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The views expressed in this presentation are the
prudential Policies on
views of the author and do not necessarily reflect
the views or policies of the Asian Development
Bank Institute (ADBI), the Asian Development
House Prices: Evidence
Bank (ADB), its Board of Directors, or the
governments they represent. ADBI does not
guarantee the accuracy of the data included in this
from an Event Study Using
paper and accepts no responsibility for any
consequences of their use. Terminology used may
not necessarily be consistent with ADB official
Korean Real-Transaction
terms.
Data
Hosung Jung and Jieun Lee
The views expressed here are those of the authors and do not
necessarily reflect the views and policies of the Bank of Korea.
Table of Contents
Source : BOK 3
Background & Motivation
The gap between household debt and disposable income
increases right before the GFC and again since 2013
Household debt to disposable income ratio in Korea is above
the average of OECD
Household debt and Income Household debt to income ratio
Previous studies examine the effectiveness of LTV and DTI regulations using
cross-country or single country with macro/city level data or focusing on
general equilibrium models
- Cross-country studies (e.g., Crowe et al. (2013), Ceruttie et al. (2017), Kutter
and Shim (2016), Bruno et al.)
- Single country studies (e.g., Igan and Kang (2011), Kim (2013), Craig and
Hua (2011) )
- General equilibrium model (e.g., Antipa and Lecat (2010), Kanan et al.,
(2012), Lambertini et al., (2013), Chen and Columba (2016))
8
Contributions of this study
10
Empirical Analysis
12
Note : Turnover: # of transaction/ # of households
Empirical Analysis
LTV/DTI Policies and Housing Prices
Tightening Loosening
Event LTV DTI LTV DTI LTV&DTI
(24 districts) (73 districts) (73 districts) (73 districts) (62 districts)
Month ARCMR ARMR ARCMR ARMR ARCMR ARMR ARCMR ARMR ARCMR ARMR
-5 1.630* 1.665* 2.092*** 2.272*** -0.670** -0.397** -0.614* -0.327* 0.362 0.635
-4 0.528 0.565 2.296*** 2.468*** -0.158 0.118 -0.34 -0.05 0.437 0.713
-3 1.383* 1.418* 0.729*** 0.905*** -1.314*** -1.037*** -1.311** -1.019** -1.499** -1.221**
-2 2.279*** 2.312*** 0.838*** 1.016*** -0.671** -0.394** -0.928** -0.637** -0.773 -0.496
-1 3.344*** 3.369*** 0.629*** 0.809*** -1.514*** -1.236*** -1.699*** -1.405*** -1.956*** -1.676***
0 3.360*** 3.375*** 0.267 0.445 -1.285** -1.006** -1.466** -1.172** -2.360*** -2.077***
1 2.328*** 2.351*** -0.471 -0.287 -1.136** -0.858** -1.751*** -1.457*** -2.918*** -2.634***
2 0.862 0.89 -0.695** -0.511** 0.407** 0.685** 0.408* 0.700* 0.324 0.607
3 0.892 0.925 -0.159 0.025 0.206* 0.483* 0.352** 0.643** 0.183 0.463
4 0.557 0.591 0.107 0.291 0.115 0.391 0.261 0.552 0.256 0.537
5 -0.23 -0.195 0.934*** 1.117*** 0.847*** 1.121*** 0.942*** 1.230*** 1.180*** 1.459***
6 1.021 1.058 -0.788* -0.605* 0.455*** 0.728*** 0.615*** 0.902*** 0.772*** 1.050***
7 1.113 1.149 -1.053*** -0.870*** -0.011 0.26 -0.374 -0.089 0.409* 0.686*
8 1.689* 1.725* -0.702** -0.518** 0.363** 0.638** 0.443** 0.733** 0.664*** 0.940***
9 -1.085 -1.05 -0.176 0.009 0.159 0.432 0.16 0.448 0.632** 0.908**
10 0.817 0.853 0.103 0.289 0.554*** 0.826*** 0.566*** 0.853*** 1.424*** 1.699***
Average (-5,-3) 1.180*** 1.216*** 1.706*** 1.882*** -0.714*** -0.438*** -0.755*** -0.465*** -0.233 0.042
Average (-2,0) 2.994*** 3.019*** 0.578*** 0.757*** -1.157*** -0.879*** -1.364*** -1.071*** -1.697*** -1.416***
Average (1,3) 1.361*** 1.389*** -0.442** -0.258** -0.174 0.103 -0.331** -0.038** -0.804** -0.521**
Average (4,6) 0.449 0.485 0.084** 0.268** 0.472*** 0.747*** 0.606*** 0.895*** 0.736*** 1.015***
Average (7,9) 0.573 0.608 -0.644*** -0.460*** 0.170*** 0.443*** 0.077*** 0.364*** 0.568*** 0.845***
13
Empirical Analysis
Macroprudential Policies and Cumulative Abnormal Returns (CAR)
Tightening LTV Tightening DTI Tightening
30
10
10
8
8
20
6
6
10
%
%
4
4
2
2
0
-6 -4 -2 0 2 4 6 8 10 -6 -4 -2 0 2 4 6 8 10 -6 -4 -2 0 2 4 6 8 10
month month month
0
0
-2
-2
1
-4 %
%
-4
0
-6
-6
-1
-8
-2
-8
-6 -4 -2 0 2 4 6 8 10 -6 -4 -2 0 2 4 6 8 10 -6 -4 -2 0 2 4 6 8 10
month month month
Note: We accumulate the abnormal returns from 6 months before the implementation
date of the event’s being reported, and then keep accumulating until 10 months shown 14
on the horizontal axis.
