Millard, Stephen; Rubio, Margarita; Varadi, Alexandra - 2021
We use a DSGE model with financial frictions, leverage limits on banks, loan to value (LTV) limits and debt … macroeconomic variables and on welfare. We find that capital requirements can nullify the effects of financial frictions and reduce … the effects of shocks emanating from the financial sector on the real economy. LTV limits, on their own, are not …