IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v170y2018icp14-18.html
   My bibliography  Save this article

Contagious loan default

Author

Listed:
  • Goedecke, Jann

Abstract

Applying survival analysis to a large loan-level dataset for regulatory purposes on group loans provided by Mexican banks, I find that ex-post credit risk is subject to substantial geographic spillover effects. Potential underlying mechanisms include contagious defaulting behavior, which bears the risk of proliferating into a repayment crisis in the event of an economic or political shock, as experiences from similar markets suggest.

Suggested Citation

  • Goedecke, Jann, 2018. "Contagious loan default," Economics Letters, Elsevier, vol. 170(C), pages 14-18.
  • Handle: RePEc:eee:ecolet:v:170:y:2018:i:c:p:14-18
    DOI: 10.1016/j.econlet.2018.05.028
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176518302015
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.econlet.2018.05.028?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Rajkamal Iyer & Manju Puri, 2012. "Understanding Bank Runs: The Importance of Depositor-Bank Relationships and Networks," American Economic Review, American Economic Association, vol. 102(4), pages 1414-1445, June.
    2. Kiss, Hubert Janos & Rodriguez-Lara, Ismael & Rosa-García, Alfonso, 2014. "Do social networks prevent or promote bank runs?," Journal of Economic Behavior & Organization, Elsevier, vol. 101(C), pages 87-99.
    3. Trautmann, Stefan T. & Vlahu, Razvan, 2013. "Strategic loan defaults and coordination: An experimental analysis," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 747-760.
    4. Katzur, Tomek & Lensink, Robert, 2012. "Group lending with correlated project outcomes," Economics Letters, Elsevier, vol. 117(2), pages 445-447.
    5. Allen, Treb, 2016. "Optimal (partial) group liability in microfinance lending," Journal of Development Economics, Elsevier, vol. 121(C), pages 201-216.
    6. Britta Augsburg & Ralph De Haas & Heike Harmgart & Costas Meghir, 2015. "The Impacts of Microcredit: Evidence from Bosnia and Herzegovina," American Economic Journal: Applied Economics, American Economic Association, vol. 7(1), pages 183-203, January.
    7. Alessandra Cassar & Luke Crowley & Bruce Wydick, 2007. "The effect of social capital on group loan repayment: evidence from field experiments," Economic Journal, Royal Economic Society, vol. 117(517), pages 85-106, February.
    8. Manuela Angelucci & Dean Karlan & Jonathan Zinman, 2015. "Microcredit Impacts: Evidence from a Randomized Microcredit Program Placement Experiment by Compartamos Banco," American Economic Journal: Applied Economics, American Economic Association, vol. 7(1), pages 151-182, January.
    9. Guérin, Isabelle & Labie, Marc & Servet, Jean-Michel (ed.), 2015. "The Crises of Microcredit," University of Chicago Press Economics Books, University of Chicago Press, number 9781783603756, Febrero.
    10. Harrison Hong & Jeffrey D. Kubik & Jeremy C. Stein, 2005. "Thy Neighbor's Portfolio: Word‐of‐Mouth Effects in the Holdings and Trades of Money Managers," Journal of Finance, American Finance Association, vol. 60(6), pages 2801-2824, December.
    11. Arnold, Lutz G. & Booker, Benedikt, 2013. "Good intentions pave the way to … the local moneylender," Economics Letters, Elsevier, vol. 118(3), pages 466-469.
    12. D'Espallier, Bert & Guérin, Isabelle & Mersland, Roy, 2011. "Women and Repayment in Microfinance: A Global Analysis," World Development, Elsevier, vol. 39(5), pages 758-772, May.
    13. Gregorio Impavido, 1998. "Credit Rationing, Group Lending and Optimal Group Size," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 69(2), pages 243-260, June.
    14. Shumway, Tyler, 2001. "Forecasting Bankruptcy More Accurately: A Simple Hazard Model," The Journal of Business, University of Chicago Press, vol. 74(1), pages 101-124, January.
    15. Isabelle Guérin & Jean-Michel Servet & Dominique Labie, 2015. "The crises of microcredit," Post-Print halshs-02913573, HAL.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Anaïs Périlleux & Ariane Szafarz, 2022. "Women in the boardroom: a bottom–up approach to the trickle-down effect," Small Business Economics, Springer, vol. 58(4), pages 1783-1800, April.
    2. Bátiz-Zuk Enrique & González-Holden Alexa, 2023. "Identifying Gender Disparities on the Time to Repay Microfinance Group Loans: Evidence from Mexico," Working Papers 2023-07, Banco de México.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marek Hudon & Marc Labie & Ariane Szafarz, 2019. "A long time ago in a galaxy far, far away… How microfinance evolved and how research followed," Working Papers CEB 19-013, ULB -- Universite Libre de Bruxelles.
