Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico

Dean Karlan and Jonathan Zinman

Working Papers from Economic Growth Center, Yale University

Abstract: The long-run price elasticity of demand for credit is a key parameter for intertemporal modeling, policy levers, and lending practice. We use randomized interest rates, offered across 80 regions by Mexico’s largest microlender, to identify a 29-month dollars-borrowed elasticity of -1.9. This elasticity increases from -1.1 in year one to -2.9 in year three. The number of borrowers is also elastic. Credit bureau data does not show evidence of crowd-out. Competitors do not respond by reducing rates, perhaps because Compartamos’ profits are unchanged. The results are consistent with multiple equilibria in loan pricing.

Keywords: microcredit; interest rates; interest rate policy; interest rate elasticities (search for similar items in EconPapers)
JEL-codes: E43 G21 O11 O12 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2013-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.econ.yale.edu/growth_pdf/cdp1024.pdf (application/pdf)

Related works:
Journal Article: Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico (2019)
Working Paper: Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico (2013)
Working Paper: Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico (2013)
Working Paper: Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico (2013)
Working Paper: Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico (2013)
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:egc:wpaper:1024

Access Statistics for this paper

More papers in Working Papers from Economic Growth Center, Yale University Contact information at EDIRC.
Bibliographic data for series maintained by Benjamin King ( this e-mail address is bad, please contact ).