An Agent-Based Model for the Assessment of LTV Caps

42 Pages Posted: 23 Jul 2019

See all articles by Dimitrios Laliotis

Dimitrios Laliotis

International Monetary Fund (IMF); European Central Bank (ECB)

Alejandro Buesa

Banco de España; Universidad Complutense de Madrid (UCM) - Department of Fundamentals of Economic Analysis II (Quantitative Economics)

Miha Leber

European Central Bank (ECB)

Francisco Javier Población García

European Central Bank (ECB)

Date Written: July, 2019

Abstract

We assess the effects of regulatory caps in the loan-to-value (LTV) ratio using agent-based models (ABMs). Our approach builds upon a straightforward ABM where we model the interactions of sellers, buyers and banks within a computational framework that enables the application of LTV caps. The results are first presented using simulated data and then we calibrate the probability distributions based on actual European data from the HFCS survey. The results suggest that this approach can be viewed as a useful alternative to the existing analytical frameworks for assessing the impact of macroprudential measures, mainly due to the very few assumptions the method relies upon and the ability to easily incorporate additional and more complex features related to the behavioral response of borrowers to such measures.

Keywords: borrower-based measures, HFCS survey, house prices, macroprudential policy

JEL Classification: D14, D31, E50, R21

Suggested Citation

Laliotis, Dimitrios and Buesa, Alejandro and Leber, Miha and Población García, Francisco Javier, An Agent-Based Model for the Assessment of LTV Caps (July, 2019). ECB Working Paper No. 2294, Available at SSRN: https://ssrn.com/abstract=3424162

Dimitrios Laliotis (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Universidad Complutense de Madrid (UCM) - Department of Fundamentals of Economic Analysis II (Quantitative Economics) ( email )

Campus of Somosaguas
Madrid
Spain

Miha Leber

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Francisco Javier Población García

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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