skip to primary navigationskip to content
 

CF weekly workshop - Sule Alan

When Feb 01, 2011
from 04:45 PM to 05:45 PM
Where Winstanley Lecture Theatre, Trinity College
Contact Name
Add event to calendar vCal
iCal

** Please note the start time **

Dr Sule Alan (Faculty of Economics)

Title: Subprime consumer credit demand: an empirical analysis of a randomised interest rate experiment

Abstract: We test the interest rate sensitivity of subprime credit card borrowers using a unique panel data  set from a UK credit card company.  What is novel about our contribution is that we were given details of a randomized interest rate experiment conducted by the lender between October 2006 and January 2007.  We 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 truly exogenous variation in interest rates when estimating credit demand elasticities.  We show that estimating a standard credit demand equation with nonexperimental variation leads to seriously biased estimates even when conditioning on a rich set of controls and individual fixed effects.  In particular, this procedure  results in a large and statistically significant 3-month elasticity of credit card debt with respect to interest rates even though the experimental estimate of the same elasticity is neither economically nor statistically different from zero.

 

 

« April 2018 »
April
MoTuWeThFrSaSu
1
2345678
9101112131415
16171819202122
23242526272829
30

RSS Feed Latest news

Best Student Paper Award 2018 - registration is now closed

Feb 02, 2018

For the last ten years, Cambridge Finance is offering its Best Student Paper Award. The award comprises a cash honorarium of £1,000 and a certificate is awarded to the author of the best student paper in finance presented during the 2017-2018 academic year.

View all news

Upcoming events

Cambridge Finance Workshop - Richard Sloan

May 03, 2018

Room W4.03, Cambridge Judge Business School

Previous events

Upcoming events