Heterogeneous Effects and Spillovers of Macroprudential Policy in an Agent-Based Model

4 The concept of Household Reference Person is used in a number of government surveys for deriving statistics and describing the household in terms of the characteristics of the household member selected for the purpose of a survey. [...] In particular, the leverage can now be written as the current exponential average sale price of houses of the same quality, pQ, divided by the current equity stake of the household in the house, k, which can be computed in a mark-to-market style as the current exponential average sale price of houses of the same quality minus the remaining mortgage principal. [...] A maximum value i is set for the ratio of the principal borrowed q over the value of the collateral, which is assumed to be equal to the transaction price of the house to be bought, with i representing the type of household (i.e., first-time buyer, home mover or buy-to-let investor). [...] The only endogenous lever for the bank to influence household demand for credit is the interest rate spread, which it sets in response to changes in the demand and with the goal of reaching a target level of credit per household (see Appendix A.5 for further details).19 In this way, the bank reacts to increases (decreases) in the 16 In the UK, it is unusual for mortgage products beyond a 10-year t. [...] So, while the average number of housing transactions stays about constant in the long term as discussed in the previous section, the timing of when these transactions take place is influenced by constraints on the availability of credit depending on the state of the housing cycle.