After the financial crisis of 2007–09, many jurisdictions introduced new banking regulations to make banks more resilient and less likely to fail. These regulations included tighter limits for the quality and quantity of bank capital and introduced minimum standards for liquidity. But what was the impact of these changes?
We use rich microdata to measure home equity extraction in Canada and track its evolution over time. We find home equity extraction has been rising in recent years and has likely contributed materially to dynamics in household spending.