    2. Bédécarrats, Florent & Guérin, Isabelle & Morvant-Roux, Solène & Roubaud, François, 2019. "Estimating microcredit impact with low take-up, contamination and inconsistent data. A replication study of Crépon, Devoto, Duflo, and Parienté (American Economic Journal: Applied Economics, 2015)," International Journal for Re-Views in Empirical Economics (IREE), ZBW - Leibniz Information Centre for Economics, vol. 3(2019-3), pages 1-22.
    3. Martin Dufwenberg, 2014. "Banking on Experiments?," Working Papers 534, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    4. Hubert J. Kiss & Ismael Rodriguez-Lara & Alfonso Rosa-Garcia, 2022. "Experimental bank runs," Chapters, in: Sascha Füllbrunn & Ernan Haruvy (ed.), Handbook of Experimental Finance, chapter 25, pages 347-361, Edward Elgar Publishing.
      • Hubert J. Kiss & Ismael Rodriguez-Lara & Alfonso Rosa-Garcia, 2021. "Experimental Bank Runs," ThE Papers 21/03, Department of Economic Theory and Economic History of the University of Granada..
    5. Hubert Janos Kiss & Ismael Rodriguez-Lara & Alfonso Rosa-Garcia, 2018. "Who runs first to the bank?," CERS-IE WORKING PAPERS 1826, Institute of Economics, Centre for Economic and Regional Studies.
    6. Kiss, Hubert János & Rodriguez-Lara, Ismael & Rosa-Garcia, Alfonso, 2022. "Who withdraws first? Line formation during bank runs," Journal of Banking & Finance, Elsevier, vol. 140(C).
    7. Hameem Raees Chowdhury, 2016. "Joint-Liability in Microcredit: Evidence from Bangladesh," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 44(1), pages 105-129, March.
    8. Sonia Di Giannatale. & Daniel Ventosa-Santaulària. & María José Roa. & Alexander Elbittar. & Darío Trujano., 2020. "The Role of Cognitive and Personality Characteristics in Timely Microcredit Repayment: Evidence from a Survey Conducted by Provident, Mexico. (El papel de las características cognitivas y de personali," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(1), pages 1-20, May.
    9. Marek Hudon & Marc Labie & Patrick Reichert, 2020. "What is a Fair Level of Profit for Social Enterprise? Insights from Microfinance," Journal of Business Ethics, Springer, vol. 162(3), pages 627-644, March.
    10. Manthos D. Delis & Fulvia Fringuellotti & Steven Ongena, 2020. "Credit and Income Inequality," Staff Reports 929, Federal Reserve Bank of New York.
    11. Lucia Dalla Pellegrina & Giorgio Di Maio & Paolo Landoni & Emanuele Rusinà, 2021. "Money management and entrepreneurial training in microfinance: impact on beneficiaries and institutions," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(3), pages 1049-1085, October.
    12. Emily Breza & Cynthia Kinnan, 2021. "Measuring the Equilibrium Impacts of Credit: Evidence from the Indian Microfinance Crisis," The Quarterly Journal of Economics, Oxford University Press, vol. 136(3), pages 1447-1497.
    13. N'dri, Lasme Mathieu & Kakinaka, Makoto, 2020. "Financial inclusion, mobile money, and individual welfare: The case of Burkina Faso," Telecommunications Policy, Elsevier, vol. 44(3).
    14. Pedro Carneiro & Sokbae Lee & Daniel Wilhelm, 2020. "Optimal data collection for randomized control trials [Microcredit impacts: Evidence from a randomized microcredit program placement experiment by Compartamos Banco]," The Econometrics Journal, Royal Economic Society, vol. 23(1), pages 1-31.
    15. Abhijit Banerjee & Emily Breza & Esther Duflo & Cynthia Kinnan, 2019. "Can Microfinance Unlock a Poverty Trap for Some Entrepreneurs?," NBER Working Papers 26346, National Bureau of Economic Research, Inc.
    16. Daniel Bjorkegren & Joshua Blumenstock & Omowunmi Folajimi-Senjobi & Jacqueline Mauro & Suraj R. Nair, 2022. "Instant Loans Can Lift Subjective Well-Being: A Randomized Evaluation of Digital Credit in Nigeria," Papers 2202.13540, arXiv.org.
    17. D’Espallier, Bert & Goedecke, Jann & Hudon, Marek & Mersland, Roy, 2017. "From NGOs to Banks: Does Institutional Transformation Alter the Business Model of Microfinance Institutions?," World Development, Elsevier, vol. 89(C), pages 19-33.
    18. Meyer, Camille, 2020. "The commons: A model for understanding collective action and entrepreneurship in communities," Journal of Business Venturing, Elsevier, vol. 35(5).
    19. Kiss, Hubert J. & Rodriguez-Lara, Ismael & Rosa-Garcia, Alfonso, 2014. "Do women panic more than men? An experimental study of financial decisions," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 52(C), pages 40-51.
    20. Ragui Assaad & Caroline Krafft & Shaimaa Yassin, 2020. "Job creation or labor absorption? An analysis of private sector job growth in Egypt," Middle East Development Journal, Taylor & Francis Journals, vol. 12(2), pages 177-207, July.

    More about this item

    Keywords

    Credit risk; Repayment crisis; Geographic spillovers; Survival analysis; Microfinance; Mexico;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:170:y:2018:i:c:p:14-18. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.