Identifying "Default Thresholds" in Consumer Liabilities Using High Frequency Data

Don Schlagenhauf and Carlos Garriga ()

No 1305, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: The concept of "default threshold" captures the notion of a level of debt that it is not sustainable that results in default. This paper constructs different measures based on the dynamics of the monthly debt payment to after-tax income ratio. The preliminary examination using data from the Consumer Credit Panel suggest that some of these measures have some predictive content when compared to alternative measures based on FICO scores. A quantitative model of default behavior is constructed to replicate the dynamic patterns observed in the data.

Date: 2017
New Economics Papers: this item is included in nep-ban, nep-dge and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed017:1305

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