With Great Power Comes Great Responsibility: Macroprudential Tools at Work in Canada

The goal of this paper is to assess the effectiveness of the policy measures taken by Canadian authorities to address the housing boom. We find that the the last three rounds of macroprudential policies implemented since 2010 were associated with lower mortgage credit growth and house price growth....

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Krznar, Ivo, Morsink, James
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2014
Subjects
Housing
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Summary:The goal of this paper is to assess the effectiveness of the policy measures taken by Canadian authorities to address the housing boom. We find that the the last three rounds of macroprudential policies implemented since 2010 were associated with lower mortgage credit growth and house price growth. The international experience suggests thatâ[euro]"in addition to tighter loan-to-value limits and shorter amortization periodsâ[euro]"lower caps on the debt-to-income ratio and higher risk weights could be effective if the housing boom were to reignite. Over the medium term, the authorities could consider structural measures to further improve the soundness of housing finance.