Journal of Financial Stability Vol. 53 2021
Lending pro-cyclicality and macroprudential policy: Evidence from Japanese LTV ratios
open access
Abstract
Using unique micro data compiled from the real estate registry in Japan, we examine more than 400,000 loan-to-value (LTV) business loan ratios to draw implications for caps on LTV ratios as a macroprudential policy measure. We find that the LTV ratio exhibits counter-cyclicality, behavior that would have severely impeded the efficacy of a simple LTV cap had it been imposed. We also find that borrowers obtaining high-LTV loans are more risky but grew faster than those with lower LTV loans, which implies that a simple fixed cap on LTV ratios might inhibit growing (albeit risky) firms from borrowing.
- DOI
- 10.1016/j.jfs.2020.100819
- Volume
- 53
- Pages
- 100819
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref