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Consumer credit performance over the business cycle in Colombia: some empirical facts

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  • Luis E. Arango
  • Lina Cardona-Sosa

Abstract

This paper studies the behavior of the survival function of accruing loans during the slowdown experienced by the Colombian economy between January-2008 and March-2009 as documented by Alfonso et al. (2013). We use a dataset with information of different vintage loans between July-2007 and March-2014 from a private credit union that operates in Medellín, the second largest city in Colombia, and its metropolitan area. The analysis suggests that the survival function of accruing loans reduces before and during the slowdown event: if the probability of survival at month ten of a consumer credit vintage is below the 97.5% and below 95% at month fifteen, the probability of a future slowdown is not negligible.

Suggested Citation

  • Luis E. Arango & Lina Cardona-Sosa, 2015. "Consumer credit performance over the business cycle in Colombia: some empirical facts," BORRADORES DE ECONOMIA 012389, BANCO DE LA REPÚBLICA.
    • Handle: RePEc:col:000094:012389
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    References listed on IDEAS

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    1. Viviana Alejandra Alfonso & Luis Eduardo Arango & Fernando Arias & José David Pulido, 2011. "Ciclos de negocios en Colombia: 1980-2010," Borradores de Economia 651, Banco de la Republica de Colombia.
    2. Frankel, Jeffrey & Saravelos, George, 2012. "Can leading indicators assess country vulnerability? Evidence from the 2008–09 global financial crisis," Journal of International Economics, Elsevier, vol. 87(2), pages 216-231.
    3. Herman Kamil & José David Pulido & José Luis Torres, 2010. "El IMACO": un índice mensual líder de la actividad económica en Colombia"," BORRADORES DE ECONOMIA 007129, BANCO DE LA REPÚBLICA.
    4. Jeffrey D. Sachs & Aaron Tornell & Andrés Velasco, 1996. "Financial Crises in Emerging Markets: The Lessons from 1995," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 147-216.
    5. Cameron,A. Colin & Trivedi,Pravin K., 2005. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9780521848053, December.
    6. Correa, Arnildo & Marins, Jaqueline & Neves, Myrian & da Silva, Antonio Carlos, 2014. "Credit Default and Business Cycles: An Empirical Investigation of Brazilian Retail Loans," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 68(3), September.
    7. Gerhard Bry & Charlotte Boschan, 1971. "Foreword to "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs"," NBER Chapters, in: Cyclical Analysis of Time Series: Selected Procedures and Computer Programs, pages -1, National Bureau of Economic Research, Inc.
    8. Barham, Bradford L. & Boucher, Stephen & Carter, Michael R., 1996. "Credit constraints, credit unions, and small-scale producers in Guatemala," World Development, Elsevier, vol. 24(5), pages 793-806, May.
    9. Juan Amador & José Gómez-González & Andrés Pabón, 2013. "Loan growth and bank risk: new evidence," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 27(4), pages 365-379, December.
    10. Charles Engel & Kristin Forbes & Jeffrey Frankel, 2012. "Global Financial Crisis," NBER Books, National Bureau of Economic Research, Inc, number enge11-2, May.
    11. Gerhard Bry & Charlotte Boschan, 1971. "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs," NBER Books, National Bureau of Economic Research, Inc, number bry_71-1, May.
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    Cited by:

    1. Luis Eduardo Arango & Lina Cardona-Sosa, 2015. "Determinants of consumer credit within a constrained framework: evidence from Colombian microdata," Borradores de Economia 912, Banco de la Republica de Colombia.
    2. Luis E. Arango & Lina Cardona-Sosa, 2015. "Determinants of consumer credit within a debt constrained framework. Evidence from microdata," BORRADORES DE ECONOMIA 013965, BANCO DE LA REPÚBLICA.

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    More about this item

    Keywords

    accruing loans; nonperforming loans; survival function; economic slowdown;
    All these keywords.

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • 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

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