Lending Pro-Cyclicality and Macro-Prudential Policy: Evidence from Japanese LTV Ratios

Using a unique micro dataset compiled from the real estate registry in Japan, we examine more than 400,000 loan-to-value (LTV) ratios for business loans to draw implications for the efficacy of caps on LTV ratios as a macro-prudential policy measure. We find that the LTV ratio exhibits counter-cyclicality through the business cycle. We also find that borrowers obtaining high-LTV loans performed no worse ex-post than those with lower LTV loans. Our findings imply that a fixed cap on LTV ratios might not only be ineffective in curbing loan volume in boom periods but also inhibit well-performing firms from borrowing.基盤研究(S) = Grants-in-Aid for Scientific Research (S)52 p