Empirical Analysis
Tightening of LTV/ DTI limits and average abnormal returns (AAR)
15
Empirical Analysis
Loosening of LTV/ DTI limits and average abnormal returns (AAR)
16
Empirical Analysis
Regression Analysis (Event Study) : Extended model of Ayer(2002)
=> OLS with city dummies and clustered standard errors at the district level
ARCMR: the abnormal return for sample district i determined using the constant
mean return model
ARMR: the abnormal return for sample district i determined using the market
adjusted return model
POST[1,5]: a dummy variable equal to 1 for the post-regulation period
covering the period from t=+1 to +5 months, and zero otherwise
Event window: eleven abnormal returns for each sample district — the five
months leading up to the regulatory enforcement [-5,-1], event,
the next five months after the event[1,5]
17
Empirical Analysis
Control variables (Xi,t)
Region-specific variables
UNSOLD: unsold inventory of houses (%)
∆log(INDIDX): change in log industrial productivity index
TURNOVER(%): the number of household transaction/the number of household
JTP: Jeonse-to-price ratio
I{MIGRATION}: a dummy variable equal to 1 for positive net migration, and
zero otherwise
SPILLOVER: the average rate of house price growth in the three neighboring
districts the longest shared boarders
MORATE: the mortgage rate for city c at time t-1
Macroeconomic variables
∆log(M2): the monthly differences in the logarithm of the monetary aggregate
18
Empirical Analysis
Regulation tightening: Event window [-5,5]
ALL LTV DTI
VARIABLES ARCMR ARMR ARCMR ARMR ARCMR ARMR
POST[1,5] -0.738*** -0.726*** -0.598 -0.562 -0.886*** -0.875***
(-4.01) (-3.92) (-1.36) (-1.26) (-3.88) (-3.78)
UNSOLD -0.019 -0.021 -1.081*** -0.988*** -0.006 -0.010
(-0.45) (-0.68) (-3.45) (-3.34) (-0.13) (-0.29)
Δlog(INDIDX) 0.008 0.008 -0.020 -0.019 0.011 0.011
(0.72) (0.70) (-0.66) (-0.63) (1.04) (1.02)
TURNOVER 1.045*** 1.022*** 1.515*** 1.491*** 0.994*** 0.976***
(3.09) (3.02) (3.15) (3.19) (2.91) (2.82)
JTP 0.010 0.013 -0.164* -0.169** 0.034* 0.037**
(0.53) (0.74) (-2.05) (-2.11) (1.85) (2.05)
I{MIGRATION>0} -0.022 -0.059 -0.381 -0.388 0.033 -0.002
(-0.13) (-0.39) (-1.12) (-1.19) (0.20) (-0.01)
SPILLOVER 0.288*** 0.287*** 0.528*** 0.527*** 0.253*** 0.252***
(4.11) (4.12) (3.79) (3.78) (3.59) (3.60)
MORATE -0.192 -0.229 -0.255 -0.378 -0.170 -0.199
(-1.10) (-1.31) (-0.36) (-0.54) (-1.06) (-1.24)
Δlog(M2) 1.291*** 1.263*** 1.171 1.163 1.396*** 1.373***
(3.58) (3.52) (1.49) (1.49) (3.73) (3.65)
Constant 0.144 0.332 7.588* 8.586** -0.966 -0.826
(0.11) (0.25) (1.73) (2.13) (-0.80) (-0.68)
Observations 2,398 2,398 275 275 2,123 2,123
Adj.R-squared 0.09 0.09 0.16 0.15 0.08 0.08
19
Empirical Analysis
Regulation loosening: Event window [-5,5]
ALL LTV DTI LTV & DTI
VARIABLES ARCMR ARMR ARCMR ARMR ARCMR ARMR ARCMR ARMR
POST[1,5] 0.470*** 0.490*** -0.057 -0.052 0.463*** 0.489*** -0.363 -0.360
(3.76) (3.96) (-0.28) (-0.25) (2.84) (3.01) (-1.09) (-1.08)
