Micro Effects of Macroprudential Policies

This thesis evaluates the micro effects of macroprudential policies. Policies that are naturally intended for the proper functioning of the macroeconomic system and for the reduction of financial instability. It comprises three papers and an introductory chapter, jointly studying four macroprudential policies. It leverages the use of highly granular microdata from administrative, supervisory, and surveys, including tax records, property registries, pension fund balance sheets, and macroprudential policy parameters. Chapters 2 and 3 focus on macroprudential policies in the housing and mortgage market, while Chapter 4 looks at the macroprudential policies for pension funds. The thesis applies structural models, quasi-natural experimental and instrumental variable strategies to identify causal effects of policy changes on household decisions. Chapter 2: Residual Mortgage Debt, Insurance and Defaults This chapter examines the role of the Nationale Hypotheek Garantie (NHG), a government-backed residual mortgage insurance scheme, in mitigating default risk in a high-LTV mortgage environment. Exploiting a legislated eligibility threshold exogenously adjusted annually, the analysis reveals that NHG participation is associated with a lower default gradient across house values, suggesting effective risk segmentation. However, unintended consequences, such as differential impacts on divorcing couples, highlight the need for more nuanced policy design. The chapter combines structural modelling with a quasi-experimental approach to uncover behavioural heterogeneity in insurance take-up and default risk. Chapter 3: Macroprudential Policies, Household Credit and House Prices This chapter quantifies the causal impact of borrower-based macroprudential limits, specifically Loan-to-Income (LTI) and Loan-to-Value (LTV) caps, on household credit and housing market outcomes. Using a novel instrument derived from time-varying, income- and interest-rate-specific borrowing constraints calibrated by NIBUD, the analysis shows that a relaxation of credit limits leads to higher household debt and, in turn, higher house prices. The identification strategy isolates exogenous variation in borrowing capacity, allowing for robust estimation of credit-driven demand effects. The results reveal a strong heterogeneity across income groups, locations, and property types, and suggest that early-cycle activation of macroprudential instruments can mitigate systemic risk while minimising procyclical effects. Chapter 4: Broken promises? Trust and pension savings in turbulent times This chapter explores how trust in pension institutions affects voluntary pension savings. Linking household survey data with supervisory records and pension fund balance sheets, the study uses exogenous shocks, such as pension cuts and indexation changes, as trust instruments. The findings show that higher trust significantly increases voluntary participation, with generational differences playing a key role. Younger cohorts exhibit lower trust and lower savings rates, underscoring the importance of targeted communication strategies in the transition to the new Dutch pension contract. Contributions The dissertation contributes to the literature by demonstrating how macroprudential policies, often designed with aggregate financial stability in mind, have significant and heterogeneous microeconomic effects. It highlights the importance of granular data and microeconometric techniques in evaluating policy effectiveness and unintended consequences. The findings have direct implications for the design and timing of borrower-based measures, the structure of mortgage insurance schemes, and the communication of pension reforms.