Monetary Fund
ISBN 13 : 1475568886
Total Pages : 18 pages
Book Rating : 4.82/5 ( download)

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Download or read book Korea’s Challenges Ahead—Lessons from Japan’s Experience written by Ms.Edda Zoli and published by International Monetary Fund. This book was released on 2017-01-18 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper draws out the parallels between Korea and Japan in terms of demographics, potential growth, balance sheets, asset prices and inflation. Korea’s demographic trends seem to track Japan’s with a lag of about 20 years. Low productivity in the service sector and labor market duality are common to both countries and need to be addressed with structural reforms. While Korea’s corporate balance sheets are stronger than Japan’s in the early 1990s, Korea needs to progress with the restructuring of nonviable firms to avoid the adverse consequences of delayed balance-sheet repair that Japan experienced. Given its strong fiscal balance sheet position, Korea can afford using fiscal policy actively to incentivize corporate restructuring and structural reforms and cushion their possible short-term adverse impact. Korea can prevent bubbles in asset prices that were at the origin of Japan’s initial crisis with the continued use of macroprudential policies. Although Korea does not appear to be headed toward deflation, new econometric analysis presented in the paper suggests that aging will exert a downward drag on its inflation going forward.

Author : Juliana Dutra Araujo
Publisher : International Monetary Fund
ISBN 13 : 151354540X
Total Pages : 53 pages
Book Rating : 4.00/5 ( download)

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Download or read book Effects of Macroprudential Policy: Evidence from Over 6,000 Estimates written by Juliana Dutra Araujo and published by International Monetary Fund. This book was released on 2020-05-22 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper builds a novel database on the effects of macroprudential policy drawing from 58 empirical studies, comprising over 6,000 results on a wide range of instruments and outcome variables. It encompasses information on statistical significance, standardized magnitudes, and other characteristics of the estimates. Using meta-analysis techniques, the paper estimates average effects to find i) statistically significant effects on credit, but with considerable heterogeneity across instruments; ii) weaker and more imprecise effects on house prices; iii) quantitatively stronger effects in emerging markets and among studies using micro-level data; and iii) statistically significant evidence of leakages and spillovers. Other findings include relatively stronger impacts for tightening than loosening actions and negative effects on economic activity in the near term.

Author : International Monetary Fund. Monetary and Capital Markets Department
Publisher : International Monetary Fund
ISBN 13 : 1498390781
Total Pages : 38 pages
Book Rating : 4.81/5 ( download)

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Download or read book Switzerland written by International Monetary Fund. Monetary and Capital Markets Department and published by International Monetary Fund. This book was released on 2014-09-03 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This Technical Note on Macroprudential Institutional Arrangements and Policies on Switzerland highlights that macroprudential prudential powers and responsibilities are split across agencies. There is one dedicated macroprudential tool, the Counter Cyclical Buffer, which has a specified framework for decision making and consultation. Developments in real estate and mortgage lending are important systemic concerns. Very loose monetary policy has driven interest rates down to historically low levels, accelerating mortgage lending and bringing total mortgage debt to more than 140 percent of gross domestic product. The authorities have taken measures to address these risks. It is recommended that transparency and accountability could be strengthened by highlighting cross agency activity and policy analysis related to financial stability and macroprudential policies to the public. In a medium-term perspective macroprudential arrangements should be reviewed while considering placing responsibility and powers for macroprudential policies with one institution or committee. Additional measures may be needed. Mortgages to businesses and for commercial purposes deserve further attention and measures.

Author : GASTON. SAHAY GELOS (RATNA.)
Publisher : International Monetary Fund
ISBN 13 :
Total Pages : 2040 pages
Book Rating : 4.63/5 ( download)

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Download or read book SHOCKS AND CAPITAL FLOWS written by GASTON. SAHAY GELOS (RATNA.) and published by International Monetary Fund. This book was released on 2023 with total page 2040 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Author : Viral V. Acharya
Publisher : International Monetary Fund
ISBN 13 : 1513545159
Total Pages : 57 pages
Book Rating : 4.58/5 ( download)

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Download or read book The Anatomy of the Transmission of Macroprudential Policies written by Viral V. Acharya and published by International Monetary Fund. This book was released on 2020-05-22 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze how regulatory constraints on household leverage—in the form of loan-to-income and loan-to-value limits—a?ect 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. Consistent with constrained lenders adjusting their portfolio choice, more-a?ected banks drive this reallocation and substitute their risk-taking into holdings of securities and corporate credit.