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Constraints on LTV as a macroprudential tool : a precautionary tale

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dc.contributor.author Garcia Montalvo, José
dc.contributor.author Raya, Josep M.
dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
dc.date.accessioned 2018-02-14T15:30:07Z
dc.date.available 2018-02-14T15:30:07Z
dc.date.issued 2017-12-01
dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1592
dc.identifier.citation
dc.identifier.uri http://hdl.handle.net/10230/33898
dc.description.abstract The introduction of limits or regulatory penalties on high LTV ratios for residential mortgages is one of the most frequently used tools of macroprudential policy. The available evidence seems to indicate that this instrument can reduce the feedback loop between credit and house prices. In this paper, we show that these constraints on LTV ratios, used by Spanish banking regulators before the onset of the housing crisis of 2008, did not prevent that feedback loop. In the Spanish case, the fact that appraisal companies were mostly owned by banks led to a situation in which the LTV limits were used to generate appraisal values adjusted to the needs of the clients, rather than trying to appropriately represent the value of the property. This tendency towards over-appraisals produced important externalities in terms of a higher than otherwise demand for housing, and intensification of the feedback loop between credit and house prices.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries Economics and Business Working Papers Series; 1592
dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.title Constraints on LTV as a macroprudential tool : a precautionary tale
dc.title.alternative
dc.type info:eu-repo/semantics/workingPaper
dc.date.modified 2018-02-14T15:29:36Z
dc.subject.keyword
dc.subject.keyword Statistics, Econometrics and Quantitative Methods
dc.rights.accessRights info:eu-repo/semantics/openAccess


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