S-Space College of Social Sciences (사회과학대학) Institute of Economics Research (경제연구소) Seoul Journal of Economics Seoul Journal of Economics vol.32 no.1/4 (2019)
LTV Ratio Regulations and House Prices in a Small Open Economy with Heterogeneous Households
- Lee, Junhee
- Issue Date
- Seoul Journal of Economics, Vol.32 No.3, pp. 263-283
- Macro-prudential regulations, such as loan-to-value (LTV) ratio ceiling, are implemented in several economies to stabilize the financial market and macro-economy, in addition to conventional
stabilization policies. This study constructs a small open economy model with heterogeneous households and house price fluctuations and examines the effects of LTV ratio regulation. Results of the model show that tightening the LTV ratio ceiling has considerable contractionary effects in a small open economy, but the effects are much smaller in a closed economy due to the general equilibrium effects of endogenous interest adjustment.