Norges Bank

Working Paper

Multiple credit constraints and time-varying macroeconomic dynamics

Marcus Mølbak Ingholt
Working Paper


I explore the macroeconomic implications of borrowers facing both loan-to-value (LTV) and debt-service-to-income (DTI) limits, using an estimated DSGE model. I identify when each constraint dominated over the period 1984-2019: LTV constraints dominate in contractions, when house prices are relatively low – and DTI constraints dominate in expansions, when interest rates are relatively high. I also find that DTI standards were relaxed during the mid-2000s’ boom, and that lower DTI limits or higher interest rates, but not lower LTV limits, would have prevented the boom. Finally, county panel data attest to multiple credit constraints as a source of nonlinear dynamics.

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ISSN 1502-8190 (online)

Published 9 September 2020 15:50
Published 9 September 2020 15:50