Default contagion among credit modalities: evidence from Brazilian data

Michel Alexandre, Giovani Antônio Silva Brito and Theo Cotrim Martins

MPRA Paper from University Library of Munich, Germany

Abstract: The aim of this paper is to assess the impact of the default of some personal credit modality in the future default of the other modalities. Using Brazilian microdata, we run a logistic regression to estimate the probability of default in a given credit modality, including among the explanatory variables the personal overdue exposure in the other credit modalities. Our results show that such effect is positive and significant, although quantitatively heterogeneous. We also discuss the rationale behind these results. Specifically, it was found that financing credit modalities (vehicle and real estate financing) contaminate more the other credit modalities, as their default may bring to the debtor the loss of the financed good. Moreover, riskier loan categories (overdraft, non-payroll-deducted personal credit and credit card) are more contaminated by the default of other modalities, what is explained by the fact that defaulted individuals have a limited access to less risky credit modalities.

Keywords: Credit default contagion; debtor approach; transaction approach (search for similar items in EconPapers)
JEL-codes: C58 G17 G28 (search for similar items in EconPapers)
Date: 2017-02
New Economics Papers: this item is included in nep-ban
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:76859

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