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How Do Regulators Influence Mortgage Risk: Evidence from an Emerging Market

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  • John Y. Campbell
  • Tarun Ramadorai
  • Benjamin Ranish

Abstract

To understand the effects of regulation on mortgage risk, it is instructive to track the history of regulatory changes in a country rather than to rely entirely on cross- country evidence that can be contaminated by unobserved heterogeneity. However, in developed countries with fairly stable systems of financial regulation, it is difficult to track these effects. We employ loan-level data on over a million loans disbursed in India over the 1995 to 2010 period to understand how fast-changing regulation impacted mortgage lending and risk. We use cross-sectional differences in the time- series variation of delinquency rates, conditional on initial interest rates, to detect the effects of regulation on mortgage delinquencies.

Suggested Citation

  • John Y. Campbell & Tarun Ramadorai & Benjamin Ranish, 2012. "How Do Regulators Influence Mortgage Risk: Evidence from an Emerging Market," NBER Working Papers 18394, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:18394
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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