Different Business, Same Regulation: Does Homogenous Regulation Succeed in Taming Housing and Financial Market Instability?

Braun, Julia

doi:10.2139/ssrn.4232021

Cited by 1 publication

(6 citation statements)

References 0 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Our model is a macroeconomic real estate business-cycle model featuring a housing market and a banking sector. The model builds on Braun et al (2022) and incorporates banks' limitations in business practices introduced by regulatory micro-and macroprudential 𝐶𝐴𝑅 that aim at strengthening the financial market and avoiding macroeconomic destabilization.…”

Section: Model Structurementioning

confidence: 99%

“…As the main objective of macroprudential policy is to protect the financial system from the risks associated with excessive credit growth without compromising macroeconomic stability, in our model, previous credit growth serves as a measure to detect economic up-and downswings. This follows the approach of Braun (2022). To set the 𝐶𝐶𝑦𝐵 accordingly, we calculate the 𝐶𝐶𝑦𝐵 as:…”

Section: Regulatory Capital Adequacy Requirements Including Ccybmentioning

confidence: 99%

“…11 As Sommervoll, Borgersen and Wennemo (2009), Braun et al (2022), andBraun (2022) we allow for 𝑟 𝐴𝐼 = 𝑟 𝑑 . Following this approach, agents may decide about mortgage lending according to individual market expectations and balance sheet compositions.…”

Section: Mortgage Supplymentioning

confidence: 99%

“…We follow the approach of Lengwiler and Maringer (2011) and Braun (2022) in which 𝐴𝐼's market price is not equal to its fundamental value. Instead, it is the result of agents' interaction.…”

Section: Alternative Investmentmentioning

confidence: 99%

“…Deviating from the approach of Lengwiler and Maringer (2011) and Braun (2022) we model a constantly liquid share market and prevent liquidity to dry up by introducing a market maker. Thus, we ensure that banks can trade the market portfolio whenever they want or need to.…”

Section: Alternative Investmentmentioning

confidence: 99%

See 4 more Smart Citations

The Effect of the Countercyclical Capital Buffer on the Stability of the Housing Market

Braun

2023

29th Annual European Real Estate Society Conference

View full text Add to dashboard Cite

After the great turmoil of the latest financial crisis, the criticism of the regulatory frameworks became increasingly stronger. The rules that banks needed to comply with are presumed to be procyclical and unable to prevent and mitigate the extent of strong financial and economic cycles. As a result, Basel III introduced a set of macroprudential tools to overcome these regulatory shortfalls. One tool that strives to counteract the issue of procyclicality is the countercyclical capital buffer (𝐶𝐶𝑦𝐵). This paper introduces a heterogeneous agent-based model that investigates the implication of the new regulatory measure. We develop a housing and a financial market where economic agents trade residential property that is financed by financial institutions. To examine the macroeconomic performance of the 𝐶𝐶𝑦𝐵, we evaluate the dynamics of key stability indicators of the housing and the financial market under four different market conditions: in an undisturbed market and in times of three different structural shocks.Computational experiments reveal that the 𝐶𝐶𝑦𝐵 is effective in stabilizing the housing and the financial market in all market settings. But the extent of the stabilizing effect varies according to market conditions. In the shock scenarios, the 𝐶𝐶𝑦𝐵 performs better in dampening market fluctuations and increasing banking soundness. Although the new macroprudential tool helps to mitigate economic fluctuations and to stabilize market conditions in the aftermath of a crisis, it is not able to prevent any of the crises tested.

show abstract

Section: Model Structurementioning

confidence: 99%

Section: Regulatory Capital Adequacy Requirements Including Ccybmentioning

confidence: 99%

Section: Mortgage Supplymentioning

confidence: 99%

Section: Alternative Investmentmentioning

confidence: 99%

Section: Alternative Investmentmentioning

confidence: 99%

See 3 more Smart Citations