Implementable, Optimal Macroprudential and Monetary Policies: Implications for House Prices and Household Debt
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This paper addresses implementable, optimal macroprudential and monetary policies in a standard DSGE model augmented with nominal price and wage rigidities and housing sector. The paper also discusses the effect of introducing of time-varying LTV regulation in cooling down large swings of household debt. In particular, it examines macroprudential policy reacting to credit growth or housing price growth to dampen the excessive volatility of household debt. The paper shows that the time-varying macroprudential policy rules reacting to the debt to income ratio or to the credit growth are more effective in moderating the household debt swings to exogenous shocks than the time-varying macroprudential policy rule responding to the housing price growth. In particular, the time-varying macroprudential policy reacting to debt to borrower's labor income is most effective in moderating the debt fluctuations to housing demand shocks. The macroprudential policy reacting to the housing price growth is almost indifferent to the time-invariant macroprudential policy when the economy is hit by the house demand shock. The time-varying macroprudential policy is against the winds in the sense that the LTV ratio goes down when the economy expands with an increase in housing price and demand. The paper shows that there is a substantial welfare increase associated with the time-varying macroprudential policy compared to the time-invariant macroprudential policies.
Abstract
This paper addresses implementable, optimal macroprudential and monetary policies in a standard DSGE model augmented with nominal price and wage rigidities and housing sector. The paper also discusses the effect of introducing of time-varying LTV regulation in cooling down large swings of household debt. In particular, it examines macroprudential policy reacting to credit growth or housing price growth to dampen the excessive volatility of household debt. The paper shows that the time-varying macroprudential policy rules reacting to the debt to income ratio or to the credit growth are more effective in moderating the household debt swings to exogenous shocks than the time-varying macroprudential policy rule responding to the housing price growth. In particular, the time-varying macroprudential policy reacting to debt to borrower's labor income is most effective in moderating the debt fluctuations to housing demand shocks. The macroprudential policy reacting to the housing price growth is almost indifferent to the time-invariant macroprudential policy when the economy is hit by the house demand shock. The time-varying macroprudential policy is against the winds in the sense that the LTV ratio goes down when the economy expands with an increase in housing price and demand. The paper shows that there is a substantial welfare increase associated with the time-varying macroprudential policy compared to the time-invariant macroprudential policies.
참고문헌 (21)
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