Multiple Credit Constraints and Time-Varying Macroeconomic Dynamics

I explore the implications of borrowers facing both loan-to-value (LTV) and debt-service-to-income (DTI) limits, using an estimated DSGE model. I identify when each constraint dominated over the period 1985-2021: The LTV constraint initially dominates, due to loose DTI standards, as well as low house prices around recessions. From 2012, tighter DTI standards and growing house prices have kept the DTI constraint binding. Whether a constraint binds shapes macroeconomic outcomes and the effectiveness of macroprudential tools. Finally, county panel data attest to multiple credit constraints as a source of nonlinear dynamics. (C) 2022 Elsevier B.V. All rights reserved.