The Unassuming Economist

From the IMF’s latest report on Switzerland:

“Housing matters for economic activity and financial stability in Switzerland. The mortgage market is large relative to the size of the economy and banks are heavily exposed. House prices have significantly outpaced income growth, and this trend has accentuated during the pandemic. The Swiss authorities have taken decisive action to address unsustainable developments, but vulnerabilities have increased. This paper shows that a fuller set of macroprudential tools can be more effective to reduce systemic risk. Adequate calibration and a forward-looking approach are key given lags between policy announcements and policy effects. The paper quantifies a suite of LTV/DSTI caps, amortization requirements, and ‘speed limits’ calibrated at the vintage level to guard against the build-up of vulnerabilities and strengthen resilience.”