Skip to main content

Macro Credit Policy and the Financial Accelerator


This paper studies macro credit policies within the celebrated financial accelerator model of Bernanke, Gertler and Gilchrist (1999). The focus is on borrower-based restrictions on lending such as loan-to-value (LTV) ratios. We find that the efficacy of cyclical taxes on LTV ratios depends upon the nature of the underlying loan contract. If the loan contract contains equity-like features such as indexation to aggregate conditions, then there is little role for cyclical taxation. But if the loan contract is not indexed to aggregate conditions, then there are substantial gains to procyclical taxes on LTV ratios.

JEL Classification Codes: C68, E44, E61, G28.

Keywords: credit policy, loan-to-value ratios, borrower-based lending restrictions, macroprudential policy.


Suggested citation: Carlstrom, Charles T., and Timothy S. Fuerst, 2015. “Macro Credit Policy and the Financial Accelerator,” Federal Reserve Bank of Cleveland, Working Paper, no. 15-31.

Upcoming EventsSEE ALL

  • 06.23.21

    Policy Summit 2021: Pathways to Economic Resilience in Our Communities

    Offering the latest research on and best practices for promoting the economic mobility and resilience of low- and moderate-income individuals, families, and communities.

  • 07.12.21

    Summer Research Coding Camp

    Summer Research Coding Camp is a virtual weeklong immersive program for rising high school juniors and seniors. Students will participate in experiential hands-on activities exposing them to real world skills such as data analysis and interpretation while exploring how economists utilize these skills in their careers.

  • 07.15.21

    Inflation 101

    Join us for a FedTalk featuring Robert Rich, senior economic and policy advisor and director of the Center for Inflation Research at the Federal Reserve Bank of Cleveland.

  • 10.07.21

    Inflation: Drivers and Dynamics Conference 2021

    The European Central Bank (ECB) and the Federal Reserve Bank of Cleveland’s Center for Inflation Research will host the Inflation: Drivers and Dynamics Conference 2021, which will be held virtually on October 7–8.

  • 11.17.21

    2021 Financial Stability Conference: Planning for Surprises, Learning from Crises

    The Federal Reserve Bank of Cleveland and the Office of Financial Research will host their annual financial stability conference, Financial Stability: Planning for Surprises, Learning from Crises, which will be held virtually on November 17-19, 2021.