In this paper, we quantify the effect of loan-to-value ratio (LVR) policy, as implemented in New Zealand between 2013 and 2016, in containing mortgage loan growth and credit risk at the bank level. We use the empirical strategy proposed by the BIS and find first that the effect of the LVR policy...

What are the macroeconomic consequences of changing aggregate lending standards in residential mortgage markets, as measured by loan-to-value (LTV) ratios? In a structural VAR, GDP and business investment increase following an expansionary LTV shock. Residential investment, by contrast, falls, a...