Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/98196
Authors: 
Karlan, Dean
Zinman, Jonathan
Year of Publication: 
2013
Series/Report no.: 
Center Discussion Paper, Economic Growth Center 1024
Abstract: 
The long-run price elasticity of demand for credit is a key parameter for intertemporal modeling, policy levers, and lending practice. We use randomized interest rates, offered across 80 regions by Mexico’s largest microlender, to identify a 29-month dollars-borrowed elasticity of -1.9. This elasticity increases from -1.1 in year one to -2.9 in year three. The number of borrowers is also elastic. Credit bureau data does not show evidence of crowd-out. Competitors do not respond by reducing rates, perhaps because Compartamos’ profits are unchanged. The results are consistent with multiple equilibria in loan pricing.
Subjects: 
microcredi
interest rates
interest rate policy
interest rate elasticities
JEL: 
E43
G21
O11
O12
Document Type: 
Working Paper

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