Working Paper: The effects of macroprudential policies on house price cycles in an agent-based model of the Danish housing market

Working Paper - May 2019 - No. 138

Authors Cokayne, Graeme (Danmarks Nationalbank)
Subject Macroprudential policy; Housing finance; Firms and households
Type Working paper
Year 2019
Published 24 May 2019
In this paper an agent-based model is used to investigate how tightening loan-to-value and loan-to-income ratios affects house price cycles. The use of an agent-based model allows for the analysis of the effects of these policies on heterogeneous households. I find that these policies reduce house price cycles in a non-linear way that depends crucially on the distribution of households and highlights the importance of macroprudential policymakers taking into account the distributions of households.