Premium
Towards Understanding Macrofinancial Impacts of Loan‐to‐Value Ratio Policy in New Zealand: A General Equilibrium Perspective
Author(s) -
Fukac Martin,
Greig Lucy,
Snethlage Daniel
Publication year - 2018
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/1467-8462.12256
Subject(s) - asset (computer security) , loan , economics , loan to value ratio , general equilibrium theory , dynamic stochastic general equilibrium , monetary economics , value (mathematics) , psychological resilience , perspective (graphical) , financial economics , monetary policy , finance , microeconomics , psychology , computer security , machine learning , casualty insurance , artificial intelligence , computer science , psychotherapist , mortgage insurance , insurance policy
We use a dynamic stochastic general equilibrium model as a framework for thinking about the transmission mechanism of loan‐to‐value macroprudential policy. We analyse the key channels through which the caps on loan‐to‐value ratios work to limit the speed of asset and credit cycles. We further analyse the mechanisms through which the caps support financial system resilience during asset price downturns that are of sufficient magnitude to cause financial and macroeconomic instability.