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Using bounds to investigate household debt repayment behaviour

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  • Grant, Charles
  • Padula, Mario

Abstract

Understanding the factors that influence arrears is crucial if policy makers wish to alleviate the problems caused by debt. But conventional estimates of repayment behaviour impose implausible assumptions about lender behaviour. However, an upper and lower bound for the effect of the determinants of repayment behaviour can be estimated. Reasonable assumptions about the behaviour of economics agents narrow these bands. We use administrative data from a leading Italian lender to the household sector to demonstrate the methodology, and we show that conventional estimates under-estimate the true default probability.

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  • Grant, Charles & Padula, Mario, 2013. "Using bounds to investigate household debt repayment behaviour," Research in Economics, Elsevier, vol. 67(4), pages 336-354.
    • Handle: RePEc:eee:reecon:v:67:y:2013:i:4:p:336-354
    DOI: 10.1016/j.rie.2013.09.007
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    Cited by:

    1. Saten Kumar, 2016. "Is the US Consumer Credit Asymmetric?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(2), pages 194-215, May.

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