van Bekkum, S., Gabarro, M., Irani, RustomM. and Peydró, J.L. (2024). The real effects of borrower-based macroprudential policy: Evidence from administrative household-level data Journal of Monetary Economics, 147:.
-
Affiliated authorsSjoerd van Bekkum, Marc Gabarro Bonet
-
Publication year2024
-
JournalJournal of Monetary Economics
We analyze the effects of borrower-based macroprudential policy at the household level. We exploit administrative Dutch tax and housing records in conjunction with the introduction of a mortgage loan-to-value (LTV) limit. We find that the regulation sharply reduces mortgage leverage with bunching at the LTV limit. While (regulation) affected households reduce total leverage and interest expenses, they also decrease cash balances to satisfy the LTV limit, generating an important solvency-liquidity trade-off. Nevertheless, affected households experience less financial distress after the introduction of the LTV regulation. Moreover, these households experience better liquidity management and smoother consumption following income loss. Overall, our results highlight the key financial stability and real effects of borrower-based macroprudential policy.