We assess the effectiveness of the Gross Leverage Position in Foreign Exchange Derivatives (PBA), a macroprudential policy implemented by the Colombian central bank in 2007, in regulating housing price fluctuations. Using the synthetic control method, we demonstrate that the PBA significantly reduced the pace of housing price growth, particularly during the Global Financial Crisis from 2008 to 2010. Prior to the introduction of the PBA, Colombia experienced unsustainable housing price increases fueled by rapid credit expansion and substantial capital inflows. The PBA successfully reversed this trend, contributing to a decline in housing price appreciation and enhancing financial stability during times of uncertainty. The convergence of housing price growth rates between Colombia and the synthetic control further supports the notion of the PBA’s causal influence. Our findings highlight the value of targeted macroprudential policies for maintaining stability within housing markets and preventing asset bubbles. This study provides insights for emerging economies facing similar challenges, emphasizing the importance of responsive policy measures tailored to specific economic contexts while also suggesting avenues for future research on the long-term effects of such interventions.
