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Unsecured credit markets are not insurance markets

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  • Athreya, Kartik
  • Tam, Xuan S.
  • Young, Eric R.

Abstract

We study the extent to which unsecured credit markets have altered the transmission of increased income risk to consumption variability over the past several decades. We find that unsecured credit markets pass through increased income risk to consumption, irrespective of bankruptcy policy and the information possessed by lenders. If risk sharing has indeed improved over this period, the reasons do not therefore lie in the unsecured credit market.

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  • Athreya, Kartik & Tam, Xuan S. & Young, Eric R., 2009. "Unsecured credit markets are not insurance markets," Journal of Monetary Economics, Elsevier, vol. 56(1), pages 83-103, January.
  • Handle: RePEc:eee:moneco:v:56:y:2009:i:1:p:83-103
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