The Effectiveness of Borrower-Based Macroprudential Measures: A Quantitative Analysis for Slovakia

What Drives Mortgage Default Risk in Europe and the U.S.?

“…3 Like the academic literature, they generally do not derive PDs and LGDs and thereby do not allow linking the household model outcome to bank stress tests. The model presented here can help accomplish this link, as also demonstrated in GP (2017) and Jurča et al (2020). Multi-period simulation frameworks for modeling household credit risk parameters have been developed in recent years.…”

“…The analysis of macroprudential policies was illustrated in GP (2017) andJurča et al (2020). In the present paper, the focus is on borrower support measures as deployed in response to the COVID-19 pandemic.…”

The Effectiveness of Borrower-Based Macroprudential Policies: A Cross-Country Analysis Using an Integrated Micro-Macro Simulation Model

“…Information on the actual calibrations implemented in practice was used to refine the calibrations. A calibration of this kind cannot reproduce the complexity of the BBM policy mix in individual countries, especially where multiple exemptions (speed limits), separate categories (e.g., distinguishing first time buyers and buy to let) or cross-lending standards limits are employed (see Jurča et al 2020 for an example of the calibration details at the country-specific level).…”

“…Second, by focusing on the impact of BBMs on household risk metrics (PDs and LGDs) in a micro-macro simulation framework, our paper links to the growing literature that uses micro data and/or micro (-macro) simulation frameworks to assess borrower-based macroprudential policies (Cussen et al 2015, Gross and Población 2017, Nier et al 2019, Jurča et al 2020, Neugebauer et al 2021, Dirma and Karmelavičius 2023 Further, our paper relates to the empirical literature on the impact of macroprudential policies on macroeconomic dynamics. Numerous papers assess the impact of macroprudential policies on house prices and credit (Lim et al 2011, Ahuja and Nabar 2011, Jacome and Mitra 2015, Kuttner and Shim 2016, Richter et al 2018, Poghosyan 2019.…”

Calibrating Macroprudential Policies in Europe Amid Rising Housing Market Vulnerability

“…For a 'double trigger' defaulter, one liquidity trigger (e.g., lower income) explains why the borrower cannot service his mortgage, while a second equity trigger (a fall in house prices) explains why he cannot refinance the debt posting the home as collateral or sell the property to avoid foreclosure. The borrower defaults only if both levers are triggered.13 Cunningham et al(2017) show that the fracking boom in Pennsylvania reduced the risk of default by alleviating the liquidity trigger, with larger effects among homeowners with negative equity, validating the 'double trigger of default' hypothesis.14 In other countries decisions to activate LTV and/or DTI/DSTI are taken proactively as a structural measure and not necessarily linked to overvaluation or indebtedness.15 SeeGornicka and Valderrama (2020),Jurca et al (2020),Valderrama (2022), and Valderrama (2021) for a quantitative calibration of different borrower-based tools under alternative macrofinancial scenarios in Austria, Slovakia, and Switzerland.…”