Working paper/research report

Publication year: 2014

URL: https://sier.skku.edu/_res/sier/etc/2013-04.pdf

Title of series: SIER Working Paper Series

Number in series: 2013-4

Abstract: 

In the aftermath of the financial crisis, macroprudential measures to calm overheating property markets such as maximum loan to value (LTV) ratios received considerable attention. Little is known, however, about the effective- ness of those measures. This is due to the fact that only very few tightening and easing episodes are observed, often associated with a large variety of in- struments, making event studies the only viable empirical approach. This paper, in contrast, proposes a Qual VAR to uncover the latent propensity for macroprudential tightening from binary information on LTV tightening episodes. We provide impulse response functions for macroprudential policy shocks derived from a VAR. This allows us to, first, acknowledge the endoge- nous nature of macroprudential policy, second, derive the surprise component of policy in terms of macroprudential shocks, third, estimate the dynamic impact of macroprudential measures and, fourth, compare their impact with that of conventional monetary policy shocks. The results are derived for Asian economies, where macroprudential measures to avoid property bubbles haven been used before and during the global financial crisis.

Harvard Citation style: Tillmann, P. (2014) Estimating the Effects of Macroprudential Policy Shocks. (SIER Working Paper Series, 2013-4). Seoul: Sungkyun Economic Research Institute. https://sier.skku.edu/_res/sier/etc/2013-04.pdf

APA Citation style: Tillmann, P. (2014). Estimating the Effects of Macroprudential Policy Shocks. (SIER Working Paper Series, 2013-4). Sungkyun Economic Research Institute. https://sier.skku.edu/_res/sier/etc/2013-04.pdf