Loan to Value Ratio and Monetary Transmission Mechanism

Description	Parameter	Value

Discount factor: patient households	β₁	0.99
Discount factor: Impatient households	β₂	0.95
Discount factor: firms	γ	0.98
Labour supply aversion	η	1.01
Housing weight	j	0.1
Capital output ratio	μ	0.3
Elasticity of output to real estate	υ	0.05
Depreciation rate of physical capital	δ	0.05
Retail markup	X	1.1

[i] Source: Authors’ construction

Table 2

Data

Variable	Description	Source	Transformation

Y	Real gross domestic product	CZSO	log, Ŷ
C	Real consumption	CZSO	log, Ĉ
I	Investment	CZSO	log, Î
CPI	Consumer Price Index	CZSO	$log, \hat{CPI}$
HP	Offer prices of apartments adjusted for inflation	CZSO	$log, \hat{HP}$
R	3M PRIBOR	CNB	$\hat{R}$

[i] Source: Authors’ construction

Table 3

Prior distribution

		Prior distribution

Parameter	Description	Distribution	Mean	Std. dev.

Production

α	Proportion of patient households	Beta	0.60	0.10
ψ	Investment adjustment costs	Normal	2.00	0.50

LTV ratios

m₁	LTV firms	Beta	0.80	0.10
m₂	LTV impatient households	Beta	0.80	0.10

Calvo parameter

θ	Price rigidity	Beta	0.75	0.10

Monetary rule

r_π	Inflation weight in monetary rule	Normal	0.60	0.10
r_R	Interest rate weight in monetary rule	Normal	0.80	0.10

Persistence of shocks

ρ_u	Cost-push shock persistence	Beta	0.70	0.10
ρ_j	Housing preference shock persistence	Beta	0.70	0.10
ρ_A	Technology shock persistence	Beta	0.70	0.10
ρ_i	Investment shock persistence	Beta	0.70	0.10

Volatility of shocks

ρ_R	Monetary shock	Inv. gamma	0.10	inf
ρ_u	Cost-push shock	Inv. gamma	0.10	inf
ρ_j	Housing preference shock	Inv. gamma	0.10	inf
ρ_A	Technology shock	Inv. gamma	0.10	inf
ρ_i	Investment shock	Inv. gamma	0.10	inf
ρ_Y	Shock depicting other effects in the economy	Inv. gamma	0.001	inf

[i] Source: Authors’ construction

Table 4

Posterior distribution

	Posterior distribution
	1998:Q1–2017:Q4			2006:Q1–2017:Q4

Parameter	Mean	95 HPDI		Mean	95% HPDI

α	0.3268	0.2156	0.4327	0.4848	0.3559	0.6160
m₁	0.4471	0.3143	0.5821	0.8035	0.7252	0.8829
m₂	0.7320	0.6283	0.8368	0.5931	0.4299	0.7597
θ	0.7495	0.5922	0.9119	0.7485	0.5937	0.9147
ψ	0.1067	0.0454	0.1643	0.3191	0.2174	0.4164

Monetary rule

r_π	0.5500	0.3798	0.7190	0.6047	0.4418	0.7643
r_R	0.9355	0.9214	0.9502	0.9203	0.8985	0.9427

Persistence of shocks

ρ_u	0.9547	0.9306	0.9793	0.7527	0.6435	0.8628
ρ_j	0.9028	0.8651	0.9410	0.9354	0.8917	0.9792
ρ_A	0.7565	0.6740	0.8412	0.7396	0.6282	0.8551
ρ_i	0.6463	0.5604	0.7301	0.6043	0.5155	0.6918

Volatility of shocks

σ_R	0.0017	0.0014	0.0020	0.0020	0.0015	0.0024
σ_u	0.0141	0.0100	0.0181	0.0057	0.0039	0.0076
σ_j	0.3348	0.2169	0.4521	0.2166	0.0875	0.3402
σ_A	0.0167	0.0137	0.0195	0.0080	0.0045	0.0113
σ_i	0.0380	0.0327	0.0431	0.0392	0.0321	0.0463
σ_Y	0.0010	0.0002	0.0019	0.0225	0.0137	0.0310

[i] Source: Own calculation

Impulse-response of monetary shocks based on alternative LTV settings for households
*Source: Authors’ construction based on model IRFs.*

Impulse-response of monetary shocks based on alternative LTV settings for households and firms
*Source: Authors’ construction based on model IRFs*

Amplitudes’ sensitivity of the impulse response of monetary shocks based on alternative LTV settings for inpatient households
*Source: Authors’ construction based on model IRFs*

Amplitudes’ sensitivity of the impulse response of monetary shocks based on alternative LTV settings for inpatient households and firms
*Source: Authors’ construction based on model IRFs*

References

Authors

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Articles in this issue

DOI: https://doi.org/10.2478/danb-2019-0020 | Journal eISSN: 1804-8285 | Journal ISSN: 1804-6746 (formerly 1804-8285)

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Language: English

Page range: 383 - 399

Published on: Dec 31, 2019

Published by: European Research University

In partnership with: Paradigm Publishing Services

Keywords:

Housing Sector,

Loan to Value Ratio,

DSGE Model,

Monetary Transmission Mechanism,

Czech Republic

Related subjects:

Business and economics,

Law,

© 2019 Vlastimil Reichel, Daniel Němec, Jakub Chalmovianský, published by European Research University
This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Volume 10 (2019): Issue 4 (December 2019)

Loan to Value Ratio and Monetary Transmission Mechanism

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