In this study we analyze the impact of targeted macroprudential policies-specifically limits on loan-to-value (LTV) and debt-to-income (DTI) ratios-on housing prices in Korea, one of the few developed countries with relatively long and successful experience in implementing these policies. Using an event study methodology with real-transaction data for a monthly panel of 7 districts, we find that DTI limits appear more effective in stabilizing housing prices than LTV limits. Consistent with the goernment's policy intention, the loosening of LTV and DTI limits boosts house price growth whereas the tightening of only DTI limits prevents it. Furthermore, we show that LTV regulations are more effective when banks are regulated, while DTI regulations are more effective when all financial institutions including nonbank institutions are regulated. Overall, the results suggest that macroprudential policies, especially DTI limits, can be useful tools for curbing excessive household debt and subsequent house price bubbles.
Keywords: Macroprudential Policies, LTV, DTI, Housing Prices, Household Debt
JEL Classification: G15, G18, G34
