The Unassuming Economist

From the IMF’s latest report on Estonia:

“Housing market and macroprudential policy. Although the housing market has weathered the crisis well, it is critical as a preventive policy tool that the standard macroprudential instruments (debt to income, loan-to-value, and loan maturity cap requirements and the 15 percent risk weight for mortgage loans), be maintained to help keep the housing prices aligned with fundamentals. The authorities should be ready to re-calibrate tools in light of the risks of housing market overheating that are posed by the pension system withdrawals. As the economy recovers, the systemic risk and countercyclical capital buffers (both currently at zero) could be re-assessed and macroprudential tools may need to be used more actively if significant divergences with the euro-area’s cyclical conditions emerge.”