The short-sightedness of former RBA Governor Glenn Stevens’ comment in 2014 that macroprudential controls on high risk mortgage lending were “dreaded” and the “latest fad” has, once again, been exposed via a new working paper from the Bank for International Settlements (BIS), which evaluates evidence from 56 economies over more than two decades showing they are generally effective in taming housing credit and house prices:
Contribution
This paper is the first in the literature that uses a narrative approach to identify exogenous changes in macroprudential policy measures based on a detailed reading of policymakers’ objectives. We also consider the size and scope of changes in maximum LTV ratios to capture the intensity of policy actions and their causal effects.
Findings
