Using a regime switching framework we investigate the determinants of default clustering. We find that a common credit cycle, modeled as a two-state Markov chain, can account for a large portion of default correlations, with the residual clustering being captured by a factor structure. During credit crunches default rates increase, and so does the conditional residual correlation. Using data fo...

We examine how asymmetric information and competition in the credit market affect voluntary information sharing between lenders. We study an experimental credit market in which information sharing can help lenders to distinguish good borrowers from bad ones, because borrowers may exogenously switch locations. Lenders, however, are also engaged in spatial competition, and lose market power by sh...

The research and experimentation (R&E) tax credit has long been the subject of criticism. Some argue that if the goal is more research and innovation, it’s better to increase direct federal funding of research. Others argue that the credit is not effective, that companies would do the research in any case. Some object the very notion of using tax policy to influence private sector behavior, pre...

This paper evaluates the short-term impact of Thailand's 'Million Baht Village Fund'program, among the largest scale government microfinance iniative in the world, using pre- and post-program panel data and quasi-experimental cross-village variation in credit-per-household. We find that the village funds have increased total short-term credit, consumption, agricultural investment, income growth...

Researchers as well as policymakers have expressed concerns that some contract features in the credit-card and subprime mortgage markets may induce consumers to borrow too much and to make suboptimal contract and repayment choices. These concerns are motivated in part by intuition and evidence on savings and credit suggesting that consumers have a time-inconsistent taste for immediate gratifica...

Data mining has been increasing as one of the chief key features of many security initiatives. Often, used as a means for detection of fraud, assessing risk as well. Data mining involves the use of data analysis tools to discover unknown, valid patterns as well as relationships in large data sets. Decades have seen a massive growth in the use of credit cards as a transactional medium. Data mini...

We study asset pricing and trading behavior in an exchange economy populated by two agents with different risk aversion. We show that the credit market plays a central role in the risk sharing between the two agents. It allows the less-risk-averse agent to borrow in order to take on levered positions in the stock and thus bear more risk. Optimal risk sharing results in the more-risk-averse agen...

This paper provides a unified analysis for the onset of the 1998 financial crisis and the strong economic recovery afterward in Russia and other former Soviet Union countries. Before the crisis a banking failure arose owing to the coexistence of a lemons credit market and high government borrowing. In a lemons credit market low credit risk firms switched from bank to nonbank finance, including ...

We study a model of a financial market, in which two risky assets are paying dividends with rates, changing from one fixed value to another when some credit event occurs. The credit events are associated with the first times at which the asset values fall below some given constant levels. The behavior of the asset values is described by exponential diffusion processes with random drift rates an...

We analyze a new dataset on borrowing decisions of a sample of customers of a credit card company. This credit card allows customers to pay for their purchases via installment credit over terms up to 12 months at an interest rate that depends on the customer’s credit score and the duration of the installment loan. We use these data to estimate the effect of interest rates on consumers’ demand f...