International Capital Flows and the Boom-Bust Cycle in Spain

Veld, Jan in ’t; Kollmann, Robert; Pataracchia, Beatrice; Ratto, Marco; Roeger, Werner

doi:10.2139/ssrn.2436234

Cited by 17 publications

(15 citation statements)

References 39 publications

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“…In the VAR literature, similar restrictions both for aggregate demand and supply shocks were employed by Peersman (2005) Greenwood-Nimmo and Tarassow, 2016;Eickmeier et al, 2009;Duchi and Elbourne, 2016;Bijsterbosch and Falagiarda, 2015;Finlay and Jääskelä, 2014;Peersman, 2005;Hristov et al, 2012;while, Straub and Peersman, 2006;Canova and Paustian, 2011 provided the evidence from DSGE models). The imposed restriction on credit is in line with evidence from DSGE models (e.g., Alpanda andZubairy, 2017 andʹt Veld et al, 2014). The imposed restriction on house prices is consistent with evidence from VAR-based studies such as Del Negro and Otrok (2007), Goodhart and Hofmann (2008), Jarociński and Smets (2008), Sá, Towbin and Wieladek (2014) as well as the imposed sign restriction in the study of Ume (2018).…”

Section: Insert Tables 1a and 1b Heresupporting

confidence: 83%

“…In a loose LTV ratio shock, output, bank credit (Table 1.A), and house prices (Table 1.B) respond in the same direction. These restrictions are in line with evidence from the DSGE models of Alpanda and Zubairy, 2017 and ʹt Veld et al, 2014. We are mainly interested in the comparison of the two latter shocks (i.e., monetary and LTV ratio shocks), which will be the focus of our discussion in subsequent sections.…”

Section: Insert Tables 1a and 1b Heresupporting

confidence: 65%

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The Real Effects of Loan-To-Value Limits: Empirical Evidence from Korea

Pontines¹

2020

SSRN Journal

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This study adds to a recent and growing literature that assesses the effects of macroprudential policy. We compare the effects of monetary policy and loan-to-value ratio shocks for Korea, an inflation targeting economy and an active user of loan-to-value limits. We identify shocks using sign-restricted structural VARs and rely on a recent approach within this method to conduct structural inference. This study finds that both monetary policy and loan-to-value ratio shocks have effects on different measures of credit, i.e., real bank credit, real total credit and real household credit. We also find that both shocks have non-negligible effects on real house prices, including effects on real output, real consumption and real investment. We do, however, find that loan-to-value ratio shocks have negligible effects on the price level. These findings indicate that for the period covered by this study, limits on loan-to-value achieved their financial stability objectives in Korea in terms of limiting credit and house price appreciation under an inflation targeting regime. Furthermore, it attained these objectives without posing any threat to its price stability objective. Overall, these findings suggest that limits on loan-tovalue have important aggregate consequences despite it being a sectoral, targeted policy instrument. AbstractThis study adds to a recent and growing literature that assesses the effects of macroprudential policy. We compare the effects of monetary policy and loan-to-value ratio shocks for Korea, an inflation targeting economy and an active user of loan-tovalue limits. We identify shocks using sign-restricted structural VARs and rely on a recent approach within this method to conduct structural inference. This study finds that both monetary policy and loan-to-value ratio shocks have effects on different measures of credit, i.e., real bank credit, real total credit and real household credit. We also find that both shocks have non-negligible effects on real house prices, including effects on real output, real consumption and real investment. We do, however, find that loan-to-value ratio shocks have negligible effects on the price level. These findings indicate that for the period covered by this study, limits on loan-to-value achieved their financial stability objectives in Korea in terms of limiting credit and house price appreciation under an inflation targeting regime. Furthermore, it attained these objectives without posing any threat to its price stability objective. Overall, these findings suggest that limits on loan-to-value have important aggregate consequences despite it being a sectoral, targeted policy instrument.JEL Codes: E31, E32, E52, E58, G28

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Section: Insert Tables 1a and 1b Heresupporting

confidence: 83%

Section: Insert Tables 1a and 1b Heresupporting

confidence: 65%

The Real Effects of Loan-To-Value Limits: Empirical Evidence from Korea

Pontines¹

2020

SSRN Journal

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“…This is one of the legacies lingering after the current economic crisis. Moreover, the global financial crisis determined a sharp reduction of the capital flows to Spain and a persistent slump in Spanish real activity -falling house prices, and a tightening of collateral constraints for Spanish borrowers in 't Veld et al (2014).…”

Section: Results and Conclusionmentioning

confidence: 99%

Economic sustainability and possibilities of action for the states, in the case of monetary integration: some notes for reflection

Picatoste

Benito

Laxe

2016

PIE

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Abstract:The economic crisis that began in 2008 highlighted the difficulties faced by those national economies members of a monetary area. Such is the case of the countries in the euro area. In this situation, the possibilities of increasing the international competitiveness of the domestic economy are severely reduced. This paper presents a theoretical analysis of the fundamentals of real exchange rate and the factors influencing pricing, focusing on the degree of competition in the markets and the cost structure. It is undertaken through the study of maximising corporate profits, formation of labour costs and determinants of market structure; contextualised in a currency area. The findings clearly show that there are efficient policies that can be applied in order to increase domestic competitiveness through internal devaluation; nevertheless, the results show that a loss of purchasing power of workers will probably be the result, while corporate profit margins grow.

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“…19 Monetary policy tightening affects the economy more broadly, reducing 18. See also in 't Veld et al (2014) for similar dynamics in a three-country DSGE model. 19.…”

Section: Extended Models and Robustnessmentioning

confidence: 85%

Effects of Monetary and Macroprudential Policies—Evidence from Four Inflation Targeting Economies

Kim¹,

Mehrotra²

2018

J of Money Credit Banking

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We examine the effects of monetary and macroprudential policies in the Asia‐Pacific region, where many inflation targeting economies have adopted macroprudential policies in order to safeguard financial stability. Using structural panel vector autoregressions that identify both monetary and macroprudential policy actions, we show that tighter macroprudential policies used to contain credit growth also have a significant negative impact on macroeconomic aggregates such as real GDP and the price level. The similar effects of monetary and macroprudential policies may suggest a complementary use of the two policies at normal times. However, they could also create challenges for policymakers, especially during times when low inflation coincides with buoyant credit growth.

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International Capital Flows and the Boom-Bust Cycle in Spain

Cited by 17 publications

References 39 publications

The Real Effects of Loan-To-Value Limits: Empirical Evidence from Korea

The Real Effects of Loan-To-Value Limits: Empirical Evidence from Korea

Economic sustainability and possibilities of action for the states, in the case of monetary integration: some notes for reflection

Effects of Monetary and Macroprudential Policies—Evidence from Four Inflation Targeting Economies

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