Multiple credit constraints and timevarying macroeconomic dynamics

Arbeitspapier

I explore the macroeconomic implications of borrowers facing both loan-to-value (LTV) and debt-service-to-income (DTI) limits, using an estimated DSGE model. I identify when each constraint dominated over the period 1984-2019: LTV constraints dominate in contractions, when house prices are relatively low - and DTI constraints dominate in expansions, when interest rates are relatively high. I also find that DTI standards were relaxed during the mid-2000s' boom, and that lower DTI limits or higher interest rates, but not lower LTV limits, would have prevented the boom. Finally, county panel data attest to multiple credit constraints as a source of nonlinear dynamics.

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• ISBN: 978-82-8379-163-1
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 10/2020

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models ; Computable and Other Applied General Equilibrium Models ; Business Fluctuations; Cycles ; Financial Markets and the Macroeconomy
• Subject: Multiple credit constraints ; Nonlinear estimation of DSGE models ; State-dependent credit origination

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ingholt, Marcus Mølbak
• Event: Veröffentlichung
• (who): Norges Bank
• (where): Oslo
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/246113