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QCGBF Virtual Seminar Series: House Price Dynamics, Optimal LTV Limits and the Liquidity Trap

Online

1 Jun
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King's Business School invites you to the first in the series of the QCGBF Virtual Seminar Series.
Part of Qatar Centre for Global Banking & Finance Virtual Seminar Series

Andrea Ferrero (University of Oxford) will be presenting on the topic of House Price Dynamics, Optimal LTV Limits and the Liquidity Trap, with Richard Harrison and Benjamin Nelson.

The inception of macro-prudential policy frameworks in the wake of the global financial crisis raises questions about the effects of the newly available policy tools and their interaction with the existing ones. We study the optimal setting of a loan-to-value (LTV) limit, and its implications for optimal monetary policy, in a model with nominal rigidities and financial frictions.

The welfare-based loss function implies a role for macro-prudential policy to enhance risk-sharing. Following a house price boom-bust episode, macro-prudential policy alleviates debt-deleveraging dynamics and prevents the economy from falling into a liquidity trap. In this scenario, optimal policy always entails countercyclical LTV limits, while the response of the nominal interest rate depends on the nature of the underlying shock driving house prices.

At this event

Francesca Monti

Francesca Monti

Deputy Director of the Qatar Centre for Global Banking & Finance

David Aikman

David Aikman

Director of the Qatar Centre for Global Banking & Finance


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