UNSOLD -0.058 -0.073** -0.083 -0.094* -0.057 -0.065 -0.057 -0.049
(-1.51) (-2.21) (-1.46) (-1.80) (-1.41) (-1.64) (-0.89) (-0.82)
Δlog(INDIDX) 0.012 0.013 -0.018 -0.018 0.013 0.015 -0.024 -0.024
(0.80) (0.92) (-1.01) (-1.01) (0.78) (0.87) (-1.07) (-1.08)
TURNOVER 1.184*** 1.213*** 1.189*** 1.160*** 1.233*** 1.268*** 1.296*** 1.281***
(4.76) (4.80) (5.16) (4.92) (4.53) (4.58) (4.21) (4.04)
JTP -0.054*** -0.047*** -0.185*** -0.189*** -0.048*** -0.045*** -0.197*** -0.203***
(-5.33) (-4.71) (-6.37) (-6.45) (-3.94) (-3.73) (-5.45) (-5.54)
I{MIGRATION>0} 0.245 0.221 0.228 0.207 0.216 0.194 0.170 0.163
(1.42) (1.29) (1.00) (0.91) (0.97) (0.87) (0.52) (0.50)
SPILLOVER 0.221*** 0.222*** 0.173** 0.172** 0.251*** 0.253*** 0.207*** 0.206**
(3.98) (4.00) (2.36) (2.33) (4.63) (4.65) (2.66) (2.65)
MORATE -0.635*** -0.562*** -1.631*** -1.637*** -0.609*** -0.537*** -1.750*** -1.751***
(-5.87) (-5.32) (-6.55) (-6.58) (-4.83) (-4.36) (-5.71) (-5.72)
Δlog(M2) -0.102 -0.060 -0.492 -0.494 -0.096 -0.059 -0.545 -0.548
(-0.36) (-0.21) (-1.37) (-1.38) (-0.29) (-0.18) (-1.18) (-1.19)
Constant 4.871*** 4.326*** 17.313*** 17.747*** 4.468*** 4.099*** 18.673*** 19.173***
(5.34) (4.87) (6.31) (6.44) (4.11) (3.86) (5.45) (5.56)
Observations 2,145 2,145 1,386 1,386 1,716 1,716 957 957
Adj.R-squared 0.06 0.06 0.06 0.06 0.07 0.06 0.08 0.07
20
Empirical Analysis
Robustness checks
21
Empirical Analysis
Changes in LTV and DTI limits
Tightening Loosening
LTV DTI LTV DTI
VARIABLES ARCMR ARMR ARCMR ARMR ARCMR ARMR ARCMR ARMR
POST[1,5] -2.546** -2.548** -1.388* -1.366* -4.864*** -4.829*** 0.524 0.536*
(-2.12) (-2.12) (-1.70) (-1.68) (-3.83) (-3.82) (1.63) (1.67)
ΔLTV 0.024 0.052 -0.313** -0.298** -0.195** -0.190*** 0.053** 0.056**
(0.32) (0.65) (-2.04) (-2.02) (-2.63) (-2.78) (2.43) (2.38)
ΔDTI -0.075 -0.134 -0.011 -0.010 0.042** 0.040** 0.040* 0.039*
(-0.37) (-0.67) (-0.96) (-0.87) (2.52) (2.47) (1.90) (1.83)
POST[1,5]*ΔLTV -0.185** -0.189** 0.381*** 0.379***
(-2.09) (-2.15) (4.08) (4.08)
POST[1,5]*ΔDTI -0.011 -0.011 -0.006 -0.006
(-0.60) (-0.59) (-0.60) (-0.59)
CONTROL YES YES YES YES YES YES YES YES
22
Empirical Analysis
Macroeconomic variables
Tightening Loosening
ALL LTV DTI ALL LTV DTI
VARIABLES ARCMR ARCMR ARCMR ARCMR ARCMR ARCMR
POST[1,5] -0.705*** -0.794 -0.810*** 0.785*** 0.375 0.799***
(-3.73) (-1.60) (-3.46) (5.25) (1.60) (3.96)
UNSOLD -0.043 -1.241*** -0.029 -0.046 -0.078 -0.053
(-1.00) (-3.51) (-0.67) (-1.31) (-1.44) (-1.47)
Δlog(INDIDX) 0.003 -0.039 0.007 0.012 -0.021 0.013
(0.26) (-1.22) (0.62) (0.85) (-1.14) (0.83)
TURNOVER 1.130*** 1.664*** 1.102*** 1.019*** 0.829*** 1.057***
(3.28) (3.31) (3.11) (4.12) (3.45) (4.02)
JTP 0.027 -0.181* 0.051** 0.013 -0.109*** 0.012
(1.43) (-1.92) (2.54) (0.82) (-3.14) (0.69)
I{MIGRATION>0} 0.000 0.000 0.000 0.000 0.000 -0.000
(0.14) (0.27) (0.09) (0.44) (0.26) (-0.06)
SPILLOVER 0.307*** 0.550*** 0.275*** 0.197*** 0.142* 0.227***
(4.37) (3.76) (3.95) (3.51) (1.92) (4.09)
