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dc.contributor.authorAlan, Suleen_US
dc.contributor.authorDumitrescu, Ruxandraen_US
dc.contributor.authorLoranth, Gyongyien_US
dc.date.accessioned2011-03-09en_US
dc.date.accessioned2011-05-09T09:35:10Z-
dc.date.available2011-05-09T09:35:10Z-
dc.date.issued2011en_US
dc.identifier.urihttp://hdl.handle.net/10419/45460-
dc.description.abstractWe test the interest rate sensitivity of subprime credit card borrowers using a unique panel data set from a UK credit card company. We were given details of a randomized interest rate experiment conducted by the lender between October 2006 and January 2007. Access to such information is rare. We first calibrate an intertemporal consumption model to show that the experimental design has sufficient statistical power to detect economically plausible responses among borrowers. We then find that individuals who tend to utilize their credit limits fully do not reduce their demand for credit when subject to increases in interest rates as high as 3 percentage points. This finding is naturally interpreted as evidence of binding liquidity constraints. We also demonstrate the importance of isolating exogenous variation in interest rates when estimating credit demand elasticities. We show that estimating a standard credit demand equation with the nonexperimental variation in the data leads to severely biased estimates. This is true even when conditioning on a rich set of controls and individual fixed effects.en_US
dc.language.isoengen_US
dc.publisherTÜSİAD-Koç University Economic Research Forum Istanbulen_US
dc.relation.ispartofseriesTÜSİAD-Koç University Economic Research Forum working paper series 1105en_US
dc.subject.jelD11en_US
dc.subject.jelD12en_US
dc.subject.jelD14en_US
dc.subject.ddc330en_US
dc.subject.keywordsubprime crediten_US
dc.subject.keywordrandomized trialsen_US
dc.subject.keywordliquidity constraintsen_US
dc.subject.stwSubprime-Hypotheken_US
dc.subject.stwZinsen_US
dc.subject.stwKonsumentenverhaltenen_US
dc.subject.stwZeitpräferenzen_US
dc.subject.stwKreditkarteen_US
dc.subject.stwPrivate Verschuldungen_US
dc.subject.stwVerschuldungsrestriktionen_US
dc.subject.stwGroßbritannienen_US
dc.titleSubprime consumer credit demand: evidence from a lender's pricing experimenten_US
dc.typeWorking Paperen_US
dc.identifier.ppn653796307en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:ERF Working Paper Series, TÜSİAD-Koç University Economic Research Forum (ERF)

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