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Do loan-to-value and debt-to-income limits work : Evidence from Korea

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  • Do loan-to-value and debt-to-income limits work
  • Igan, Deniz; Kang, Heedon
  • International Monetary Fund


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Title Do loan-to-value and debt-to-income limits work
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Sub Title

Evidence from Korea

Material Type Reports
Author(English)

Igan, Deniz; Kang, Heedon

Publisher

[Washington, D.C.]:International Monetary Fund

Date 2011-12
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < General
Economy < Economic Conditions
Holding International Monetary Fund

Abstract

With another real estate boom-bust bringing woes to the world economy, a quest for a better policy toolkit to deal with these boom-busts has begun. Macroprudential measures could be in such a toolkit. Yet, we know very little about their impact. This paper takes a step to fill this gap by analyzing the Korean experience with these measures. We find that loan-to-value and debt-to-income limits are associated with a decline in house price appreciation and transaction activity. Furthermore, the limits alter expectations, which play a key role in bubble dynamics.

User Note

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.