EconPapers    
Economics at your fingertips  
 

A Simple Model of Subprime Borrowers and Credit Growth

Andrea Tambalotti, Giorgio Primiceri and Alejandro Justiniano

No 11083, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The surge in credit and house prices that preceded the Great Recession was particularly pronounced in ZIP codes with a higher fraction of subprime borrowers (Mian and Sufi, 2009). We present a simple model with prime and subprime borrowers distributed across geographic locations, which can reproduce this stylized fact as a result of an expansion in the supply of credit. Due to their low income, subprime households are constrained in their ability to meet interest payments and hence sustain debt. As a result, when the supply of credit increases and interest rates fall, they take on disproportionately more debt than their prime counterparts, who are not subject to that constraint.

Keywords: Collateral constraint; Credit supply; House price; Household debt; Housing boom (search for similar items in EconPapers)
JEL-codes: E21 E44 G21 (search for similar items in EconPapers)
Date: 2016-01
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
https://cepr.org/publications/DP11083 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: A Simple Model of Subprime Borrowers and Credit Growth (2016) Downloads
Working Paper: A simple model of subprime borrowers and credit growth (2016) Downloads
Working Paper: A Simple Model of Subprime Borrowers and Credit Growth (2016) Downloads
Working Paper: A simple model of subprime borrowers and credit growth (2016) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:11083

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP11083

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2025-03-19
Handle: RePEc:cpr:ceprdp:11083