This study evaluates the effect of loan-to-value (LTV) limits on house prices. The identification strategy exploits variation in LTV limits induced by Hong Kong Monetary Authorities’ decision to introduce differentiated LTV limits anchored on the value of the property, which allows us to observe the counterfactual house price development. We estimate an elasticity of 0.8 between LTV limits and house prices: A one percentage point decrease in LTV limits reduce house prices by 0.8 percentage points. Overall, our results document that macro-prudential policies, that regulate access to financing, are an effective policy tool to control house price growth.
|Number of pages||30|
|Publication status||Published - 2019|
|Event||2019 Financial Management Association Annual Meeting - Sheraton New Orleans Hotel, New Orleans, United States|
Duration: 23 Oct 2019 → 26 Oct 2019
|Conference||2019 Financial Management Association Annual Meeting|
|Location||Sheraton New Orleans Hotel|
|Period||23/10/2019 → 26/10/2019|