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On Consumer Credit Outcomes in the U.S.-Mexico Border Region

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  • Chintal Desai

    ()

  • Andre Mollick

    ()

Abstract

The ease in mobility of people across the U.S.-Mexico border region provides a natural setting for analyzing the role of economic interdependency on consumer credit outcomes. Since the U.S. and Mexican economies are not entirely synchronized and have different growth rates, the growing Mexican border economy is likely to increase the consumption of U.S. goods and services in the region, and provide additional job opportunities to the U.S. border residents. Thus, the effect of being located at the border (‘border effect’) might reduce default and bankruptcy in the U.S. However, if both economies are nearly perfectly correlated, then the ‘border effect’ is likely to be insignificant. Our results are consistent with the border effect lowering the rate of bankruptcies and mortgage defaults in the U.S. counties that share a border with Mexico. An increase in the level of economic interdependency, as measured by the differential economic growth between Mexican municipalities and their sister U.S. county, decreases the bankruptcy rates in the U.S. border region. Overall, this research helps understand credit risk issues in the U.S.-Mexico border region. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Chintal Desai & Andre Mollick, 2014. "On Consumer Credit Outcomes in the U.S.-Mexico Border Region," Journal of Financial Services Research, Springer;Western Finance Association, vol. 45(1), pages 91-115, February.
  • Handle: RePEc:kap:jfsres:v:45:y:2014:i:1:p:91-115
    DOI: 10.1007/s10693-012-0154-y
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    File URL: http://hdl.handle.net/10.1007/s10693-012-0154-y
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    References listed on IDEAS

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    1. Hanson, Gordon H., 2001. "U.S.-Mexico Integration and Regional Economies: Evidence from Border-City Pairs," Journal of Urban Economics, Elsevier, vol. 50(2), pages 259-287, September.
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    More about this item

    Keywords

    Consumer credit; Personal bankruptcy; Default; U.S.-Mexico border; D14; E44; G21; G28;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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

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