Do Loan-To-Value and Debt-To-Income Limits Work? Evidence From Korea

Do Loan-To-Value and Debt-To-Income Limits Work? Evidence From Korea PDF

Author: Ms.Deniz Igan

Publisher: International Monetary Fund

Published: 2011-12-01

Total Pages: 35

ISBN-13: 1463927835

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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.