Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico

Jonathan Zinman and Dean Karlan

No 9503, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The long-run price elasticity of demand for credit is a key parameter for intertemporal modeling, policy levers, and lending practice. We use randomized interest rates, offered across 80 regions by Mexico?s largest microlender, to identify a 29-month dollars-borrowed elasticity of -1.9. This elasticity increases from -1.1 in year one to -2.9 in year three. The number of borrowers is also elastic. Credit bureau data does not show evidence of crowd-out. Competitors do not respond by reducing rates, perhaps because Compartamos? profits are unchanged. The results are consistent with multiple equilibria in loan pricing.

Keywords: Interest rate elasticities; Interest rate policy; Interest rates; Microcredit (search for similar items in EconPapers)
JEL-codes: E43 G21 O11 O12 (search for similar items in EconPapers)
Date: 2013-06
New Economics Papers: this item is included in nep-exp, nep-mac and nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico (2019)
Working Paper: Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico (2013)
Working Paper: Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico (2013)
Working Paper: Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico (2013)
Working Paper: Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico (2013)
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