Consumer Debt Moratoria

Bulent Guler, Yasin Onder, Mauricio Villamizar-Villegas and Jose Villegas

Borradores de Economia from Banco de la Republica de Colombia

Abstract: We evaluate the effectiveness of consumer debt moratoria, one of the earliest policy interventions aimed at alleviating debt burdens. Using administrative data from Colombia, our study compares households that narrowly qualified for the moratorium (eligible up to 60 days overdue on their mortgages) against those who narrowly missed eligibility. Our analysis indicates that the moratorium policy boosts consumption among financially strained households while reducing delinquency rates on mortgages and other loans. We then develop a life-cycle incomplete market model, incorporating households subject to idiosyncratic income shocks, to examine both the general equilibrium and longrun effects of the policy. Our model shows that the policy increases aggregate output, consumption, and welfare for both households and bank owners. The policy also facilitates financial stability by attenuating the decline in house prices and increasing aggregate housing demand. Finally, we use our model to explore potential outcomes of debt forgiveness. **** RESUMEN: Evaluamos la efectividad de las políticas de los periodos de gracia (moratoria de deuda) de los hogares. Utilizando datos de registro de crédito (Formato 341) de Colombia, nuestro estudio compara los créditos que por poco eran elegibles para participar en el programa de moratoria (hasta 60 días de mora en sus créditos hipotecarios) contra aquellos que no alcanzaron a ser elegibles. Nuestro análisis indica que la política impulsa el consumo, al tiempo que reduce las tasas de morosidad, tanto en créditos hipotecarios como en otras modalidades. Para complementar el análisis, desarrollamos un modelo de ciclo de vida con mercados incompletos, incorporando hogares sujetos a choques idiosincráticos de ingresos, para examinar tanto el equilibrio general como los efectos a largo plazo de la política. Nuestro modelo muestra que la política aumenta la producción agregada, el consumo y el bienestar tanto de los hogares como de los bancos. La política también facilita la estabilidad financiera al atenuar la caída en los precios de las viviendas y aumentar su demanda.

Keywords: debt moratoria; regression discontinuity design; heterogeneous agent models; moratoria de deuda; diseño de regresión discontinua; modelos de agentes heterogéneos (search for similar items in EconPapers)
JEL-codes: E44 F34 (search for similar items in EconPapers)
Pages: 65
Date: 2024-08
New Economics Papers: this item is included in nep-dge
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https://doi.org/10.32468/be.1276

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Persistent link: https://EconPapers.repec.org/RePEc:bdr:borrec:1276

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