October 2020 issue contents
The Effects of Borrower-Based Macroprudential Policy: An Empirical Application to Korea

Thorsten Franz 
Deutsche Bundesbank


The effects of borrower-based macroprudential policy (BBMaPP) measures in the form of mandatory caps on loanto-value (LTV) and debt-service-to-income (DSTI) ratios in the Korean real estate market are investigated using a sign-identified structural vector autoregressive (SVAR) model. Sign restrictions are drawn from a small open-economy dynamic stochastic general equilibrium (DSGE) model with collateralizable housing. While empirical results suggest only moderate effects of monetary policy on house prices in Korea, BBMaPP measures have been successful in curbing real household credit and real house price growth. A historical decomposition also emphasizes the advantages of a targeted approach toward macroprudential regulation.

JEL Code: E32, E44, E58, G28.

Full article (PDF, 47 pages, 1,408 kb)