Macroprudential policy, mortgage lending and economic activity in Mexico

The global financial crisis revealed the insufficiency of the microprudential approach in containing systemic risks associated with the procyclicality of credit and the build-in of bubbles in financial markets. Since then, different macroprudential regulation tools have been implemented, strengthening regulatory bodies and improving the monitoring of the financial system. In this regard, there is evidence of the macroprudential policy effectiveness in reducing the procyclicality of credit in developed countries. However, the literature on macroprudential policy in Mexico is scarce. This note presents preliminary results contributing to the literature by analyzing the relationship between macroprudential policy, economic activity, and credit in three segments of the Mexican mortgage market. We analyze the period 2009-2020 through the implementation of least squares with breakpoints in the total balances of mortgage credit. Our results show a decrease in the procyclicality of mortgage credit in the construction and new housing segments. In contrast, the used housing credit is decoupled from the economic cycle.