A quantitative theory of unsecured consumer credit with risk of default
AbstractThe authors study, theoretically and quantitatively, the general equilibrium of an economy in which households smooth consumption by means of both a riskless asset and unsecured loans with the option to default. The default option resembles a bankruptcy filing under Chapter 7 of the U.S. Bankruptcy Code. Competitive financial intermediaries offer a menu of loan sizes and interest rates wherein each loan makes zero profits. They prove the existence of a steady-state equilibrium and characterize the circumstances under which a household defaults on its loans. They show that their model accounts for the main statistics regarding bankruptcy and unsecured credit while matching key macroeconomic aggregates and the earnings and wealth distributions. They use this model to address the implications of a recent policy change that introduces a form of “means-testing” for households contemplating a Chapter 7 bankruptcy filing. They find that this policy change yields large welfare gains. ; Also issued as Payment Cards Center Discussion Paper No. 07-08, 05-12, and 01-01 ; Supersedes Working Paper No. 05-18 and 02-6
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 07-16.
Date of creation: 2007
Date of revision:
Other versions of this item:
- Satyajit Chatterjee & Dean Corbae & Makoto Nakajima & José-Víctor Ríos-Rull, 2007. "A Quantitative Theory of Unsecured Consumer Credit with Risk of Default," Econometrica, Econometric Society, vol. 75(6), pages 1525-1589, November.
- Satyajit Chatterjee & Dean Corbae & Makoto Nakajima & Jose-Victor Rios-Rull, 2002. "A Quantitative Theory of Unsecured Consumer Credit with Risk of Default," Centro de AltiÂsimos Estudios RiÂos PeÂ©rez(CAERP) 2, Centro de Altisimos Estudios Rios Perez (CAERP).
- NEP-ALL-2007-06-30 (All new papers)
- NEP-BAN-2007-06-30 (Banking)
- NEP-DGE-2007-06-30 (Dynamic General Equilibrium)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading lists or Wikipedia pages:
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Beth Paul).
If references are entirely missing, you can add them using this form.