Monetary Normalizations and Consumer Credit: Evidence from Fed Liftoff and Online Lending

Christoph Bertsch, Isaiah Hull and Xin Zhang
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Xin Zhang: Sveriges Riksbank

International Journal of Central Banking, 2021, vol. 17, issue 71, 47

Abstract: On December 16, 2015, the Federal Reserve initiated "liftoff," a critical step in the monetary normalization process. We use a unique panel data set of 640,000 loan-hour observations to measure the cross-sectional impact of liftoff on interest rates, demand, and supply in the peer-to-peer market for uncollateralized consumer credit. We find that the spread decreased by 17 percent, driven by an increase in supply. Our results are consistent with an investor-perceived reduction in default probabilities and suggest that liftoff provided a strong, positive signal about the future solvency of high credit risk borrowers.

JEL-codes: E25 E42 E52 (search for similar items in EconPapers)
Date: 2021
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Working Paper: Monetary Normalizations and Consumer Credit: Evidence from Fed Liftoff and Online Lending (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2021:q:5:a:7

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