14 mai 2019
BDF Paris
Séminaire Banque de France
Résumé
What are the macroeconomic consequences of changing aggregate lending standards in residential mortgage markets, as measured by loan-to-value (LTV) ratios? Using a structural VAR, we nd that GDP and business investment increase following an expansionary LTV shock. Residential investment, by contrast, falls after a small initial uptick, a result that depends on the systematic reaction of monetary policy. We show that, historically, the Fed tended to respond directly to expansionary LTV shocks by raising the monetary policy instrument, and, as a result, mortgage rates increased and residential investment declined. The monetary policy reaction function in the United States appears to include lending standards in residential markets, a finding we confirm in Taylor rule estimations. Without the endogenous monetary policy reaction, residential investment increases. House prices behave in a similar way. This suggests that an exogenous loosening of LTV ratios is unlikely to explain booms in residential investment and house prices, at least in times of conventional monetary policy. By contrast, exogenous monetary policy shocks account for higher fractions of variation in residential investment and house prices.
Mots-clés
loan-to-value ratio, monetary policy, residential investment, structural; VAR, Cholesky identication, Taylor rules.;