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Who is credit constrained among denied or discouraged borrowers?"

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Author Info

  • Albert Touna Mama
  • Jacques Ewoudou

Abstract

Since the seminal work of Jappelli (1990), it has become standard to identify as liquidity-constrained, borrowers who were either turned down for credit or did not apply because they might be turned down. In this paper, we show that the so-called “denied or discouraged†proxy does not capture accurately consumers’ credit access when consumers seek credit to finance expenditure on durable goods. Our sample is drawn from the Panel Study of Income Dynamics. We document systematic misclassification of unconstrained households as constrained. We argue that: for durables, this proxy captures best the intensity put forth by the borrower when shopping for a loan.

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Bibliographic Info

Paper provided by Economic Research Southern Africa in its series Working Papers with number 199.

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Length: 19 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:rza:wpaper:199

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Keywords: Borrowing constraints; Mortgage loans; Consumer search;

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