Using bounds to investigate household debt repayment behaviour

Charles Grant and Mario Padula

Research in Economics, 2013, vol. 67, issue 4, 336-354

Abstract: Understanding the factors that influence arrears is crucial if policy makers wish to alleviate the problems caused by debt. But conventional estimates of repayment behaviour impose implausible assumptions about lender behaviour. However, an upper and lower bound for the effect of the determinants of repayment behaviour can be estimated. Reasonable assumptions about the behaviour of economics agents narrow these bands. We use administrative data from a leading Italian lender to the household sector to demonstrate the methodology, and we show that conventional estimates under-estimate the true default probability.

Keywords: Consumer credit; Default; Manski bounds (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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Working Paper: Using Bounds to Investigate Household Debt Repayment Behaviour (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:67:y:2013:i:4:p:336-354

DOI: 10.1016/j.rie.2013.09.007

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