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Information Sharing in Credit Markets: A Survey

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Abstract

Information sharing about borrowers' characteristics and their indebtedness can have important effects on credit markets activity. First, it improves the banks' knowledge of applicants' characteristics and permits a more accurate prediction of their repayment probabilities. Second, it reduces the informational rents that banks could otherwise extract from their customers. Third, it can operate as a borrower discipline device. Finally, it eliminates borrowers' incentive to become over-indebted by drawing credit simultaneously from many banks without any of them realizing. Understanding the effects of information sharing also helps to shed light on some key issues in the design of a credit information system, such as the relationship between public and private mechanisms, the dosage between black and white information sharing, and the "memory" of the system. Merging the insights from theoretical models with the lessons of experience, one can avoid serious pitfalls in the design of credit information systems.

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Bibliographic Info

Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 36.

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Date of creation: 01 Mar 2000
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Publication status: Published in The Economics of Consumer Credit: European Experience and Lessons from the U.S, edited by G. Bertola, R. Disney, and C. Grant. Cambridge: The MIT Press, July 2006
Handle: RePEc:sef:csefwp:36

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Keywords: information sharing; credit markets;

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References

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Cited by:
  1. Carter, Michael R. & Galarza, Francisco & Boucher, Stephen, 2007. "Underwriting area-based yield insurance to crowd-in credit supply and demand," MPRA Paper 24326, University Library of Munich, Germany.
  2. Hainz, Christa, 2004. "Quality of Institutions, Credit Markets and Bankruptcy," Discussion Papers in Economics 388, University of Munich, Department of Economics.
  3. Artashes Karapetyan & Bogdan Stacescu, 2009. "Information sharing and information acquisition in credit markets," IEW - Working Papers 454, Institute for Empirical Research in Economics - University of Zurich.
  4. Hainz, Christa, 2009. "Creditor passivity: The effects of bank competition and institutions on the strategic use of bankruptcy filings," Journal of Comparative Economics, Elsevier, vol. 37(4), pages 582-596, December.
  5. Maria Semenova, 2008. "Information Sharing in Credit Markets: Incentives for Incorrect Information Reporting," Comparative Economic Studies, Palgrave Macmillan, vol. 50(3), pages 381-415, September.
  6. Alberto Giovannini & Francesco Giavazzi, 2001. "A More Efficient Financial System for Improved Economic Performance : An Attempt at Identifying the Priorities," Revue d'Économie Financière, Programme National Persée, vol. 62(2), pages 71-81.
  7. Jan Bouckaert & Hans Degryse, 2002. "Softening Competition by Enhancing Entry: An Example from the Banking Industry," CESifo Working Paper Series 782, CESifo Group Munich.
  8. Tullio Jappelli & Marco Pagano, 2000. "Information Sharing in Credit Markets: The European Experience," CSEF Working Papers 35, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  9. Wu, Ji & Jeon, Bang Nam & Luca, Alina C., 2010. "Does Distance Affect the Performance of Foreign Banks? Evidence from Multinational Banking in Developing Countries," MPRA Paper 37083, University Library of Munich, Germany, revised 01 Feb 2012.
  10. Alberto Giovannini & Francesco Giavazzi, 2001. "Un système financier plus efficient pour obtenir de meilleures performances économiques : une tentative d'identification des priorités," Revue d'Économie Financière, Programme National Persée, vol. 62(2), pages 79-91.

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