MORATE 0.469 2.003 0.607* -0.985*** -2.126*** -0.937***
(1.45) (1.26) (1.81) (-9.40) (-8.34) (-7.62)
GLIQ/GDP -0.029 -0.242 -0.040 0.201*** 0.244*** 0.190***
(-0.74) (-1.36) (-1.05) (5.28) (5.15) (4.47)
Observations 2,398 275 2,123 2,145 1,386 1,716
Adj.R-squared 0.09 0.15 0.08 0.06 0.07 0.07
23
Empirical Analysis
Different event windows
ALL LTV DTI ALL LTV DTI ALL LTV DTI
VARIABLES ARCMR ARCMR ARCMR ARCMR ARCMR ARCMR ARCMR ARCMR ARCMR
EVENT WINDOW [-2,2] [-2,2] [-2,2] [-3,3] [-3,3] [-3,3] [-5,9] [-5,9] [-5,9]
POST DUMMY [1,2] [1,2] [1,2] [1.3] [1.3] [1.3] [1,9] [1,9] [1,9]
Tightening
POST -0.749*** -0.399 -0.848*** -0.733*** -0.614 -0.839*** -0.990*** -0.354 -1.152***
(-2.85) (-0.99) (-2.86) (-3.09) (-1.23) (-3.21) (-5.50) (-0.88) (-5.29)
CONTROL YES YES YES YES YES YES YES YES YES
Observations 1,090 125 965 1,526 175 1,351 3,270 375 2,895
Adj.R-squared 0.07 0.22 0.04 0.06 0.21 0.03 0.09 0.15 0.08
Loosening
POST 0.447* 0.157 0.412 0.493** 0.227 0.465* 0.411*** -0.009 0.383***
(1.68) (0.48) (1.31) (2.51) (0.82) (1.88) (4.11) (-0.05) (3.27)
CONTROL YES YES YES YES YES YES YES YES YES
Observations 975 630 780 1,365 882 1,092 2,925 1,890 2,340
Adj.R-squared 0.08 0.09 0.08 0.07 0.08 0.07 0.06 0.06 0.07
24
Empirical Analysis
Types of regulations (Speculative zones and Bank)
Tightening Loosening
LTV DTI LTV DTI
VARIABLES ARCMR ARCMR ARCMR ARCMR ARCMR ARCMR ARCMR ARCMR
a1 POST[1,5] -1.825** -0.229 -0.887*** -0.851** 0.362** 0.422** 0.758*** 0.743***
(-2.34) (-0.45) (-3.92) (-2.62) (2.18) (2.64) (4.29) (4.60)
a2 POST[1,5]*SP 1.597* 0.869*** -1.056** -1.421***
(1.70) (3.12) (-2.03) (-2.83)
SP -1.763 -0.908*** 0.667 2.653***
(-1.02) (-2.92) (0.82) (4.80)
a2 POST[1,5]*BANK -1.597* 0.072 -1.990*** -2.072***
(-1.70) (0.24) (-2.86) (-3.46)
BANK 1.763 0.143 2.821*** 3.781***
(1.02) (0.38) (3.89) (5.59)
25
Conclusion
26
Thanks for your attention!
27
Appendix
Event Descriptions : LTV regulations
# of LTV ratio LTV ratio Regulated
Event Date Description Direction
districts (before regulation) (after regulation) household ratio
Designate speculative zones
200611 13 56.1 47.5 15.5 Tighten
/Lower LTV limit ratio
28
Appendix
Event Descriptions : DTI regulations
# of LTV ratio LTV ratio Regulated
Event Date Description Direction
districts (before regulation) (after regulation) household ratio
200611 Raise DTI limit ratio 1 100.0 89.9 2.4 Tightening
200701 Designate speculative zones 1 100.0 94.1 1.5 Tightening
200703 Raise DTI limit ratio 70 89.3 49.1 75.8 Tightening
200709 Remove speculative zones 6 52.2 100.0 7.3 Loosening
200801 Remove speculative zones 3 53.0 100.0 1.9 Loosening
200811 Remove speculative zones 58 48.0 100.0 61.8 Loosening
200909 Raise DTI limit ratio 61 100.0 64.9 61.9 Tightening
201009 Lower DTI limit ratio 61 94.2 100.0 62.4 Loosening
201104 Raise DTI limit ratio 61 93.7 59.1 62.9 Tightening
201205 Remove speculative zones 3 43.8 53.2 5.0 Loosening
201408 Lower DTI limit ratio 25 53.6 63.6 23.5 Loosening
29