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The costs of macroprudential deleveraging in a liquidity trap
IMF, Washington, DC 20431 USA..
Sveriges Riksbank, Brunkebergstorg, Sweden..
IMF, Washington, DC 20431 USA.;Gothenburg Univ, Gothenburg, Sweden.;CEPR, London, England..
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2024 (English)In: Review of economic dynamics, ISSN 1094-2025, E-ISSN 1096-6099, Vol. 51, p. 991-1011Article in journal (Refereed) Published
Abstract [en]

We study various macroprudential tools and their interaction with monetary policy in a New Keynesian model featuring long-term debt, illiquid housing and an effective lower bound constraint on policy rates. We find that the short-run deleveraging costs of different macroprudential tools - all sized to imply the same reduction in household debt in the medium and long-term - can differ significantly, depending on the state of economy and monetary policy. Specifically, a loan-to-value tightening is more than three times as contractionary as a loan-to income tightening when debt is high and monetary policy cannot accommodate.

Place, publisher, year, edition, pages
Elsevier, 2024. Vol. 51, p. 991-1011
Keywords [en]
Household debt, Zero lower bound, New Keynesian model, Collateral and borrowing constraints, Mortgage interest deductibility, Housing prices
National Category
Economics
Identifiers
URN: urn:nbn:se:uu:diva-522463DOI: 10.1016/j.red.2023.09.005ISI: 001138571300001OAI: oai:DiVA.org:uu-522463DiVA, id: diva2:1834692
Available from: 2024-02-05 Created: 2024-02-05 Last updated: 2024-06-17Bibliographically approved

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Walentin, Karl

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